Plus One Flyers, Inc.
Board of Directors
Insurance Deductible Plan
Committee Report
S. Kurowski, Vice President, Director
E. Archer, Ph.D., Director
23 January 2007
Updated 20 July 2007
Contents
1.0
2.0
3.0
4.0
5.0
Objectives
Data Sets Examined
IDP Claims Data Analysis
Insurance Strategy Analysis
Conclusions and Recommendations
p.2
2
3
6
11
Reasons come first. Answers come second.
- Jim Rohn, Business Philosopher
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1.0 Objectives
This committee was charged on 10/21/2006 by the Board of Directors with the following tasks:

IDP Claim Form Language Clarity – subsequent to the most recent IDP claim submission form revision
approved by the board of directors 03/16/2006, recommend for Board approval, as required, any language
clarifications necessary and consistent with IDP policy.
A revised IDP claim form and procedures document were separately and electronically submitted to the
President for Board review on 01/09/2007.

IDP Guidance – report IDP claim patterns characterized by period, cost, aircraft model, aircraft tail N,
owners, members, etc., as revealed by the club’s last several years of available operations history data,
and make relevant recommendations where possible.
The findings of this report will also be used as a part of a separately reported Directors and Officers
guidance document combining 2006 operations flight data and 2007 Membership Survey data.

Insurance Strategy Guidance – in advance of the club’s 2007 insurance policy renewal negotiations,
explore key decision factors and enumerate best available options for partial institutional / self insurance
combinations, and make relevant recommendations where possible.
2.0 Data Sets Examined

IDP Data Set
o 464 IDP claims from July 1998 to October 2006.
o Assembled XLS from paper IDP claim forms for 1998-2002 and 2005-2006 (Kurowski) and prior
IDP analysis XLS documents for 2003-2004 (Griffith).
o Normalized and binned by claim category (multiple possible per claim). Most claims having
continuation chains were “folded” into a single IDP claim having an aggregate total and cause.
o Loaded into SQL relational database table for analysis.

Flights and Tail Numbers Data Sets
o 38005 (non-maintenance, non-lost-Hobbs) club aircraft flights from 2003 through 2006.
o 76 tail numbers; aircraft data assembled and normalized from SQL database tables and paper
records files (Kurowski).
o Copied SQL relational database tables from Plus One operations database for analysis.

Insurance Loss Data Set
o 27 Insurance claims from 2000 through 2006, including estimated 12/06 gear-up landing claim.
o Assembled XLS from paper fax (Zanette, 1/2005) and PDF email (Zanette, 11/2006).
o Met with Chris Zanette of Zanette Aircraft Insurance Center 12/15/2006, and again with Chris
Zanette and W. Scott Brown Associates 01/12/2007.

Assumptions
o Kinds of IDP events are of uniform likelihood and type over the span of time of the dataset.
o Missing, incomplete or inaccurate IDP data were statistically insignificant.
o Best comparative weighting normalization is by aircraft flight hours and revenue.
o The operations flights dataset pilot identity records are currently insufficiently consistent for use in
pilot flight time correlations, mainly due to routine data entry errors.
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3.0 IDP Claims Data Analysis
Claims data were studied for trends and outlier conditions that might reveal key decision factors influencing
operational policies, particularly with respect to cost, reason, aircraft tail, aircraft model and member pilots.
3.1 IDP Claims by Reason
464 IDP claims were categorically binned by reason and sorted by weighted cost in Figure 1 and Table 1. The
charter purposes of IDP are met in the following proportions by cost:




60% owner compensation excessive aircraft damage or wear and tear.
24% insurance loss deductibles.
14% owner compensation aircraft down time.
2% member pilot payee and travel / lodging.
Loss Deductible
IDP Claim Reasons by Cost
Propeller
(multiple possible per claim)
Down-time
Loss
Deductible
24%
Tires/Brakes
4%
Wing
Gear Main
Empennage
Tires/Brakes
Mechanical Failure
Empennage
4%
Avionics
Gear Nose
Interior
Gear Main
7%
Wing
8%
Down-time
14%
Propeller
18%
Starter
Taxi/Parking
Travel/Lodging
Pilot Payee
Exterior(non-func)
Figure 1 – IDP Claims by Reason, Cost-Weighted
Amount
$89,038
$64,411
$49,465
$29,553
$25,418
$14,837
$14,623
$12,087
$10,000
$9,108
$8,839
$6,064
$5,848
Claims
31
30
49
24
18
15
69
16
32
17
50
16
16
$/Claim
$2,872
$2,147
$1,009
$1,231
$1,412
$989
$212
$755
$312
$536
$177
$379
$366
Reason
Loss Deductible
Propeller
Down-time
Wing
Gear Main
Empennage
Tires/Brakes
Mechanical Failure
Avionics
Gear Nose
Interior
Starter
Taxi/Parking
%
24.4%
17.7%
13.6%
8.1%
7.0%
4.1%
4.0%
3.3%
2.7%
2.5%
2.4%
1.7%
1.6%
Amount
$4,348
$4,303
$3,278
$3,058
$2,913
$1,823
$1,697
$1,413
$1,106
$1,080
$254
$64
Claims
24
42
18
7
33
24
15
9
7
17
3
3
$/Claim
$181
$102
$182
$437
$88
$76
$113
$157
$158
$64
$85
$21
Reason
Travel/Lodging
Pilot Payee
Exterior(non-func)
Windows
Loose equipment
Battery
Electrical
Instruments
No Start
Flight Time
Ops Fees
Unpaid Fees
%
1.2%
1.2%
0.9%
0.8%
0.8%
0.5%
0.5%
0.4%
0.3%
0.3%
0.1%
0.0%
Table 1 – IDP Claims by Reason
At a minimum, taxi/parking claims and most battery claims should be entirely preventable. When examined by
reason alone (Figure 2), claim counts were more evenly distributed and reveal no bias except to confirm claims by
count are led by wear and tear to tires, brakes and interior.
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Tires/Brakes
IDP Claim Reasons by Claim
Mech
Failure
3%
Flight Time
3%
Gear Nose
3%
Exterior
3%
Interior
(multiple possible per claim)
Down-time
Taxi/Parking
Empennage
3%
3% Electrical Tires/Brakes
12%
3%
Pilot Payee
Starter
3%
Loose equipment
Avionics
Interior
9%
Loss Deductible
Propeller
Dow n
time
8%
Gear Main
3% Battery
4%
Travel
Wing
Lodging
4%
4%
Pilot Payee
7%
Avionics
Stow ed
5%
Propeller Loss Deductible
equipment
5%
6%
5%
Figure 2 – IDP Claims by Reason
Wing
Travel/Lodging
Battery
Gear Main
Exterior(non-func)
Gear Nose
Flight Time
Mechanical Failure
Starter
3.2 IDP Claims by Pilot
For 101 IDP claims having pilot identification information, no significant pilot-specific findings were found.
 No pilot had more than two IDP claim events totaling above $1000.
 Claims over $1000 comprised 87% of all monies paid for these 101 IDP claims.
 The top 12 claims paid 51% of all monies, principally in dual engine aircraft incidents.
3.3 IDP Claims by Aircraft Model
For 163 IDP claims having aircraft identification for 47 tails from 2003-10/2006 and flight data records for that
same period were used to produce Table 2, normalized by claim count, flight count, hours flown and revenue,
sorted by $IDP/hour. Because Cessna-172s have about three times the next most common number of planes per
model in the club, in the measures below, they tend to represent the median value.
Model
Piper-PA-28RT-201
Cessna-170
Grumman-AA-5B
Socata-TB-10
Beech-Duchess
Mooney-M20K
Cessna-172RG
Champion-7ECA
Sportstar
Cessna-152
Cessna-182P
Piper-PA-28-161
Cessna-172
Cessna-182RG
Cirrus-SR22
Piper-PA-28-181
Cessna-172SP
Cessna-177RG
#
Tails
1
1
1
2
3
1
3
2
1
3
1
3
Claims
1
4
1
6
23
1
10
2
1
8
2
10
$IDP
Paid
$2,456
$7,230
$4,000
$8,848
$20,186
$1,270
$9,945
$1,226
$620
$5,983
$2,287
$3,286
Flights
20
173
177
578
1837
63
1215
437
253
2530
634
2189
1
1
4
3
1
4
3
14
10
1
$1,322
$634
$2,510
$1,371
$50
587
432
2991
2881
146
15
62
$18,944
14207
Hours
34.8
205.6
312.0
1344.2
3709.0
279.4
2367.5
510.2
287.4
3569.5
1522.6
3369.2
22120.3
1588.4
938.2
5423.3
5331.9
281.8
Revenue
$3,654
$14,656
$23,508
$108,261
$607,835
$35,073
$204,785
$39,644
$25,291
$189,723
$162,899
$242,392
$IDP
/claim
$2,456
$1,808
$4,000
$1,475
$878
$1,270
$994
$613
$620
$748
$1,144
$329
$IDP
/flight
$122.79
$41.79
$22.60
$15.31
$10.99
$20.16
$8.19
$2.81
$2.45
$2.36
$3.61
$1.50
$IDP
/hour
$70.57
$35.17
$12.82
$6.58
$5.44
$4.55
$4.20
$2.40
$2.16
$1.68
$1.50
$0.98
$IDP
/tail-hour
$70.57
$35.17
$12.82
$3.29
$1.81
$4.55
$1.40
$1.20
$2.16
$0.56
$1.50
$0.33
$IDP
/tail
$2,456
$7,230
$4,000
$4,424
$6,729
$1,270
$3,315
$613
$620
$1,994
$2,287
$1,095
$200,822
$214,936
$433,227
$527,942
$29,439
$331
$211
$179
$137
$50
$2.25
$1.47
$0.84
$0.48
$0.34
$0.83
$0.68
$0.46
$0.26
$0.18
$0.83
$0.68
$0.12
$0.09
$0.18
$1,322
$634
$628
$457
$50
$1,612,772
$306
$1.33
$0.86
$0.06
$1,263
Table 2 – Normalized IDP Claims Data by $IDP/hour for Aircraft Model
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3.4 Aircraft IDP Cost Breakeven Threshold
The IDP funding pool collects $4.50/mo per member, or about $43,200/yr from 800 members. From 2003 to 2006,
total average annual flight time was 16,200 hours/yr, giving an IDP pool average relative membership rate of
funding of $2.67/hour, which can be taken as the maximum breakeven threshold to compare with the $IDP/hour
column in Table 2. Some low-to-high tradeoffs are expected and aircraft having the fewest claims are unreliable
for policy-setting conclusions, however aircraft having more than a handful of claims and $IDP/hour rates an order
of magnitude higher than this threshold should receive further consideration, particularly with respect to the
$IDP/tail-hour column that factors in the number of each aircraft model. See 3.6 for more on cost break-even.
3.5 Claims Frequency “Density”
We examined the relationship between IDP claims frequency and amount over the spans of various combinations
of years between 1998 and 2006 to assess data sensitivity to time period (Table 3). To within a few percent
variation, IDP claims were uniformly distributed across all tested time windows for median, 95% and 99%
confidence levels, reinforcing the validity of the entire 1998-2006 data set for analytical purposes.
95%
99%
1998-2006
Years
Median
$34,375
$50,496
$57,948
1999-2006
$34,742
$51,042
$58,850
2000-2006
$34,506
$51,457
$59,373
2001-2006
$34,621
$52,306
$60,567
Table 3 – Uniform IDP Data Set Segmentation Variation
The frequency density distribution for IDP claims shown in Figure 3 (logarithmic cost scale on the horizontal axis)
indicates most claims are below $500 with a peak near $100 just below the $152 median.
Figure 3 – Non-Linear IDP Claims Frequency “Density” Distribution
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The small spike at $2,500 reflects the low-frequency single-engine insurance deductible amounts. Statistically 99%
of IDP claims are $5,000 or less, and 95% of claims are $2,500 or less.
3.6 Total Annual IDP Claims Expenses
Figure 4 illustrates IDP claims data available for the whole years 1999-2005, averaging expenses of about $32K/yr.
In (4.4) we model this more accurately at $34K/yr. The threshold calculation in (3.4) suggests the IDP pool fund
should, on average, grow annually by the difference of $42,300 and $34K, roughly $8,300 per year, assuming
current membership of about 800 pilots.
Annual Total IDP Payments
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
1999
2000
2001
2002
2003
2004
2005
Figure 4 – IDP Claim Payouts by Year, 1999-2005
At the multiyear averages of $34K annually for 16,200 flight-hours/yr gives an actual mean $IDP/hour cost
rate of $2.10/hour compared to the current-membership-limited maximum of $2.67/hour.
4.0 Insurance Strategy Analysis
4.1 Method
To inform our insurance strategy, we attempted in the following sections to determine a reasonable premium for a
primary underwriter so that their loss risk and re-insurance operating margins are covered plus a modest profit. We
further enumerated several insurance policy modifications for evaluation with the assistance of our broker.
4.2 Insurance Loss History
Insurance loss data from 2000-2006 was examined (Table 4). In “good” years, the (losses/premium) loss ratio
was consistently below 20%, and in “bad” years the loss ratio was roughly 70%. Using a five-year moving average
the loss ratios are most recently between 20% and about 30%, so we used a conservative 30% loss ratio as an
estimate for the five-year moving average at end-of-year 2007.
The underwriter(s) therefore are taking a (five-year averaged) 70% margin. Our broker said Plus One is treated
much like an FBO by reason of number of aircraft and pilots, and that FBO loss ratios were about 60% and that
around 60% to 65% was insurance profitability break-even [Zanette], implying 35% to 40% margin. As a
comparison, the auto insurance industry operates on 6% margins [Griffith].
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Table 4 – Insurance Loss History 2000-2006
All Estimates in Italic
Source: Zanette Aircraft Insurance Center 11/08/2006, 01/26/2005
Month
Loss
Paid
2006
Dec
$23,000
2005
Feb
$1,052
2004
Nov
$16,183
Oct
$4,099
Prior Hard landing damage
Jul
$4,811
Hard landing
Feb
$67,500
Year
$106,000
2003
2002
2001
2000
Description
gear up landing (est)
Hard landing
Prop strike
Loss
Ratio
Approx.
Premium
/ Yr
Appro.
Premium
/ Mo
5-Yr Moving
Avg Losses
Paid
Oct
$20,500
Ground loop
Jul
$20,207
Hard landing
Jan
$3,160
Taxi incident
Sep
$12,012
Prop strike
Aug
$44,000
Forced landing
Mar
$13,000
Landed short
Aug
$13,293
Prop strike on landing
Jul
$7,114
Prop strike on landing
Jun
$57,500
friction fire
$330,000
$27,500
$67,505
$257,963
79%
21%
$1,052
0%
$330,000
$27,500
$103,813
$208,603
67%
33%
$203,593
62%
$330,000
$27,500
$111,557
$222,366
76%
24%
3-yr moving means
74%
26%
Landing/Taxi incident
aircraft went off end of runway
Apr
$10,958
Mar
$8,348
spinner & prop damage
Mar
$7,500
fuselage severed in half
Feb
$28,945
gear collapsed, stabilizer bent
Feb
$62,500
collapsed nose strut
Jan
$5,384
Prop strike
Oct
$4,410
landed long
Sep
$13,692
Engine fire
Jul
$8,565
Prop strike
Jul
$8,063
Prop strike
Feb
$5,039
Prop damage
5-Yr Moving
Avg Loss
Ratio
7%
Liability - 2 fatal (RESERVE)
$5,000
5-Yr Moving
Avg Margin
$23,000
Hull - total loss
Jan
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Year
Losses
$43,867
14%
$310,000
$25,833
$69,012
21%
$330,000
$27,500
$201,542
77%
$260,000
$21,667
$39,769
17%
$233,935
$19,495
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4.3 Insurance Risk Model
An annual median combined insurance and IDP claim loss rate of $42K was determined. To understand the risk an
insurance company faces insuring an operation with our performance history, we ran a Monte Carlo simulation of
our insurance risk based upon IDP payments and insurance claims history data, 2001-2006, shown in Figure 5.
Monte Carlo simulations are frequently used to create full probability distributions from empirical data. (10,000
months of simulation may seem overkill but this is necessary only to produce a smooth curve with few gaps for the
low-probability events.)
Figure 5 – Model Simulation Results
Combined Insurance+IDP Risk Analysis
Our modeled monthly median loss risk, including multiple events per month, is about $3,500 or $42K annually –
half of the time the amount would be more, half of the time the amount would be less. Another way to look at this
is if we had a cumulative total deductible of $42K/yr, in which case, on average, half of the years we’d need
to file insurance claims, and the other half the deductible would cover all losses.
To within a 95% confidence we should expect no monthly losses larger than $62,500, or not to exceed $750,000
annually. Over an eight-year period, Table 4 shows an annual insurance-only losses average roughly $100K; with
the average annual IDP cost of about $30K the total annual losses are about $130K. Repurposing the $330K
annual premiums toward a 95% confidence balance would therefore build a cash reserve at roughly $200K
annually, or 4 years to exceed $750K. While a $750K cash balance should cover 95% of our risk in a given year,
the remaining 5% still requires re-insurance coverage; and large losses, once paid, could quickly deplete that
balance. Unless there’s an initial working cash balance and a rapid cash build-up mechanism, self-insurance for the
95% case could never be safely initiated.
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However, this 95% confidence limit estimate of $750K is a very conservative overestimate of the actual amount,
reflecting the simplicity of the simulation. The model does not take into account switching of strategies following
multiple high-loss events, which would likely happen in reality. A more accurate (and certainly lower) estimate
would require the incorporation of these contingencies into the model. Nevertheless, we conclude self-insurance at
$750K to be ruled out as an option.
4.4 IDP Fund Risk Model and Fund Cap Estimate
To a 99% confidence level, the IDP fund was modeled to be safely capped at a balance of $58K, and the median
expected IDP claim loss is $34K/yr, in agreement with the approximate actual seven-year average of $32K in (3.6).
The IDP fund operates in fact as a small self-insurance layer. A second simulation was run to model IDP risk alone
to assess the balance necessary for a 95% and 99% confidence of coverage within a given year.
Figure 6 – Model Simulation Results
IDP Fund Risk Analysis
We regarded this $58K figure as a maximum IDP fund cap amount, after which the IDP fund would cease to grow
and its source monies safely but opportunistically redirected to other purposes. However, when the IDP fund
balance falls below this maximum funding must resume until the cap is again achieved using a monthly “top-offIDP-first” process.
4.5 Expected Insurance Premium Reduction Estimate
Two methods of expected insurance premium reduction estimate boundaries are given below.
Upper Limit – 30% Reduction. We assumed the following: (a) 20% profit margins are typical and reasonable
for aircraft insurance underwriters; (b) Zanette’s comments in (4.2) regarding our insurance treatment being most
similar to FBOs having 60% loss ratios, are accurate; and (c), our forecast 2007 five-year average loss ratio trend
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is maintained at 30%, or improves. We further assume that insuring an FBO is a profitable business. An FBO loss
ratio of 60% with a 20% profit margin leaves a 20% operating margin, suggesting, in contrast, our insurers are
enjoying a 50% profit margin.
From these assumptions and figures we estimate a 30% reduction upper limit (about $8,300/mo) in our
insurance premiums would reasonably put us on par with insured FBOs, without any special policy modifications.
Lower Limit – 10% Reduction. Several options were explored for a minimum premium reduction. For (a) and
(b), we sought strategies by which the club’s assumption of additional risk on the front end of a loss would be
compensated by savings better than the median additional risk itself.
(a) 10% for $42K/yr aggregate deductible benefit tradeoff. We assumed the median annual loss modeled
in (4.3) represented a cumulative annual deductible. Note a $42K/yr deductible is also the approximate annual
funding rate of the IDP fund estimated in (3.4). When Table 4 is adjusted by reducing losses by at least $42K less
the deductibles already paid for those claims, our five-year estimated average loss ratio drops to a 3-year
trended 26%, down from 30% used to forecast the 2007 five-year loss ratio in (3.2).
Furthermore, in (3.1) we saw 24% of the average IDP fund payout goes to insurance deductibles, about $8K/yr
(median modeled, less the member’s 20% of the deductible) though a more conservative figure is the seven-year
actual average of about $13K/yr [IDP data set]. An annual $42K/yr deductible would therefore require an
additional $24K/yr to $29K/yr IDP payout difference, raising the IDP fund payout average to $60K/yr to $65K/yr.
However, a modest 10% decrease in insurance premiums, about $30K/yr, balances this expense.
(b) 10% for a doubled loss deductibles benefit tradeoff. Doubling the current SEL $2,500 and MEL $5,000
deductibles would double the approximately $13K/yr seven-year mean IDP-paid amounts to about $26K/yr. Again,
this amount is just offset by a 10% ($30K/yr) decrease in insurance premiums to balance this expense.
(c) 10% for loss ratio performance. Plus one had single-digit loss ratios for 2005 and 2006 (Table 4). If
the safety program remains as effective we estimate the five-year mean loss ratio will fall below 20% in 2007,
down 13% from 33% in 2005. This difference justifies an expected minimum 10% overall premium reduction.
4.6 Insurance Policy Renewal Options
Some mandatory insurance policy requirements include, but are not limited to:
 Add/drop aircraft dynamic policy amendments (monthly billing).
 Members as named insured.
 Member non-subrogation protection.
Below are enumerated several cost-reducing alternative policy features or modifications:
 Status quo, for a loss ratio performance (“LRP”) 10% reduction
o Premium – currently $27,000/mo or $330,000 annually.
o $2,500 SEL, $5,000 MEL deductibles, each and every loss (“EEL”).
 Aggregate cumulative annual deductible (“ACD”) on the order of the $42K/yr median loss, for a 10% reduction.
 Doubled each-and-every-loss deductibles (“EELD”), for a 10% reduction.
 Profit commission on renewal (“PCOR”, 15% of 70% hull less losses), up to 7% returned (2006 policy data).
 Specific combinations of the above:
o Status quo w/ LRP 10% reduction = 10% saved
o Status quo w/ LRP 10%, PCOR (up to) 7% returned = 10% to 17% saved
o Status quo w/ LRP 10%, ACD 10% = 20% reduction, 10% to 20% saved (median modeled)
o Status quo w/ LRP 10%, ACD 10%, 2x EELD = 30% reduction, 10% to 30% saved (median modeled)
The viability of these alternatives must be evaluated with the assistance of our broker and underwriter. Unless an
option results in greater savings in premiums than the cost to assume up front additional risk, no value is gained.
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5.0 Conclusions and Recommendations
5.1 IDP Findings Summary
The IDP Fund is successfully meeting its charter purpose (see 3.1). Other specific findings include:











No pilot had more than two IDP claim events totaling above $1000.
Claims over $1000 having pilot data comprised 87% of all monies paid for those 101 IDP claims.
Top 12 IDP claims having pilot data paid 51% of all monies, principally in dual engine aircraft incidents.
Median IDP claim amount is $152.
C-172 models are the median aircraft by tail count.
Actual average IDP hourly cost basis is $2.10/hour at 16,200 hours/year.
Current membership (800 count) IDP funding rate is $2.67/hour.
Most complex and high-performance aircraft exceed the $2.67 IDP funding rate (by hours or flights).
Capping and maintaining the fund at $58K provides a 99% coverage confidence for any given year.
IDP claims data from 1998 through 2006 was remarkably uniform and is a valid data set for analyses.
Median annual IDP payout is $34K/yr (modeled), and $32K/yr (actual).
5.2 IDP Fund and Policy Recommendations
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Collect and manage IDP claims and data electronically.
Aircraft having an IDP hourly cost basis on the order of 5x to 10x per hour or more above median should
be considered for a supplementary cockpit hourly IDP funding fee at some fraction of the difference.
Taxi/parking claims and most battery claims (and related down time) receive attention as avoidable.
Cap the IDP Fund at $60K and regularly top it off as needed.
Pilot- or owner-oriented policy changes are not required.
5.3 Insurance Strategy Findings
Based upon our successful safety program and low multi-year loss ratios, there is compelling evidence that Plus
One is overpaying by at least 10% and perhaps as much as 20%.
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10% reduction (lower limit) of estimated insurance premium is minimally expected.
30% reduction (upper limit) of estimated insurance premium is plausible.
More than 30% is remotely plausible, mostly by transferring up to 20% of the premium as front-end risk to
IDP in various forms of deductible increases (see 4.5 and 4.6).
Total median insurance + IDP claims losses is $42K (modeled).
Self-insurance is unachievable to 95% confidence with present club resources.
Self-insurance is achievable to 50% confidence with present club resources in the form of a $42K/yr
aggregate deductible.
Most recent five-year moving average loss ratio is 21%, suggesting underwriter margins of 79%.
Eight-year moving average annual combined insurance and IDP claim losses are roughly $130K/yr.
5.4 Insurance Strategy Recommendations
The risk analysis in (4.3) and loss ratio performance premium reduction estimate in (4.5)(c) support an expectation
of at least a 10% premium reduction with no tradeoffs. The implementation of an insurance policy aggregate
annual deductible on the order of $42K/yr is viable if it results in better than an additional 10% premium reduction.
A similar rationale applies for doubled or other multiples of the deductibles. However, the 30% upper limit
estimated in (4.5) suggests we should probably expect that in addition to a minimum 10% reduction for loss ratio
performance, no more than one other policy renewal option will be acceptable to the underwriter for more than a
10% reduction, suggesting a 20% minimum target premium reduction expectation and a 30% upper limit
expectation without transfer of additional front-end risk to IDP.
Plus One Flyers, Inc. Confidential
2007 Board of Directors IDP Committee Report
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3/8/2016