New Planes from old companies

Cars are safer but car insurance rates keep going up, and that's a much
more
competitive market than GA.


Whoa, I didn't complain about the amount, only that the differences in the
rates seem arcane on the customer end. They are happy to explain different
rates for pilot skills, but turn into a black box when it comes to
explaining the difference in planes.

The fact is that neither parachutes nor airbags do anything to protect the
airplane, and that is the main thing that is being insured. Neither of
these
makes accidents less likely. This is quite different from, say, ABS and
traction control in cars, which actually reduce the odds of metal getting
bent in the first place.

So, that explains hull a little, but not the differences between models.
Nor does it say anything about liability. Its a good point, but doesn't
really cover what is a mystery to me.

Also, the car insurers have tons of data to analyze
to see what's really going on. It will take years before a clear picture
emerges whether airbags actually help reduce, say, liability claims.


Again, a good point. What a want to know is how many years? How many
dollars? What's the correlation? I have heard lots of people saying
premiums equals claims. However, we are never allowed to see claims data.
USAA used to publish a document that gave you a good idea about claims
levels betweens models of cars. They stopped though, and I want it back,
and I want it for planes!

The one thing which does reduce the likelihood of an accident in an
airplane
is training, and the insurance companies are quite responsive in this
area.
In many cases you cannot get any insurance without it, and in others there
are programs that can help you reduce your rates.


Agreed.

As for new planes and engines, they're not reluctant, they just charge a
lot
of money. Remember when you look at those rates that you are talking about
insuring some $300-400k of machine. If a $50,000 Skyhawk costs $1000/year
to
insure we should not be surprised that an SR-22 costs $6000 or more.

Not so at all. Many insurers balked at ANY coverage for some of the
composite planes for a good while. Then, they charged enormous rates
without really having any reason other than "lack of claims data". To me,
this fails to hit the mark because the rates they charge now do not seem to
correlate with incidents as it is.

Also, your example is not the best. Let's take a look at a different one.

A new 200k 172 costs about 14k per year for a school. An older model which
costs a quarter of that is about 5k. Repairs on the two models cost nearly
the same. I suspect the new ones have less incidents because they likely
have fewer incidents due to malfunction ON AVERAGE. (please spare me the
new plane problem stories).


FWIW I
pay over $1000 to insure a $3500 car in Boston (no collision) so from that
perspective airplane insurance seems like a reasonable deal. And before
you
say anything, my record is crystal-clear and no, I can't call Geico,
because
they're not allowed to do business in this infernal state.


I never said the rates were not reasonable. I am talking about the
information that I believe we should be given to back up the differences in
rates on different models.

As for your car situation, Boston is a historical and lovely place. Too bad
about your government, Komrade.

Dude wrote:

I have heard lots of people saying premiums equals claims.

Those people are wrong. Insurance companies take in premiums, invest the money,
and make or lose money on the investments. If they are losing money on their
investments, premiums may well be increased to provide more income regardless of
the amount of claims in the same time period.

In the long run, most insurance companies will take in less money in premiums
than they pay out in claims. During periods in which investments are performing
poorly, premiums will usually go up.

George Patterson
If a man gets into a fight 3,000 miles away from home, he *had* to have
been looking for it.

"Dude" wrote in message
...

Whoa, I didn't complain about the amount, only that the differences in the
rates seem arcane on the customer end. They are happy to explain different
rates for pilot skills, but turn into a black box when it comes to
explaining the difference in planes.

If you read some of Collins' safety articles in Flying every so often some
very interesting numbers come out. I recall one article where he was
comparing night accident rates across Mooney, Piper, Cessna, and Beech
retracts. IIRC, the accident rates for Mooneys was significantly lower--like
half as much--as the others. I may be wrong on the type but there was
definitely a big difference. Now, why might this be true? Who knows. But
it's hard to ignore, and there are many similar situations where
seemingly-similar planes expose non-trivial differences in accident rates.
Underwriting small fleets with widely-varying operator types under these
circumstances is going to be as much art as science. Since there's very
little transparency as to how they work, I can't really comment on their
methods. Since they stay in business I have to assume they are doing
something right.

Again, a good point. What a want to know is how many years?

I'd guess ten as a minimum. Just my WAG. Of course a blip of bad accidents
in six months would be all it takes to send things through the roof.

How many
dollars? What's the correlation? I have heard lots of people saying
premiums equals claims. However, we are never allowed to see claims data.
USAA used to publish a document that gave you a good idea about claims
levels betweens models of cars. They stopped though, and I want it back,
and I want it for planes!

These are trade secrets, so I suspect you won't see too much of the
internals. Look around here and you'll see plenty of stories of people
receiving widely-varying quotes from different insurers. This tells me that
there are meaningful differences in how each insurer handicaps the risk.
Again, I suspect they run a bunch of numbers and then apply some fancy
guesswork and prejudice.

Not so at all. Many insurers balked at ANY coverage for some of the
composite planes for a good while. Then, they charged enormous rates
without really having any reason other than "lack of claims data". To me,
this fails to hit the mark because the rates they charge now do not seem
to
correlate with incidents as it is.

Again, are we talking about the Cirrus? Because if we are I'm going to say
that I sympathize with the evil insurance companies a little. Here's a plane
that has a lever that you pull. The pilot looks at it and sees a label that
reads, "Save your ass." The insurer looks at it and sees it marked, "total
the airplane." In the past, saving your ass generally meant saving the
airplane too. Now it doesn't. Who knows what is going to happen? So it
doesn't surprise me that it took a few years for the market to work this
problem through.

Also, your example is not the best. Let's take a look at a different one.

A new 200k 172 costs about 14k per year for a school. An older model
which
costs a quarter of that is about 5k. Repairs on the two models cost
nearly
the same. I suspect the new ones have less incidents because they likely
have fewer incidents due to malfunction ON AVERAGE. (please spare me the
new plane problem stories).

Uh, not sure what you're trying to prove here. The new plane costs 4x as
much to buy, and 3x as much to insure. If the newer planes do indeed have
fewer incidents for whatever reason then this makes sense.

As for your car situation, Boston is a historical and lovely place. Too
bad
about your government, Komrade.

It could be worse--my sister lives in Berkeley. Also a lovely place but it
makes Boston look like Houston by comparison.

-cwk.

"C Kingsbury" wrote in message
ink.net...

"Dude" wrote in message
...

Whoa, I didn't complain about the amount, only that the differences in
the
rates seem arcane on the customer end. They are happy to explain
different
rates for pilot skills, but turn into a black box when it comes to
explaining the difference in planes.

If you read some of Collins' safety articles in Flying every so often some
very interesting numbers come out. I recall one article where he was
comparing night accident rates across Mooney, Piper, Cessna, and Beech
retracts. IIRC, the accident rates for Mooneys was significantly
lower--like
half as much--as the others. I may be wrong on the type but there was
definitely a big difference. Now, why might this be true? Who knows. But
it's hard to ignore, and there are many similar situations where
seemingly-similar planes expose non-trivial differences in accident rates.
Underwriting small fleets with widely-varying operator types under these
circumstances is going to be as much art as science. Since there's very
little transparency as to how they work, I can't really comment on their
methods. Since they stay in business I have to assume they are doing
something right.


Exactly my point. Did the rates for Mooney's become lower to affect the
claims differences or not?

Again, a good point. What a want to know is how many years?

I'd guess ten as a minimum. Just my WAG. Of course a blip of bad accidents
in six months would be all it takes to send things through the roof.


If you need ten years data, then no one will innovate. The market will not
bear it.

How many
dollars? What's the correlation? I have heard lots of people saying
premiums equals claims. However, we are never allowed to see claims
data.
USAA used to publish a document that gave you a good idea about claims
levels betweens models of cars. They stopped though, and I want it back,
and I want it for planes!

These are trade secrets, so I suspect you won't see too much of the
internals. Look around here and you'll see plenty of stories of people
receiving widely-varying quotes from different insurers. This tells me
that
there are meaningful differences in how each insurer handicaps the risk.
Again, I suspect they run a bunch of numbers and then apply some fancy
guesswork and prejudice.


If the insurance companies actually came out and said that its a trade
secret, then we would all say they don't care about safety. Bad PR. It
would seem that one could stay in business more efficiently without spending
too much to figure out the differences. Just treat all the retracts the
same except for the worse offenders. Its easy and its cheap.


Not so at all. Many insurers balked at ANY coverage for some of the
composite planes for a good while. Then, they charged enormous rates
without really having any reason other than "lack of claims data". To
me,
this fails to hit the mark because the rates they charge now do not seem
to
correlate with incidents as it is.

Again, are we talking about the Cirrus? Because if we are I'm going to say
that I sympathize with the evil insurance companies a little. Here's a
plane
that has a lever that you pull. The pilot looks at it and sees a label
that
reads, "Save your ass." The insurer looks at it and sees it marked, "total
the airplane." In the past, saving your ass generally meant saving the
airplane too. Now it doesn't. Who knows what is going to happen? So it
doesn't surprise me that it took a few years for the market to work this
problem through.


Not just the Cirrus, even Diamond. I say "even Diamond" because if you look
at the numbers it is an over the top revolution in safety. They will show
you lots of little things they did to make their planes safer, and it
appears to work. However, lots of people from the other camps are saying
they are just lucky. At some point, it doesn't ring true to keep saying
that. Also, Lancair seems to have taken the note of Diamond's changes and
incorporated many of them, including full crash cage testing on the 400. I
don't blame the insurers on the Cirrus at all. Its not the parachute, its
the claims. The darn things were all crashing into little bits until they
got the training regimen in place, and fixed the chutes. Now they seem to
be doing much better, and for me, another year of Cessna level accident
records will convince me.


Also, your example is not the best. Let's take a look at a different
one.

A new 200k 172 costs about 14k per year for a school. An older model
which
costs a quarter of that is about 5k. Repairs on the two models cost
nearly
the same. I suspect the new ones have less incidents because they likely
have fewer incidents due to malfunction ON AVERAGE. (please spare me the
new plane problem stories).

Uh, not sure what you're trying to prove here. The new plane costs 4x as
much to buy, and 3x as much to insure. If the newer planes do indeed have
fewer incidents for whatever reason then this makes sense.


What I am saying is that the repairs cost the same. Unless the plane is
totaled, the claims are lower on the new plane. Too few get totaled to
justify the difference.


As for your car situation, Boston is a historical and lovely place. Too
bad
about your government, Komrade.

It could be worse--my sister lives in Berkeley. Also a lovely place but it
makes Boston look like Houston by comparison.

-cwk.


Walked through Berzerkly in my dress greens one time. My cousin was
horrifed, and sure there would be an incident. At least they are patriotic
in Beantown.

"Dude" wrote in message
...

Exactly my point. Did the rates for Mooney's become lower to affect the
claims differences or not?

Who the hell knows. Unlike cars, just about everyone gets a completely
unique insurance quote. Perhaps somebody ought to start a database where
pilots can put in what kind of coverage they have and what they're paying
for it to help everybody shop around.

Again, a good point. What a want to know is how many years?

I'd guess ten as a minimum. Just my WAG. Of course a blip of bad
accidents
in six months would be all it takes to send things through the roof.


If you need ten years data, then no one will innovate. The market will
not
bear it.

Bullfeathers. It didn't stop Cirrus or Lancair, and it hasn't stopped
homebuilding, where the picture is often (for good reason) far worse than
anything certified.

Also, my ten-year estimate is to see the effects of something subtle like
airbags. Nobody buys airbags because it cuts their insurance premium. I got
ABS and LoJack on my car because I wanted to avoid accidents and get it back
in case the dirtballs stole it. The fact that these cut my insurance by
about $200/year was icing on the cake.

If the insurance companies actually came out and said that its a trade
secret, then we would all say they don't care about safety. Bad PR. It
would seem that one could stay in business more efficiently without
spending
too much to figure out the differences. Just treat all the retracts the
same except for the worse offenders. Its easy and its cheap.

The problem is that there aren't enough underwriters to foster real
competition in the market. Avemco (for example) looks at the situation and
says, "wow, if we covered retracts for 20% less than everyone else, we'd
corner the market." But then they think, "well, if we did that, everyone
else would just match our prices, and all it would mean is less money for
us." Market theory teaches that when it comes to the number of companies in
a market, "four are few, and six are many." IIRC there are three or four
major GA underwriters.

Not just the Cirrus, even Diamond. I say "even Diamond" because if you
look
at the numbers it is an over the top revolution in safety. They will show
you lots of little things they did to make their planes safer, and it
appears to work. However, lots of people from the other camps are saying
they are just lucky. At some point, it doesn't ring true to keep saying
that. Also, Lancair seems to have taken the note of Diamond's changes and
incorporated many of them, including full crash cage testing on the 400.

Again, protection-of-life features do not necessarily translate into lower
costs for insurers unless they reduce hull losses too. Perhaps these new
glass panels will make IFR easier and thus reduce the number of accidents
due to disorientation. Or maybe they'll just lure more VFR pilots into IMC
with predictable results. Time will tell. Either way, rates will not come
down without a pretty substantial reduction in accident rates and no one is
predicting that for anybody.

I
don't blame the insurers on the Cirrus at all. Its not the parachute, its
the claims. The darn things were all crashing into little bits until they
got the training regimen in place, and fixed the chutes. Now they seem to
be doing much better, and for me, another year of Cessna level accident
records will convince me.

All of which appears to justify the "new equals bad" approach of the
insurers to modern aircraft. Had insurers treated the early Cirri like
Cherokee Sixes (both have 300HP, CS prop, fixed gear, right?) they would
have taken one hell of a bath, and they likely did anyway.

Too few get totaled to justify the difference.

Hmm... how can you be so sure?

Best,
-cwk.

Who the hell knows. Unlike cars, just about everyone gets a completely
unique insurance quote. Perhaps somebody ought to start a database where
pilots can put in what kind of coverage they have and what they're paying
for it to help everybody shop around.

A good idea, but as an individual, you can compare by asking for quotes on
several planes at a time. If you are buying new, you can get the info from
many of the companies without a tail number.


Again, a good point. What a want to know is how many years?

I'd guess ten as a minimum. Just my WAG. Of course a blip of bad
accidents
in six months would be all it takes to send things through the roof.


If you need ten years data, then no one will innovate. The market will
not
bear it.

Bullfeathers. It didn't stop Cirrus or Lancair, and it hasn't stopped
homebuilding, where the picture is often (for good reason) far worse than
anything certified.


Bullfeathers to you Sir! (I like that expression, its kinda polite)

Their owners got insurance without 10 years data. So your point that it
didn't stop anyone was sort of missing the mark.


Also, my ten-year estimate is to see the effects of something subtle like
airbags.

Ahhh, now you tell me

Nobody buys airbags because it cuts their insurance premium. I got
ABS and LoJack on my car because I wanted to avoid accidents and get it
back
in case the dirtballs stole it. The fact that these cut my insurance by
about $200/year was icing on the cake.

Ahhh again, what if it tripled your rates to buy the only car on the market
with the new technology (even if the car were at a similar or better cost,
ala Cirrus vs. Mooney)


If the insurance companies actually came out and said that its a trade
secret, then we would all say they don't care about safety. Bad PR. It
would seem that one could stay in business more efficiently without
spending
too much to figure out the differences. Just treat all the retracts the
same except for the worse offenders. Its easy and its cheap.

The problem is that there aren't enough underwriters to foster real
competition in the market. Avemco (for example) looks at the situation and
says, "wow, if we covered retracts for 20% less than everyone else, we'd
corner the market." But then they think, "well, if we did that, everyone
else would just match our prices, and all it would mean is less money for
us." Market theory teaches that when it comes to the number of companies
in
a market, "four are few, and six are many." IIRC there are three or four
major GA underwriters.

Okay, I hear you. But what if Avemco only discounted the Mooneys, and
charged the same or more for the others (based on Richard Collins data being
proved out in claims)? Would they not then be more profitable than the
competition by attracting more than their fair share of the better retract
business?

Also, what you say brings up an idea. Perhaps one year is not enough data
for claims because each insurer does not have a wide enough pool. Perhaps
they all need to provide their claims data to a third party, and then buy
back the overall fleet results in order to change rates to reflect the total
fleet results.


Not just the Cirrus, even Diamond. I say "even Diamond" because if you
look
at the numbers it is an over the top revolution in safety. They will
show
you lots of little things they did to make their planes safer, and it
appears to work. However, lots of people from the other camps are saying
they are just lucky. At some point, it doesn't ring true to keep saying
that. Also, Lancair seems to have taken the note of Diamond's changes
and
incorporated many of them, including full crash cage testing on the 400.

Again, protection-of-life features do not necessarily translate into lower
costs for insurers unless they reduce hull losses too. Perhaps these new
glass panels will make IFR easier and thus reduce the number of accidents
due to disorientation. Or maybe they'll just lure more VFR pilots into IMC
with predictable results. Time will tell. Either way, rates will not come
down without a pretty substantial reduction in accident rates and no one
is
predicting that for anybody.

Hasn't Diamond had a reduced incident as well as fatality rate?


I
don't blame the insurers on the Cirrus at all. Its not the parachute,
its
the claims. The darn things were all crashing into little bits until
they
got the training regimen in place, and fixed the chutes. Now they seem
to
be doing much better, and for me, another year of Cessna level accident
records will convince me.

All of which appears to justify the "new equals bad" approach of the
insurers to modern aircraft. Had insurers treated the early Cirri like
Cherokee Sixes (both have 300HP, CS prop, fixed gear, right?) they would
have taken one hell of a bath, and they likely did anyway.


Ahhh, but they did treat Diamonds like Cessna's and appear to be making out
like fatcats. Besides, if they really do take that approach, isn't it just
proving my point that they reduce innovation, and are therefore reducing
safety?


Too few get totaled to justify the difference.

Hmm... how can you be so sure?

Well, you got me, I guess I am not that sure after all. I think I was
basing this on fatality rates, but a plane can get totaled without a
fatality. I reall do not know, so I have to admit, its a guess. Another
reason for publishing claims info.

PS I really appreciate your perspective on this, you are helping me reshape
my opinions and sharpen some of my arguments.

"Dude" wrote in message
news
Who the hell knows. Unlike cars, just about everyone gets a completely
unique insurance quote. Perhaps somebody ought to start a database where
pilots can put in what kind of coverage they have and what they're
paying
for it to help everybody shop around.

A good idea, but as an individual, you can compare by asking for quotes on
several planes at a time. If you are buying new, you can get the info
from
many of the companies without a tail number.


The power of the database is its depth. Assuming you could get 10% of pilots
or so to use it, it would give us a lot more insight into this market.
Assuming that insurers are indeed milking us, or certain segments of the
market, this would also provide a data set that would help convince a new
company to enter the market.


Nobody buys airbags because it cuts their insurance premium. I got
ABS and LoJack on my car because I wanted to avoid accidents and get it
back
in case the dirtballs stole it. The fact that these cut my insurance by
about $200/year was icing on the cake.

Ahhh again, what if it tripled your rates to buy the only car on the
market
with the new technology (even if the car were at a similar or better cost,
ala Cirrus vs. Mooney)


I doubt it has that much effect. We're talking about toys that cost anywhere
from a quarter to half million dollars, and it is a pretty rarefied group of
people that can afford that. Yes, there are probably a few marginal
customers who just can't justify another $500 per month to own an SR-22
versus a new 182, but I doubt it's significant.

A much more interesting insurance question right now is the Sport Pilot/LSA
segment of the market. This is going to be much more price-sensitive and
potentially a lot larger. It will be interesting to see how this evolves.

Okay, I hear you. But what if Avemco only discounted the Mooneys, and
charged the same or more for the others (based on Richard Collins data
being
proved out in claims)? Would they not then be more profitable than the
competition by attracting more than their fair share of the better retract
business?

Well, I suspect this *is* going on, particularly with light twins. If you
read insurance threads here you'll often see cases where one insurer offers
a significantly (15%) lower rate than the others. The issue is that
information moves much more slowly. Airlines, for instance, change fares
constantly, but they are all published onto the SABRE network in near-real
time so competitors see very quickly what's going on and can respond in kind
if desired. Insurers probably need a minimum of a few months to see these
sorts of trends. Again, this is a case where a master database could help
accelerate things.

However, it does have a possible downside in that it diminishes the value of
price-cutting. If an insurer starts offering significantly-reduced rates on,
say, Mooneys, it will take some time before the other insurers notice. In
this time they will scoop up a lot of customers. Then the others will cut
their rates too, at which point the advantage will disappear. So the more
time it takes for your competitors to realize you cut your prices, the
higher the ROI on your price cutting. Now, you also need to consider that
cutting prices will initially cost you money since you're also going to be
offering lower rates to customers you already have. So the key is to catch
enough new customers to make up for lost revenue from existing ones. If your
competitors can respond to price cuts more or less instantly, then it
eliminates the incentive to do so. This, coincidentally, explains why the
"we will not be undersold" guarantees you see in ads are actually ways of
discouraging price competition.

So in the end the key is to have a lot of companies in the market. This way
you always have someone upsetting the cozy equilibrium that favors the
insurers and forcing everyone else to come along. The
four-is-few-six-is-many rule is derived by observation, and there remains a
Nobel to be won by the economist who gives a good crisp mathematical
justification for it.

Also, what you say brings up an idea. Perhaps one year is not enough data
for claims because each insurer does not have a wide enough pool. Perhaps
they all need to provide their claims data to a third party, and then buy
back the overall fleet results in order to change rates to reflect the
total
fleet results.

I don't see how this would benefit the insurers. Assuming they are
overcharging, they have no reason to want to stop.

with predictable results. Time will tell. Either way, rates will not
come
down without a pretty substantial reduction in accident rates and no one
is
predicting that for anybody.

Hasn't Diamond had a reduced incident as well as fatality rate?

Perhaps, I don't know. Again, the key is to figure out why. Perhaps the
reputation of the Diamond as a "safe" airplane attracts safety-oriented
pilots who are going to be safer no matter what airplane they fly. I am very
open to believing that a plane can be made more crash-worthy, and the
Diamond clearly is. I am less persuaded that there is that much more to be
done to make planes safer to fly in day VFR conditions. Is there that much
that can be done to improve stall-spin characteristics? Can we make planes
that much easier to land in crosswinds? Of course, there is always
something, but most accidents begin with bad judgment.


Ahhh, but they did treat Diamonds like Cessna's and appear to be making
out
like fatcats. Besides, if they really do take that approach, isn't it
just
proving my point that they reduce innovation, and are therefore reducing
safety?


Well, this is the way of all flesh. Prices tend to go up quickly, and come
down slowly. Yes, no question insurers do occasionally milk certain market
segments.


PS I really appreciate your perspective on this, you are helping me
reshape
my opinions and sharpen some of my arguments.


IMHO the real problem is not insurers, it's the FAA certification process.
To answer one of my own questions, it would seem that the data stream
available in the G1000 ought to be sufficient to construct a warning device
that could predict many of the potential stall-spin scenarios. For instance,
if you're buzzing around pattern altitude near a field and have the traffic
frequency tuned, you're probably flying the pattern. Now, let's watch the
airspeed trend, and sound an alarm if it starts slowing down rapidly on the
base-final turn. "Speed up, speed up!" would probably prevent a non-trivial
number of such accidents, though surely not all. You could construct similar
routines for plenty of other scenarios. However, getting this approaved by
the FAA and your company's legal department would be a nightmare. Neither of
these have *anything* to do with the insurance companies.

-cwk.

The power of the database is its depth. Assuming you could get 10% of
pilots
or so to use it, it would give us a lot more insight into this market.
Assuming that insurers are indeed milking us, or certain segments of the
market, this would also provide a data set that would help convince a new
company to enter the market.



Well, what I am shooting for is for a more responsive insurance market that
provides information on the safety of the planes through pricing. In the
long run, the more dangerous planes would be reduced, while the safer ones
would thrive, and the overall result would be added safety with lower costs
for everyone. The insurers would supposedly benefit from lowered claims
unless you believe in the theory that they LIKE larger claims.



I doubt it has that much effect. We're talking about toys that cost
anywhere
from a quarter to half million dollars, and it is a pretty rarefied group
of
people that can afford that. Yes, there are probably a few marginal
customers who just can't justify another $500 per month to own an SR-22
versus a new 182, but I doubt it's significant.


You know, I hate to admit this, but you seem to be absolutely correct.
People ARE buying a new Cirrus despite the price of insurance. However, I
think buyers may be different from the used ones.

This makes me wonder what happens to the resale values. How much is the
free training worth as part of a new Cirrus. If you want a used one, do you
haev to pay for the school to get insured?


A much more interesting insurance question right now is the Sport
Pilot/LSA
segment of the market. This is going to be much more price-sensitive and
potentially a lot larger. It will be interesting to see how this evolves.


I can't figure out how it will get very large unless Sport pilots are
allowed under the class B umbrella. I know they are not allowed in the
Bravo, but can they go under? Can the LSA's go into B with a PP as PIC? Is
that all decided?


Okay, I hear you. But what if Avemco only discounted the Mooneys, and
charged the same or more for the others (based on Richard Collins data
being
proved out in claims)? Would they not then be more profitable than the
competition by attracting more than their fair share of the better
retract
business?

Well, I suspect this *is* going on, particularly with light twins. If you
read insurance threads here you'll often see cases where one insurer
offers
a significantly (15%) lower rate than the others. The issue is that
information moves much more slowly. Airlines, for instance, change fares
constantly, but they are all published onto the SABRE network in near-real
time so competitors see very quickly what's going on and can respond in
kind
if desired. Insurers probably need a minimum of a few months to see these
sorts of trends. Again, this is a case where a master database could help
accelerate things.

However, it does have a possible downside in that it diminishes the value
of
price-cutting. If an insurer starts offering significantly-reduced rates
on,
say, Mooneys, it will take some time before the other insurers notice. In
this time they will scoop up a lot of customers. Then the others will cut
their rates too, at which point the advantage will disappear. So the more
time it takes for your competitors to realize you cut your prices, the
higher the ROI on your price cutting. Now, you also need to consider that
cutting prices will initially cost you money since you're also going to be
offering lower rates to customers you already have. So the key is to catch
enough new customers to make up for lost revenue from existing ones. If
your
competitors can respond to price cuts more or less instantly, then it
eliminates the incentive to do so. This, coincidentally, explains why the
"we will not be undersold" guarantees you see in ads are actually ways of
discouraging price competition.

So in the end the key is to have a lot of companies in the market. This
way
you always have someone upsetting the cozy equilibrium that favors the
insurers and forcing everyone else to come along. The
four-is-few-six-is-many rule is derived by observation, and there remains
a
Nobel to be won by the economist who gives a good crisp mathematical
justification for it.


That's all good stuff, but it seems to me that if you lower the price on the
"good eggs" then you might have to raise it on the "bad eggs" to make up for
that. If you can successfully drive the more claims ridden planes to your
competitor you can really stick it to him, and he may never catch up. Even
if he does, you will have a stack of cash for your next move that he will
not have.


Also, what you say brings up an idea. Perhaps one year is not enough
data
for claims because each insurer does not have a wide enough pool.
Perhaps
they all need to provide their claims data to a third party, and then buy
back the overall fleet results in order to change rates to reflect the
total
fleet results.

I don't see how this would benefit the insurers. Assuming they are
overcharging, they have no reason to want to stop.


They are not overcharging, they are not being discriminating enough. This
has too affects. One, it raises claims because it does not discourage the
use of poorly designed planes. Two, it reduces overall safety by the same
mechanism.


with predictable results. Time will tell. Either way, rates will not
come
down without a pretty substantial reduction in accident rates and no
one
is
predicting that for anybody.

Hasn't Diamond had a reduced incident as well as fatality rate?

Perhaps, I don't know. Again, the key is to figure out why. Perhaps the
reputation of the Diamond as a "safe" airplane attracts safety-oriented
pilots who are going to be safer no matter what airplane they fly. I am
very
open to believing that a plane can be made more crash-worthy, and the
Diamond clearly is. I am less persuaded that there is that much more to be
done to make planes safer to fly in day VFR conditions. Is there that much
that can be done to improve stall-spin characteristics? Can we make planes
that much easier to land in crosswinds? Of course, there is always
something, but most accidents begin with bad judgment.


I have to say that Volvo does not make the safest cars by crash statistics,
yet I believe they do benefit from exactly this phenomenon. There is sense
in the safer population theory, but I think its so marginal as to be almost
a non factor. After all, did Cirrus NOT attract safe minded individuals
with the parachute and all their marketing?


Ahhh, but they did treat Diamonds like Cessna's and appear to be making
out
like fatcats. Besides, if they really do take that approach, isn't it
just
proving my point that they reduce innovation, and are therefore reducing
safety?


Well, this is the way of all flesh. Prices tend to go up quickly, and come
down slowly. Yes, no question insurers do occasionally milk certain market
segments.


PS I really appreciate your perspective on this, you are helping me
reshape
my opinions and sharpen some of my arguments.


IMHO the real problem is not insurers, it's the FAA certification process.
To answer one of my own questions, it would seem that the data stream
available in the G1000 ought to be sufficient to construct a warning
device
that could predict many of the potential stall-spin scenarios. For
instance,
if you're buzzing around pattern altitude near a field and have the
traffic
frequency tuned, you're probably flying the pattern. Now, let's watch the
airspeed trend, and sound an alarm if it starts slowing down rapidly on
the
base-final turn. "Speed up, speed up!" would probably prevent a
non-trivial
number of such accidents, though surely not all. You could construct
similar
routines for plenty of other scenarios. However, getting this approaved by
the FAA and your company's legal department would be a nightmare. Neither
of
these have *anything* to do with the insurance companies.

-cwk.


I here you there.