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Florida, Airplanes and Hurricanes

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When you live in Florida, you tend to become obsessive about weather radar. On a normal summer day, I check into WeatherTap a half-dozen times a day just to see what's popping. (Usually, that's a lot.) For the past week, I've been watching Tropical Storm Fay slog slowly across the state and I'll concede some disappointment that she missed us entirely. I shuttered up the house and was standing by for mobile homes, dumpsters and my neighbor's garden shed to go tumbling down the street. Alas, it was not to be.

This got me thinking about how little hurricane preparation Florida residents actually do, including aviation interests. You would think that with the National Hurricane Center blasting out warnings five times a day and the media consumed with reporting on the approaching storm, that people would undertake basic preparations like food, water and flashlights. But many don't. In 2006, after Hurricane Wilma clipped south Florida and whacked the Miami area, people were lining up the next day for FEMA-provided bottled water. To me, this represents such a fundamental lack of survival instinct that I don't see how such people actually feed themselves.

You'd think that it would be advisable to move threatened airplanes out of the storm's path, but most owners don't. The majority seem content leaving their airplanes in tiedowns or in hangars that may or may not survive the storm and the common refrain is, "That's what insurance is for."

This attitude makes me crazy, for it's the very embodiment of a dismaying combination of ducking responsibility while expecting someone else to bail you out of a jam you almost certainly had the wherewithal to avoid. It's what we used to call a "welfare" attitude. And it's one reason that Florida has, in some respects, become unlivable. Most visitors to Florida are shocked to learn that insuring a home against hurricane wind damage in this state is practically impossible. At best, many insurance companies have dropped customers without warning, in the middle of a policy period, or, worse, fled the state entirely. It's a major crisis here, aggravated by the tanking of the real estate market.

Part of this is due to the insurance industry's boneheaded and irresponsible practice of isolating Florida as its own market rather than conflating the risk into a national pool. Further, few if any of these companies practice proactive loss prevention. I called our insurer just after we moved here and asked for a list of hurricane loss prevention strategies. No one returned the call. A year later, the company dropped us as a customer and left the Florida market. The ugly reality is that it doesn't take much of a hurricane to wipe out the insurers in Florida, sending them scurrying for the Georgia line.

Factor two in this equation is that homeowners, builders and local governments do little more than the basics to encourage or force hardening of buildings against hurricane wind damage. Conceding that building codes have gotten stricter, they're not strict enough, in my view. The sad fact is that a hurricane slices through the state, smashes the crap out of a wide swath of real estate—to the surprise of those who are lined up the next morning for bottled water—and what do we do? Rather than wising up and building the hurricane-hardened structures we know how to build, we cheap it out and put up more of same crackerboxes, the long term survival plan being essentially the hope that it won't happen again.

The aviation aspect of this is that the insurance companies don't encourage loss prevention, either. Rather than get involved with active programs to relocate airplanes or offer discounts to owners who do it on their own, they're willing to take the losses and adjust premiums accordingly. If the overall P & L is looking good, why bother, right? Our friends at AVEMCO explain the reasoning in this week's podcast with editor Russ Niles.

While I see the point, I also think this is short sighted and encourages owners to avoid confronting their personal responsibility to protect their property against loss. Insurance companies measure risk with big picture actuarials and if a run-of-the-mill storm like Fay chews up a few airplanes, it gets lost in a rounding error. But four years ago, Hurricane Charlie destroyed 150 airplanes at just one airport and, increasingly, it's not hard to see how a major Florida hurricane could wipe out 1000 airframes that are just sitting there waiting to be shredded.

What most policyholders don't get—except maybe in Florida—is that it doesn't take much loss to see premiums escalate or to have companies abandon markets entirely. But the larger issue isn't the losses themselves, which the aviation insurers can probably absorb because there are enough of them to distribute the risk. The larger problem is that when insurance companies avoid active loss prevention, it sends the wrong message to policy holders because it suggests to them that they don't have a dog in the fight. It encourages the notion that insurance is somehow a substitute for planning, for preparation, for the kind of forethought required to survive.

In short, it encourages victimhood. And before you know it, you're standing in line for a bottle of water.

Related Content:
Avemco Insurance's Mike Adams offer hurricane damage prevention tips in this podcast.

Comments (26)

As long as y'all aren't doing enough to mitigate risk down there, those of us in less hurricane-prone places would rather you stayed out of a "national risk pool", OK? ;-)

Posted by: Unknown | August 23, 2008 9:27 PM    Report this comment

Paul, while there is much truth in what you said, this last storm would have posed quite a challenge to avoid. It literally traveled up from the keys and out to the panhandle. To have missed it would have meant leaving town on a Monday and staying away the entire week. At Page Field (KFMY) most outside tiedowns did go somewhere. On Tuesday it looked like an empty movie set. Stronger buildings and tie down ropes will help. Also try finding gust locks for small aircraft. I had to cobble some up from scrap material.

Posted by: Mac McCarthy | August 25, 2008 5:26 AM    Report this comment

"Part of this is due to the insurance industry's boneheaded and irresponsible practice of isolating Florida as its own market rather than conflating the risk into a national pool."

This sounds almost too reasonable to be true. I am thrilled.

In most of the post you complain that people don't take enough personal responsibility, yet you want policyholders in the rest of the country to subsidize your decision to live in sunny Florida? How do you square those two beliefs?

If insurance companies don't even want to sell you a particular type of policy, or they go out of business because they can't do it profitably, that's the free market giving you a strong signal: you should move. Or accept that the risk is yours.

Posted by: Phil Schwan | August 25, 2008 5:53 AM    Report this comment

This really comes back to the whole affordability thing that a couple of your recent columns have been about- If we want flying to be affordable (OK, it isn't- so maybe MORE affordable), then we should take more responsibility for the things we can influence.

And, just like the mortgage companies who got in so much trouble for selling mortgages too cheap to people who couldn't afford them, we have to help the insurance companies wise up and take some responsibility for the situation. They (and we) could save some money if they did offer a "pre-storm relocation" credit or some such thing. Give some of the premium back to responsible owners, and maybe charge the others more at the same time.

We all (like the mortgage companies) expect someone to bail us out for our irresponsible and irrational behaviors. That's just wrong.

Posted by: Ed Winne | August 25, 2008 7:52 AM    Report this comment

Accountability and the sense of self-reliance has been lost in our culture. Another factor is that many folks paying insurance premiums want to get something tangible for their money and the only way to do that is to have a claim, thus justifying their investment in the insurance.

Posted by: Thom Riddle | August 25, 2008 9:06 AM    Report this comment

You would think insurance companies would do more to reduce losses - does that mean there isn't enough competition in the market? One obstacle to evacuating a plane, though, is knowing where to go. The basic unpredictability of storms, and the problems of finding a tiedown in an unfamiliar town make it hard. How far do you go, and to where.

That said, my AC policy has, for the last couple of years, a hurricane relocation cost reimbursement clause. I'm sure I'm not the only one.

Keith

Posted by: Keith Johnson | August 25, 2008 11:15 AM    Report this comment

As one who got nailed by Katrina and an aircraft owner, I agree that loss mitigation is the best policy. However, even with excellent forecasting, timely preparation is difficult.

For one thing, in an evacuation, one has to decide what to take and what to leave. If I take my plane, then what of my automobiles and other valuable properties. My plane has much more severe weight limits than my car and pick-up. And what of other family members? And if I try to move my plane and get back to my family, how do I do that? An effective move would be greater than 100 miles, more like 150-200 miles to avoid areas of tornado activity around a hurricane. To get someone to pick me up and bring me back against the flow of evacuation would be nearly impossible.

Until someone has evacuated from a storm's path, they have no idea what is entailed. I think most pilots would like to get their aircraft out of harms way but the burden of getting one's family and other crucially important possessions to safety will necessarily take a front seat.

Posted by: Greg Nothacker | August 25, 2008 11:29 AM    Report this comment

I own several planes in south florida. I have at different times moved them ahead of a hurricane and have also chosen to stay home and batten down. One problem is you may unwittingly move from a safe spot into harms way give the uncertainty of forecasts. I own a couple of classic planes and their low cruise speed limits the options.

Posted by: todd stuart | August 25, 2008 4:46 PM    Report this comment

I wish they would start giving discounts for moving them, maybe that would give me a few more flight hours, I know we moved the flying clubs planes I was in before it disappeared after 9/11.

We only had to fly an hour west for that one, so we flew them over and got pick up in a van for the ride back, seems like if planed ahead of they be plenty of people you could find to fly your plane for you and have airports you could fly to and sit it out.

This last storm wasn't something to run from it was to slow and the rain was what caused most of the problem, but if I could swing the time off and I don't get much work besides helping people put up plywood during a hurricane, I wouldn't mind sitting a few days in SC I got a sister by Hilton Head if it's not heading that way.

But you think it would be cheaper to pay to move them, then to pay thousands to repair or replace them.

Posted by: Herb bates | August 25, 2008 5:43 PM    Report this comment

One insurance company charges a higher deductible for damage caused by tropical storms and/or hurricanes. Rather than raise rates, or decline to insure, this company asks that the aircraft owner pay more of the repair costs if they can't or won't move the aircraft out of the storm's path.

Posted by: Jon Howard | August 26, 2008 3:14 PM    Report this comment

Reviewing this article and the posts attached, that the US insurance market is far behind in concepts on self management of one assests and ensuring that ones insurance is only used when nothing can be done to prevent a loss. Here South Africa, the majority of insurance companies, have embarked on processes to minimise risks to the point of paying back a good sum of your monthly payments every few years, and still reducing your premiums to boot. This has come about from the same attitude as discussed above that "That's what insurance is for", by re-educating consumers on minimising their risks, and getting the benefit from minimising.

Posted by: Paul Clayton | August 27, 2008 2:34 AM    Report this comment

"Boneheaded and irresponsible"!! Excuse me Paul, but when did those of us who choose not to live in hurricane prone areas become obligated to subsidize your life style? I guess its ike the entitlement of welfare recipients, the less responsible you are personally, the more the rest of the population should be charged with your upkeep. Not me bud.

Posted by: John Green | August 27, 2008 7:49 AM    Report this comment

On a more positive note. The insurance companies should mandate a 15 or 20% deductable for any aircraft in a hurricane prone area. The motivation to abrogate risk would follow naturally.

Posted by: John Green | August 27, 2008 7:52 AM    Report this comment

florida and the other gulf coast states, owners affected by these storms. need to stand up and except the responsibility for their life style choices. if you don't want to pay the full cost for hurrican insurance don't live in a hurrican area.i did not hear anyone from florida offering to help out with my earthquake insurance out here in california. so why should i help out with your hurrican insurance.

Posted by: richard miller | August 27, 2008 8:39 AM    Report this comment

Hull coverage pays for your planes body damage. There should be a large wind deductible. This will mitigate most storm damage, forcing owners to move there property to a safe area. Spread of risk is the key factor in all insurance. If used wisely we all benefit!

Posted by: Bob Davidson | August 27, 2008 9:39 AM    Report this comment

Insurer Doubles Move-Your-Airplane Compensation

When hurricanes threaten airplanes, all the choices for owners can look daunting. Forecasts are not exact, and moving the airplane out of harm's way takes time and money. But letting it sit and counting on insurance to cover the damage is also risky, and AVweb's Paul Bertorelli argues in a recent InsiderBlog post it's a bad choice for many reasons. Now, to make the choice to move the airplane a little easier, insurer AIG Aviation said this week it will double the amount of its hurricane relocation coverage on most light-aircraft policies from $500 to $1,000. "We understand that our policyholders' costs of protecting their aircraft have gone up; therefore, increasing this protective coverage was simply the right thing to do," said Will Lovett, president of AIG Aviation, North America.

Avemco's Mike Adams told AVweb editor Russ Niles in a recent podcast that his company is in favor of relocating the airplane if that's an option, but added that Avemco bases its rates on the belief that in many cases that won't be possible or even safe.

Cool maybe I need to find out I can sign up to help someone save their plane, that's got to be cheaper on everyone if planes that can't be hangered are flew out to safety

Posted by: Herb bates | August 28, 2008 11:41 AM    Report this comment

***COTINUED FROM ABOVE***

Why should the insurance companies pay to move your aircraft that you chose to place in harms way? They rated the risk according to the possible hazards of your location which could mean you paid more than in other parts of the country. If they pay heavy losses due to the storm, they may increase the rates to adjust for the loss ratio or decide not to take that risk any longer. Insurance is a business, not a charity! It is their prerogative to rate the risk as they deem necessary to remain profitable...if you don't want an increase then move the aircraft out of harms way on your dime. They could pay to move the aircraft if that is what you decide is "fair", but they could also increase your rates to do it, but I bet you would think that is "boneheaded and irresponsible" as well. I mean, it should be someone else’s responsibility to pay your expenses to avoid a risk that you chose to take...shouldn't it?

Posted by: Chris Davis | August 28, 2008 4:36 PM    Report this comment

As one who makes his living in the aviation insurance business I must say that I am a little surprised by Paul's comments in this blog. It seems a little ironic in that he criticizes the attitude of "that's what insurance is for" yet he expects his insurance to pay to move the aircraft that he chose to base in harms way to begin with.

Insurance is not a service that is provided to people out of the good of the company’s heart. It is a business with the goal of making money, just like any other business in this great country. The insurance policy is a contract in which an insurance company agrees to take a given set of risks from insured for an agreed amount of money. If it is agreed to in the policy (contract) it will be covered...no more, no less. Why is it that people (Paul included) agree to their policy by sending payment and signing a formal application and then get mad and expect more when something comes along that was not in the agreement?

***TO BE CONTINUED***

Posted by: Chris Davis | August 28, 2008 4:37 PM    Report this comment

I'm amused at all of the comments about stupid people living in Florida. I live in Florida and I worry about hurricanes. But, when I lived in Kansas and Illinois, I almost got killed by tornados. Pick your poison - no place is totally safe. Regarding relocating aircraft out of hurricane threats, the insurance companies aren't facing reality. By the time the hurricane forecast gets anywhere close, the outer rain and wind bands make flying extremely risky and mostly IFR. Also, insurance companies, with their restrictions on other pilots flying your aircraft (e.g. 25 hours required in make and model; have to be a "named pilot", etc.), make it almost impossible to find someone qualified and willing to risk flying your airplane. Also, most other pilots are either relocating their own airplanes or busy securing their airplanes, homes, boats, etc. My wife has a bad back and can't get into my airplane. She also can't see well for night and bad weather driving. Thus, I pay $3,600 per year for a substantial hangar and plan to leave by car when hurricanes threaten. Given the insurance company's constraints, that's the best I can do.

Posted by: William Fusselman | August 28, 2008 7:35 PM    Report this comment

Chris, I think you missed the point. My view is that by encouraging and getting involved in aircraft relocation and loss prevention, insurance companies work in both their own and their customers' interests. Everyone benefits. As noted in the thread, some insurers actually are doing this--offering cash discounts to help with relocation. That's smart management. At the least, if insurers offered logistical help--lists of relocation airports, mutual transportation assistance and the like--that would be more than enough to encourage awareness of loss prevention. It's not a question of me wanting insurers to beyond their stated contract but to help them avoid having to pay claims that could have been avoided.

My comment about boneheaded management was unclear and I didn't mean to apply it to the aircraft insurance market, but the Florida property and casuality segment. I should have stressed that. See my follow up blog for more.

Paul Bertorelli

Posted by: Paul Bertorelli | August 29, 2008 9:05 AM    Report this comment

Paul- I understand where you are coming from and believe me they would prefer that the aircraft be moved out of harms way, but who should foot the bill to do so? Some companies rate the premium to compensate for the risks associated with the area and take their chances. On the flip side (as you mentioned in your blog) some companies offer assistance with the expenses to do so on their light aircraft accounts. For example:

AIG- 50% of reasonable cost (not exceeding $1,000 per aircraft) to relocate at least 100nm and outside of Watch/Warning area

Global- Reasonable cost (not exceeding $500 per hurricane and $1,000 per policy) to relocate at least 75nm and outside of Watch/Warning area

Phoenix- Reasonable cost (not exceeding $500 per hurricane and $1,000 per policy) to relocate at least 100nm and outside of Watch/Warning area

Not all companies offer the "help" and each person should read their individual policies to find out what (if anything) is available. Some companies increase the deductible if the aircraft remains in the danger area. Global offers the "help" but also increases the deductible to 5% of the value if the aircraft is not moved out of danger.

Bottom line...read your policy and call your agent to find out what is available on your policy. Do what is prudent to keep the aircraft safe, but ensure the safety of lives first and formost. Aircraft can be replaced, people cannot.

Posted by: Chris Davis | August 29, 2008 11:28 AM    Report this comment

So were do all you live that you have nothing to insure against, I came to Florida because that were my family was, so I got a job even though we are pay less than up north and have to suffer the heat, and I sure as you retire you going with the rest in the south somewhere.

Posted by: Herb bates | August 29, 2008 6:33 PM    Report this comment

Deductibles wake our minds. They help us to conserve, save on future experience that will effect us negatively. Fly away save the day. Keep your premiums low to save the show. TA DA!

Posted by: Bob Davidson | August 29, 2008 9:03 PM    Report this comment

Insurance costs should be born by those with the highest risk. Why should a resident of Idaho pay for someone else's hurricane damage in Florida. That's what insurance actuaries do, determine risk and assign appropriate premiums.

As for building hurricane-proof homes. Nobody wants to live in a concrete bunker with no windows. And if your home is already built, who is going to tear it down and build a fortified home? Few would have the money, and probably nobody would actually do it. The author of this article is far removed from people and reality.

Posted by: Jim Dunn | September 3, 2008 1:08 PM    Report this comment

I appreciate the way pilots think, it must be the trianing received because it's your hind end hanging up there in the air and no one elses. Insurance company's are not Benevolent Societies structured on the publics behalf, they are there for one reason: TO MAKE A PROFIT. Ins. Co's have learned to Target Market areas of expertise. They have done feasablity studies prior to entering that market. They understand deductible or layer of risk exposure, benefits & endorsements offered. They have already purchased reinsurance over three years terms or more if they can buy it. Why not structure your company at the beginning of a term follow that structure out to maximise your profit. What I have just expained applies to all insurance companys and all lines of insurance business Underwritten. It is also the reason to shop your insurance coverages annually, things change like reinsurance contracts have to be renegotiated, specfic risk exposure goes through financial cycles that get bad, your price goes up and viceversa. There are too many variables to explain here, a word to the wise!

Posted by: Bob Davidson | September 3, 2008 2:17 PM    Report this comment

Some have said here that Florida owners should be isolated in the risk pool (that is, pay for their own losses.) That misses the point of insurance. If everyones risk was perfectly reflected in their premiums, then your premium would always exceed your losses - and what would be the point of that.

This weekend the issue comes home to many more of us, with up to 50 kt winds from Hanna up the East coast as far north as Boston (per NWS). Will you move your plane, and how far? Would a 10 percent risk of damaging winds be enough to move, would a 25 percent chance? They never forcast 100 percent, so how do you decide? Is your airplane the priority, and do you feel lucky?

Posted by: Keith Johnson | September 4, 2008 8:46 PM    Report this comment

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