Understanding the Risks of Private Aviation

published March, 2007 - On the Risk and InsuranceNewsNet, July, 2007 World News Network, July, 2007, ProducersWEB, October, 2007

Understanding the Risks of Private Aviation

Executive Summary

With the tragic accident in 2006 of Yankee’s pitcher Corry Lidle shining a spot light on the potential risks involved with private aviation, some in the life insurance industry have cast a concerned eye on their exposure when covering a licensed pilot. Underwriters are looking for more information to evaluate the latest crash data as well as advancements in avionics and safety technology to better understand and quantify the risks involved with flying. Often a private pilot will be an individual of substantial net-worth and most likely covered by life and disability insurance worth millions of dollars. In this article we will provide some basic reference information to better inform underwriters and claims examiners for cases involving a private pilot. Among the areas that we will cover: aviation basics, levels of licensing, technological advancements, and statistics that categorize and quantify crash scenarios.

Introduction

There are four basic areas to understand when considering risks associated with a private pilot:

Aviation 101:
· Licensing
There are a variety of categories for a private pilot license: Student, Recreational, Private, Commercial, and ATP. Pilots are also rated for flying using visual (VFR) reference and/or instrument (IFR) reference. An instrument rated pilot is able to fly relying solely on their cockpit instrumentation in situations of reduced or zero visibility. Those pilots possessing a license designation of “private pilot” represent the highest percentage of crash totals among the license types. As crashes related to pilot error account for as much as 80% of all incidents; training, licensing and experience are all critical safety measures.
· Aircraft
Private planes are categorized across three classes of fixed-wing general aviation aircraft: single-engine fixed landing gear, multi-engine retractable landing gear and multi-engine. Other classes of aircraft would include jet engine, sport, glider, antique, and homebuilt aircraft such as an ultra-light. Single-engine aircraft account for the highest crash totals, and although multiengine aircraft have far fewer accidents, they are far more likely to be fatal when they do occur. Statistics show that the more complex the aircraft the greater the chances of fatalities in an accident. In fact, the "lethality index” (percentage of accidents that result in death) in a single-engine aircraft is about 10% as compared to multi-engine aircraft at about 50%.
· Flight Hours
Private pilots are also ranked by actual flight hours in a specific type of aircraft. A pilot with less than 500 hours is considered a novice and generates the highest percentage of crash totals. Ironically, pilots with over 4,000 hours are considered very experienced but as a group represent a not insignificant percentage of crash totals—possibly indicative of over confidence and higher risk tolerance for more experienced pilots. Over the last decade there was a 26% decrease in accidents per 100,000 hours flown and a 25% decrease in fatalities.
· Type of Use
There are three categories of non-commercial aviation: personal/recreational, business (uncompensated piloting) and corporate (compensated piloting). In terms of safety, each of these categories is successively safer than the other. Removing commercial aviation from the equation, the remainder of all flying across the three remaining categories breaks down as follows: Personal/recreational aviation accounts for 50% of all flying but 76% of fatal accidents, business use accounts for 15% of aviation and 3% of fatal accidents, and lastly corporate aviation accounts for almost 6% of flying and less than one half of 1% of fatal accidents.

Highlights from crash statistics (2005 AOPA ASF Nall Report - www.aopa.org):
· There has been a 25% decrease in total and fatal accidents over the reported ten year period—and within this period, since 2003, there has been a 7% decrease in accidents and a 3.5% decrease in fatalities.
· 75% of accidents can be attributed to pilot error as compared to less than 8% attributed to mechanical problems.
· Although landing is the leading category of accidents, it is one of the least likely to cause fatalities (due to the slower speed of approach and airport vicinity).
· Pilots using aircraft for training and recreation are 7 times more likely to have an accident than those using aircraft for business (an important distinction for insurance underwriters).
· Weather related accidents have the highest percentage chance (94%) of ending in fatalities (and are one of the most avoidable with proper planning and equipment).

Perspective Based on Experience

In October of 2006, Eli Rowe, CEO of Parameds.com (PDC), addressed the current state of private pilot safety and aviation with over 1,000 of the life insurance and reinsurance industry’s leading risk management experts attending the Fifth Annual Meeting of the Association of Home Office Underwriters (AHOU) in Las Vegas, Nevada. Mr. Rowe, a nationally recognized instrument rated pilot who flies hundreds of hours a year, is a Chief Executive who has worked in the life insurance underwriting arena for well over a decade.

Mr. Rowe, owner of a Cirrus SR-22 single-prop aircraft equipped with MFD/PFD and safety parachute, highlighted some of the recent advancements in aviation technology such as real-time satellite weather data-link and WAAS GPS, traffic collision avoidance systems, engine monitoring displays, terrain and ground proximity awareness systems, anti-icing technology, airbag seatbelts, and even the safety parachute that can be deployed in mid-air to save a crippled aircraft from crashing. Mr. Rowe pointed out that Cory Lidle’s plane, which crashed into a building in mid-town Manhattan, had many of these available technologies, and the true reason for the accident as well as the failure to deploy the parachute might never be known for sure. He also pointed out that Lidle would fit into the novice class of pilot experience measured in hours as 500 or less which statistically have the highest accident rate.

“Quite possibly,” Mr. Rowe was quoted as saying, “the headlines about many of the accidents we have been seeing with TAA (technologically advanced airplanes) might be the indirect fault of all these technological advances. The irony, in my opinion, is that some pilots may be suffering from a false measure of extra confidence that his or her equipment is a constant blanket of protection, and possibly a license to take much more substantial risks than might otherwise not have been taken. This false ‘license-to-take-chances’ might be the reason so many Cirrus’s, known to have a built in parachute for the entire plane and loaded with advanced features, have had accidents in-spite of their features.”

During the month of October, 2006, it was noted that there had been three crashes of Cirrus aircraft in less than a month that resulted in eight fatalities—the Lidle aircraft among them. The manufacturer of Cirrus aircraft urged all those operating their planes to exercise prudence when making flight plans and to not challenge the elements, or their own skill levels, with a false sense of security or increased capabilities due to all of the advanced technological and safety features.

“From a mortality and morbidity perspective”, opined Mr. Rowe, “life insurers and re-insurers need to be able to determine whether these increased safety features, that should reduce accidents, instead may possibly contribute to them as more pilots attempt to fly in conditions that might otherwise have prohibited a pilot from taking off, and as such actually increase the risk of an accident -- and ultimately mortality -- triggering a payment of policy.”

Mr. Rowe concluded by saying, “As a private pilot and an insurance industry veteran, I recognize the importance of this type of insight into quantifiable risk statistics and advancements in avionics and safety technology. Insurance underwriters are very detail oriented and constantly on the look out for accurate information to use as a basis to inform their risk evaluation process. With so much recent advancement occurring in safety and avionics and at the same time private aviation so intensely scrutinized in the headlines, the timing could not be better for underwriters to seek out the latest data on the current state of General Aviation and Technologically Advanced Airplanes.”

Conclusion
“The desire to fly is an idea handed down to us by our ancestors who, in their grueling travels across trackless lands in prehistoric times, looked enviously on the birds soaring freely through space, at full speed, above all obstacles, on the infinite highway of the air.” (Wilbur Wright)
“What is it that makes a man willing to sit up on top of an enormous Roman candle, such as a Redstone, Atlas, Titan or Saturn rocket, and wait for someone to light the fuse?” (Tom Wolfe, 'The Right Stuff,’)
Flight is arguably human-kind’s most significant “invention”. The ability to travel by air shrank the globe and made possible the world we live in today. But aviation is not just a statement on the ingenuity of human-kind; it is also a reflection of our adventurous spirit and willingness to take risks while advancing our interests (be they commercial or personal). One cannot separate the science from the art of flying just as one cannot separate the true nature of people: the pragmatist vs. the adventurer.
Perhaps this should be taken into account when measuring the risks associated with a private pilot. Technology in aviation has reached an unprecedented level of advancement and safety, yet the true determining factor of risk (as demonstrated by statistics) lies with the individual. Statistically speaking-- how well you know the applicant is probably more important than what you know about the plane they fly. How much time spent flying a particular class of aircraft is critical. How do they plan to use personal aircraft—business or recreation? Are they thrill-seekers? Will they or won’t they fly in adverse weather or visibility challenged conditions? Do they have the hours and licensing that indicates experience? Even more so than the type of plane an applicant flies--who they are as well as how and when they plan to fly may be the real key questions to measuring risk.
Bibliography
1) Krey, Neil; 2005 NALL Report, AOPA Safety Foundation, 2006
2) Landsberg, Bruce; Safety Advisors and Safety Pilot, AOPA Safety Foundation, various 1996-2006

Original version published in On the Risk March, 2007 as Underwriting in the 21st Century: Understanding the Risks of Private Aviation
"Reprinted with permission of ON THE RISK, Journal of the Academy of Life Underwriting www.alu-web.org"