Most employers don’t tend to shop around for worker’s compensation insurance. Generally, they find an insurer and then continuously renew without giving it a second thought. However, if your insurer isn’t familiar with your aviation business, you may be paying more than you need. Here are the four most common mistakes made by aviation companies in their worker’s comp insurance.
Mistake 1: Not using the correct class code for your operation. Worker’s comp insurance premiums are based on the estimated risk and exposure. Underwriters use a set of standard class codes to help estimate the risk of an operation and using the wrong code may increase the perceived risk. For example, corporate flight department pilots should fall under 7421 Transportation of Personnel in Conduct of Business rather than 7431 Aviation–Air Charter or Air Taxi–Flying Crew.
Also, while most states use the National Council on Compensation Insurance (NCCI) codes, some states—including California and New Jersey—use their own sets of worker’s comp codes. So a corporate flight department in California would use 7424 CA&NJ Aircraft Operation–Member of Flying Crew.
Mistake 2: Submitting Incorrect Payroll Figure. Since worker’s compensation payouts are based largely on a percentage of the employee’s pay, submitting incorrect payroll figures to the underwriters estimating premiums can cause problems in the future and may even cause your worker’s compensation insurance to be terminated. Don’t guess when filling out this paperwork, and keep the figures updated if your employees receive raises in pay.
Mistake 3: Not Listing All Employee Resident States. This one can be easily overlooked, especially by companies who have pilots or other crewmembers living in states other than where the company or flight department is based. Because worker’s comp laws differ from state to state, an employee may choose to file the claim in his home state. Underwriters need to know all of the states in which the company has exposure through the residences of its employees when they set the premium.
Mistake 4: Not Requesting Prior Three Year Loss Runs. This is usually the toughest request when looking to get new competitive work comp quotes from multiple carriers. But it will have the biggest effect on the premium discount when being applied towards the overall premium.
The founder of SunSet Aviation Insurance, Ben Peterson. has been a commercial pilot and flight instructor for over 15 years. In 2012, Ben started this company to help aviation clients around the world with their insurance needs. Since then SA helped hundreds of clients worldwide and has gained trust among the aviation community.