Insurance Executive says $M$ makes $ense

$M$ sign
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Many reluctant to do SMS because it is cost with no cash benefit

USAIG CEO says that operators with SMS will have lower premiums

Installing SMS with SME brings long term results

 

ICAO and FAA have long advocated that aviation safety will reap great benefits from Safety Management System implementation. Mandatory implementation of this advanced risk management methodology began with the airlines. Initially, the carriers complained that the process imposed excessive overhead costs. However, as the results were documented, these organizations recognized that the safety benefits outweighed and administrative expenses.

SMS numbers

 

 

 

Though not yet mandatory, business aviation has resisted the utilization of SMS in their flight cultures. The companies that fly aircraft for their businesses have complained that they cannot afford to staff their aviation departments to make the required data entries or to analyze the resulting safety analysis.

The lessons of SMS have been translated into the kinds of hard data that impress the internal business reviews and the external organizations that evaluate aviation risks. Here are a few of the definitive assessments of how this discipline is so valuable:

SMS data chart

 

 

 

 

These data and practice points have been recognized by the insurance industry. That sector of the aviation business has been experiencing a long list of endogenous (Max 8, lower flying hours) and exogenous (pandemic, weather) factors are contributing to  massive aviation premium increases 25% on average. The impact for high risk operations (i.e., single-pilot aircraft operators, owner-flown aircraft, single-pilot charter operators) are being hit with even higher rates ( 50 to 150 percent). Those costs are beyond your control.

 

 Six months ago, it was predicted that SMS might be a proactive approach to resisting increased premiums. In an article assessing the cost/benefit value of SMS, the author made the following cogent comments:

  1. Better safety culture
  2. Improved safety in operational environment
  3. Better compliance results
  4. Less accidents
  5. Less unacceptable safety incidents
  6. Better safety-decision making
  7. More safety data
  8. Improved safety documentation
  9. Better performance on inspections/audits (i.e., better interaction with oversight agencies)
  10. Better reputation among consumers and in media

Implementation of SMS by an SME makes sound business sense. Experience with previous  assignment in installing this discipline reveals effective strategies MUST effectively inculcate senior management into this safety culture. Prior work also adds credibility to the SMEs (link) in comparison to internal facilitators; the SME, likely, has seen a similar issue before and have worked through the alternatives. An outsider will likely be more objective about assessing an identified possible risk than one within the organization who may have been for the system being discussed as a possible weakness.

sms top to bottom

 


USAIG’s Brogan Stresses Role for SMS in Underwriting

by Kerry Lynch

– November 29, 2021, 12:19 PM

USAIG CEO Brogan

 

Aviation insurers are looking at safety management systems (SMS) as an “extremely important tool” when evaluating risk, said John Brogan, president and CEO of United States Aircraft Insurance Group, stressing the need for companies to fold such an approach into their operations. “The insurance industry is behind it and believes in it,” Brogan told attendees at the recent Corporate Jet Investor Miami event.

He noted the stress the insurance market has come under by a number of factors—from rising costs to liability trends—and said, “That’s where safety management systems come into play for us.” While it is still too early to determine quantitatively, he said insurers, in general, see that SMS programs are “moving the needle on safety. They’ve done it on the airline side and the airlines have reaped the benefits…with the reduced accident rate and reduced overall insurance.”

General aviation is not there yet, Brogan added, “But I can assure you that your aviation underwriters are looking for that. Further, underwriters are not just looking for a checked box that a company has an SMS. “The underwriters want to visit. They want to look under the hood and feel the SMS. They want to feel that it’s part of your culture and that it’s active,” he said. “That will be an ingredient in the soup for underwriters pricing the risk.”

sms culture chart



 

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