At their next annual meeting, aerial applicators may want to bring some ketchup. The condiment might make “eating” a new 25 percent to 50 percent insurance premium increase a tad more palatable. And why do this at the annual meeting? Well, you know what they say about misery loving company…
“The insurance price hike hasn't hit us yet — we renewed insurance last August. But the aerial applicator industry is seeing big across-the-board rate increases for renewals,” said Mark Hartz of Grand Prairie Dusters in Almyra, Ark.
Even under the best scenario aerial applicators will be relieved of much cash.
“Our insurance was around $45,000 last year. If we split the difference and have, say, a 30 percent increase, we're staring at $60,000 for insurance. That's a huge leap in operating costs,” said Hartz, who also serves as treasurer for the National Agriculture Aviation Association.
The hike isn't just for those that turn in claims left and right. Even pilots that have never had a claim are getting hit with the hike.
“There seems to be no discrimination — people with pristine records are suffering the increase, too. Actually, that isn't exactly true because those with numerous claims may not even get their insurance renewed.”
Not all of this is due to the terrorist events of Sept. 11. But Hartz argues that the terrorist act has certainly been the catalyst that's allowed insurance companies to make such a bold jump.
Insurance spokesmen said losses in the stock market, Hurricane Allison, Enron, claims against the insurance companies and other things figured into the aerial applicator jump. The industry said the aforementioned group has cost, or will cost, billions of dollars.
Hartz said he believes them. “No doubt those all figured in. But 9-11 provided the impetus — greased the skids, so to speak — for their actions. I understand that the insurance companies must turn a profit. Perhaps they couldn't absorb any more losses prior to 9-11. Then the terrorists hit and it was imperative they do something. I don't know.”
Could more hikes be coming next year?
“No one dares look that far into the future. Everyone in the industry just wants to look at the insurance cycle we're currently in. I'm looking at this in a shortsighted way. If this trend continues, though, then agricultural aviation will cease to exist. No ag pilot can continue to absorb these kinds of escalating operating costs. I say ‘absorb’ because our customers are already in iffy situations.”
Hartz said as there's yet no farm bill, there's still a lot up in the air. Many farmers can't make their operations cost-flow and others are barely treading water. That means ag pilots are likely going to have to eat the current insurance hike because farmers are “as tight as a banjo string themselves.”
If aerial applicators get hit with another insurance rate increase next year, applicators will have little choice but to pass the cost on.
“That's a for-sure scenario. And that's likely not only to irritate our farming customers, but would exacerbate their financial woes. This has major implications. For those reasons, I pray this is a one-time hike. And if the companies are going to hit us again, I wish they'd tell me so I can get out of the business now, today.”
Aerial applicator insurance covers not only plane problems, but drift claims. In some cases, chemical drift claims mean sizable amounts of money. All that is included in the current premium cost jump.
Another problem aerial applicators have is the limited market of insurance providers. Many companies that formerly provided insurance have gotten out. There are now only three companies that Hartz and colleagues can get competitive rates from.
“It isn't a monopoly in the strictest sense, but it increasingly has the looks of one. We must have insurance. Very few applicators are stout enough to go it alone and stand the losses that can occur. And if you owe any money — which is the norm with the price of aircraft nowadays — the banks require insurance.”
There are no bargains to be had insurance-wise, said Hartz. If you do find a bargain, he advises extreme caution.
“I'd be very leery of a great applicator insurance deal. A company offering such things may not have the financial backing to cover losses if something happens.”
New EPA regulations
Another big thing on the horizon is the norm for both aerial and ground applicators — is proposed label language currently before the EPA. The EPA is contemplating a rewrite of label language and the insertion of new things onto chemical labels.
“There is some highly restrictive language that would be very detrimental to farmers in general and applicators specifically. On our Website (www.agaviation.org) we take on all the issues that will affect our industry.”
Among other things, Hartz said, the EPA doesn't want applications applied unless wind are between 3 and 10 miles per hour.
“They also want buffer zones around a field being sprayed when a susceptible crop is adjacent — you could have all four sides of a field that couldn't be sprayed. How are farmers going to take it when we can't get their whole field sprayed? There's a whole host of things like this that EPA is proposing, a grab bag of detrimental things. If these things pass, EPA could go out and hang anyone with the new regulations at any time. This is just more bullets to put in their gun.”
Have farmers become more up-to-date on aerial applicators issues?
“Word still needs to get out. There are some that understand what we're up against. But many still don't understand we're in this together. We need farmers' help with this EPA thing. There's a public comment period until the end of March.”