Sat, Sep 27, 2003
Jim Lauerman, AVEMCO's
Chief Underwriting Officer, made public this letter he wrote to
those involved in the new FITS (FAA/Industry Training Standards)
program. He's still mulling
over the direction that FITS will take, but so far, he's not 100%
impressed. We bring this to you, so that you can add to your
knowledge of how things work, when DC really wants to
help...
The two days last week were my first as a participant in the
FITS process, I wanted to listen a lot and say little. I'm glad I
did, but in retrospect I believe that I need to give some
perspective on my participation in the process and what Avemco
Insurance Company wants to see accomplished through FITS.
It was interesting to note the remarks made in the FOC regarding
insurance which I believe revealed a significant lack of
understanding of the way the insurance mechanism works.
The were several references to de facto regulation of
pilots by insurance companies with the clear implication that such
"regulation" is a bad thing for general aviation. It is helpful to
remember that the FARs are, by design, minimum
requirements, leaving much discretion to the pilot -- and
that's a good thing that provides us with much freedom of action.
It is also significant to remember that while the FAA is tasked to
protect public safety, it does not have a direct financial
interest in the safety of GA operations.
Aviation insurers live in a different world. Every
time one of their customers operates their aircraft, their insurer
is putting large sums of money on the line regarding the pilot's
behavior and performance. The insurer can rely to some extent upon
the adequacy of the FARs, but it would be foolish to bet the farm
on it. Thus the extra training requirements (and incentives)
insurers place on their customers. Call it de facto
regulation if you want; but any company that fails to exercise that
discipline won't be around long. Ask the many insurance companies
that have failed or withdrawn from insuring general
aviation.
The remark was also made
that "insurance companies are always five years behind." That is
actually in some ways an accurate statement because of the way
insurance works. Insurance uses the past to predict the
future and it often takes five years to develop credible data.
Insurance companies that get too far ahead of that curve pay dearly
for their impatience.
Avemco Insurance Company is committed to helping general aviation
survive and thrive. We understand, however, that a failure to
address a real economic issue (insurability) threatens to destroy
the very industry that we serve. Pretending those problems
don't exist will not solve them. What is needed is bold
and honest action to deal with them.
An aspect of that challenge is the revolutionary new technology
that is coming at us. This technology is changing the way that
general aviation aircraft are used and from my perspective the
current training environment is woefully inadequate to address the
challenges that this technology presents. It is Avemco's genuine
hope that by working with FAA, the flight training industry, and
the manufacturers, we can voluntarily come up with training methods
and standards that will make the expensive new technology
insurable.
If we succeed in accomplishing that, there will no doubt be some
de facto regulation by the aviation insurance industry as
they write some of the FITS standards into their policies and
underwriting requirements. The beauty of that approach, as opposed
to mandatory regulation, is that the free market will automatically
keep the de facto regulation in check. Believe me,
competition will keep the industry honest.
FITS will likely not be perfect. Not creating a voluntary joint
effort to solve insurability issues, however, may be fatal to our
industry. Avemco Insurance Company wants to be an active and
helpful participant in creating a system that actually works to
improve general aviation safety, and thus its economic
viability.
[Emphases added --ed.]
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