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Gentlemen:

I wonder if there's a whole different way to go with this. What if the
Association was self-insured? If there were 200 members, and the limit
of insurance (liability, airplane, etc.) was $1 million, each of the
members would only be exposed for $5,000 for the first year. We would
each pay $5,000 up front, which would be invested. If we had over $1
million in claims in the first year, it would be too bad for the others,
but for $5,000 it would be a good bet. In any case, if we continued to
pay $5,000 EVERY year, we would have $1 million more capital PER YEAR,
and it would still be much cheaper than regular insurance. By the third
year, we would be able to survive multiple major claims (God forbid).
After a few years, premiums for some founding members could go down
(maybe to zero if we had no bad experiences), as determined by the
directors of the Association. As a "cooperative", we could even return
some of the premium annually based on loss experience and fund size. If the Association required the kinds of inspections and currency
training you guys have been talking about, it could be comfortable that
claims would be low. With all this being managed within an Association,
we wouldn't have the concerns, expressed by many, that it might get out
of hand. Because the focus would be on Lancairs, and we would establish
our own risk standards, we would be in a much better position than an
insurance company, which has to balance all kinds of risk. Maybe we
would have a "Risk Committee" that would design a point scale for safety
which would determine whether a plane and pilot would be admitted to the
program. Or, maybe the scale would determine a discount. As the funds
built, we could hire someone with the proper experience to manage both
the insurance and the Association activities. I think it could build
fast, since the rates could be lower than what anyone is paying right
now. We would find the most permissive state for insurance regulation
and establish it there. What do you think? I'd rather manage our own
risks and the investment of capital than some bureaucratic insurance
underwriter who has never seen a Lancair!

Brian Barbata

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Please send your photos and drawings to marvkaye@olsusa.com.