Cleared for take-off

ONE OF my favorite photographs is a picture of my father and me, after my first airplane ride, sitting on the tire of his Cessna 170 on a turf landing strip in Alaska's Kenai Peninsula. I was 1-1/2 years old at the time. My father has owned and flown various Cessnas since the early 1960s, and I share his love of flying. I obtained my private pilot's license in 1996, my instrument rating in 1998 and my single-engine sea rating in 2002. Today, my father and I own a Cessna 182.

Similar to my father and me, the owners of Johnson Aviation Insurance earned their wings at an early age. In 1935, the S.C. Johnson Wax Co. flew a Sikorsky S-38, an amphibious biplane, to Brazil in search of new sources of the palm tree that produces carnuba (or carnauba) wax. In 1998, the late Sam Johnson, then chairman emeritus of S.C. Johnson, and his sons, Curt and Fisk, recreated that trip in a replica S-38. Today, the company, known simply as S.C. Johnson, has a fleet of six corporate aircraft. Many of its associates own and fly aircraft.

My own passion for aviation didn't stop with the Cessna, but rather led to my current position as the aviation practice leader at Johnson Insurance. I'm keenly interested in aircraft of all kinds and keep a photo album with pictures of clients' planes and photos from various airshows. We insure a number of each. In all, the aviation department at Johnson Insurance has about 400 accounts and generates about $4 million in annual premium.

Having my pilot's license makes doing business easier for me, in more ways than one. We have aviation accounts in 15 states, from the Southwest to the upper Midwest to the East. Visiting some of our clients would entail a two-day trip by car. By hopping into the plane, I can see these clients face-to-face and still be home for dinner the same day.

More important, our experience and expertise in aviation are a selling point to clients and prospects. Not only do we have advanced aviation ratings, but we also have advanced professional ratings. Chris Fostiak, an account executive in our aviation insurance department; Chris Lie, our agency president and CEO; and I have earned the "certified aviation insurance professional" (CAIP) designation. Only 40 people have achieved this designation. It's the "CPCU" of the aviation insurance industry. We are all pilots with advanced ratings. So when clients talk about their hours, ratings, medical and aircraft, we know exactly what they are saying.

We like to say that we insure everything from a J-3 (that's the Piper Cub, an antique, two-seater, taildragger plane, of course) to a G-V (a Gulfstream V jet). We insure airports, med-evac helicopters and flight schools, in addition to the following types of clients that I'll discuss in more detail in this article:

? Individual aircraft owners: They usually fly relatively small aircraft, such as a Cessna, or perhaps a Cirrus (a two- or four-seat, single-engine, high-performance aircraft), and have a private pilot's license. We don't turn any of these accounts away, but we focus on attracting prospects that earn larger annual premiums.

? Corporate fleets: A corporate fleet might consist of just a light twin-engine aircraft, such as a Cessna 310, or a smaller Jet such as Citation CJ1. Other fleets are larger, consisting of two or three jets, a helicopter and other aircraft. Some of these are flown by the corporation owners, and some corporations employ full-time pilots.

? Fixed-base operators (FBOs): These private facilities, located at airports, are the aviation industry's equivalent of a gas station, repair shop, parking garage, driving school and new- and used-car dealer, all rolled into one. They buy and sell planes, service them, charter flights and train pilots.

Aircraft (account) reconnaissance

Referrals from clients are a great source of new business for us. Many individual aircraft owners we insure know other owners and pilots who aren't happy with their current insurance program, sometimes because their agents lack expertise in aviation. We're happy to help these prospects find solutions to their insurance problems. We also get referrals from the Johnson Financial Group, the banking side of our parent corporation.

The FBOs and flight schools we insure are good referral sources too. When someone has been training at a flight school and is ready to buy a plane, where to find insurance is often one of his or her first questions-and such a person often asks around at the school or FBO. We don't always wait for them to ask, either. At all of the FBOs we insure, we leave brochures with information about our agency, including an application for insurance.

Our prospecting sources also include lists of pilots registered with the Federal Aviation Administration (FAA). Vendors obtain these lists from the FAA, and when we purchase one, the vendor will "clean it up" for us, selecting and formatting the information most useful to our agency. We use the lists to target both individual aircraft owners and corporate accounts, sending introductory letters and following up with phone calls.

We find many prospects by going out into the field-sometimes literally. Since we're located in Madison, Wis., we always attend the annual Oshkosh Air Show, a week-long event that is the premier air show and gathering place for aviation lovers in the country. As many as 2,000 aircraft take part in the event, from homebuilts to military stealth planes. We go as spectators, to enjoy the show. But we usually bring a few clients and prospects with us, and it's obviously a great place to meet more. We also attend the Wisconsin Aviation Conference and the annual convention of the National Business Aircraft Association, where we meet a lot of FBO and airport management people.

Cloud cover(ed)

All the aircraft we insure have some combination of liability and hull physical damage coverage. The liability limit on an account varies not just with the client's preference, but also with the pilot's experience. A $1 million "smooth limit," for both bodily injury and property damage liability, is common for many individual aircraft owners. Some policies will provide this limit with a $100,000 sublimit for bodily injury to each passenger on the plane. If an individual owner is a proficient pilot, we might be able to get a limit as high as $2 million on a piston engine aircraft. For corporate fleet aircraft, with professional, highly qualified full-time pilots and turbine engine equipment, we might seek limits of $300 million or higher.

Hull coverage includes a distinction between in-motion and not-in-motion coverage. This is somewhat like the difference between comprehensive and collision coverage with auto insurance. Most of our clients purchase both coverages. A small number of clients decline the in-motion hull coverage, though we advise against such a decision. Many of these clients figure that if something happens while airborne, somebody else will be handling any insurance issues anyway.

Hull coverage is provided on an agreed-amount basis, with the value often substantiated by an aircraft bluebook guide. Carriers usually allow aircraft owners to claim a value for their aircraft that is as much as 15% above or below the bluebook value. An even greater above-book limit is sometimes permitted. For instance, the owner of a single-engine aircraft may have expensive avionics installed or new paint and interior, thereby increasing the value of the plane by more than 15%. (Avionics are the computers and other electrical systems used to control and guide an aircraft). A carrier may agree to a higher limit in this case, requiring either an appraisal of the plane or copies of the installation bills for the new equipment.

For a single-engine aircraft with a value of $50,000, hull and $1 million of liability coverage are available for approximately $1,500 in annual premium. The same coverage for an owner of a twin-engine aircraft valued at $500,000 costs about $5,000 annually. Depending on what liability limits they're carrying, a corporate fleet with two jets and full-time pilots might have an annual premium of $60,000. Obviously though, all of the premiums vary with the aircraft and pilot involved.

Policies include an "open pilot warranty" that spells out the minimum qualifications required of a pilot flying an insured aircraft. For example, a pilot may own an entry-level plane such as a single-engine Cessna 172. A policy on it may require any pilot flying the plane to have a private pilot's license, 300 total hours of flying time, and 25 hours of flying time in that make and model of plane. If someone other than the named insured-say, a pilot friend-is flying the plane, the owner and plane are covered for liability and hull damage as long as the person doing the flying meets the qualifications. This doesn't mean, however, that the friend of the owner is covered. If he causes damage to the plane, the carrier may pay to repair the damage, then subrogate against that person.

We provide aircraft coverage for those of our 30 to 35 FBO clients who have aircraft fleets for rental, as well as premises and operations liability. We typically also write hangarkeepers liability insurance for them. This is roughly the equivalent of garagekeepers insurance for the aviation industry. Hangarkeepers covers the FBO for the aircraft of others in its care, custody or control. A plane wing damaged by an FBO employee who drops a fuel nozzle on it while filling the plane's tank would be an example of a covered claim.

With many aviation insurers, we can rate coverage online, which speeds the process of arranging coverage. When we submit aircraft for coverage, insurance companies want to know the make, model and year of the plane. They also want information about a plane's pilot. Most carriers have a one-page form for the pilot to fill out, listing his or her age, experience and ratings. Carriers use this single page in deciding whether to accept a submission.

This presents an opportunity for us to provide excellent service to our clients. We often go beyond the required form to paint a fuller picture of a pilot, demonstrating how the pilot has grown in experience. In addition to getting a submission accepted, this can also help a client get a better rate. For example, a client seeking coverage might not yet have his instrument rating (an FAA certification of the pilot's competence to fly by instruments alone) when he buys his first plane. We might point out to the carrier that the client is training at a flight school with an instructor the carrier already underwrites, and that the client is taking his instrument-rating "check ride" soon. A carrier might then quote a better rate for such a submission.

After Sep. 11, 2001, things were certainly more difficult in the aviation niche for a while. The market hardened as many of the aviation companies attempted to recapitalize. One of the challenges in aviation insurance has always been that the law of large numbers gets tossed out the window. Ford might make 40,000 Taurus automobiles and 50,000 Explorers this year. In contrast, Cessna might manufacture just 500 aircraft. It's much more difficult to predict loss experience with such low numbers. Recently, though, we've started to see the market soften a bit.

More than beverage service

Our claims department includes three people who are involved in the reporting and processing of claims. We make a point of staying involved with claims, to make sure the carrier has all the information it needs and that the process is moving along smoothly. One of the more interesting things about this niche is that you have the potential of delivering some of the largest claim checks you might ever see. Five years ago, one of my clients was flying his Cessna 210 when the crankshaft broke just after takeoff, with the plane about 400 feet in the air. Fortunately, after landing straight ahead in the cornfield, he walked away from the wreck. The check I delivered was for more than $225,000.

More than with other types of insurance, we stay in touch with our aviation clients throughout the year and stay on top of any changes in their aircraft and their skills. A pilot changing planes is quite different from an auto insurance client trading a pickup truck for a Corvette. That client knows his rates might go up, but almost every carrier will still provide coverage. But if a pilot wants to go from flying a Cessna 150 to a small jet, he probably won't be able to get coverage. Under more realistic circumstances, we help many of our clients transition from one aircraft or skill level to the next, "the right way." They develop growth plans that include obtaining new ratings, like a commercial rating (which I'm working on myself right now), which allows pilots to charge for their pilot services; and a "complex" rating, which allows a pilot to fly a plane with retractable landing gear.

Clients who make these transitions properly will often get a better insurance deal than will pilots who decide they want to start flying a more sophisticated aircraft right away, regardless of insurance or other considerations. Fortunately, most of our clients are quite conscientious and keep us informed about planned changes.

When we meet with clients at renewal time, we also discuss the value of their planes. Some aircraft depreciate consistently in value, and others appreciate. Nobody wants to pay for more coverage than they need, and we make sure none of our clients gets "upside down" on his or her hull insurance-otherwise, the client would not get paid as much as the aircraft is worth if it were destroyed.

In my first year with Johnson Insurance, I've concentrated on growing the book of business while also building on the services we offer clients. We keep up with changes in the industry, such as the current move under way to develop a new international standard for business aircraft operations, or IS-BAO. This is going to be similar to the ISO-9000, for corporation flight departments.

We're also building up our Web site, to include more links for our aviation clients, and putting together a news-letter. As with any clients, we systematically refer our aviation clients to the other insurance services our agency offers. They make particularly good prospects for both commercial- and personal-lines coverages, because aircraft owners and pilots tend to be more upscale consumers.

The other producers in our department and I are in the great position of being able to use our aviation experience to land clients who share our love of flying. In many profitable agencies, producers might say that if they demonstrate expertise in a particular niche and provide excellent service to their clients, the sky's the limit. For us, it's just the beginning.

J. Jeffery Rasmussen, ARM, CAIP, AAI is vice president and aviation practice leader of Johnson Insurance Services, LLC. Mr. Rasmussen has been in the insurance industry for 10 years. Before joining Johnson Insurance, he worked with property & casualty and aviation insurance at another agency and had previously worked in research and consulting with Rollins Hudig Hall (now Aon). Mr. Rasmussen has undergraduate and graduate degrees in risk management and insurance from the University of Wisconsin at Madison, where he lettered twice and was twice named to the academic All-Big Ten team as a member of the Badgers football squad.