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AVIATION INSURANCE
CHAPTER:-1
INTRODUCTION OF INSURANCE
INTRODUCTION TO SERVICE SECTOR
The service sector accounts for more than half of India's GDP:
51.16 percent in 199899. This sector has !ained at the e"pense of #oth
the a!ricultural and industrial sectors throu!h the 199$s. The rise in
the service sector's share in GDP mar%s a structural shift in the Indian
econom& and ta%es it closer to the fundamentals of a developed
econom& in the developed economies( the industrial and service
sectors contri#ute a ma)or share in GDP *hile a!riculture accounts
for a relativel& lo*er share+.
The service sector's share has !ro*n from ,-.69 per cent in
199$91 to 51.16 per cent in 199899. In contrast( the industrial
sector's share in GDP has declined from 5.-8 per cent to .$1 per
cent in 199$91 and 199899 respectivel&. The a!ricultural sector's
share has fallen from -$.9- per cent to 6.8- per cent in the respective
&ears.
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/ome economists caution that if the service sector #&passes the
industrial sector( economic !ro*th can #e distorted. The& sa& that
service sector !ro*th must #e supported #& proportionate !ro*th of the
industrial sector0 other*ise the service sector !ro*n *ill not #e
sustaina#le
ithin the services sector( the share of trade( hotels and
restaurants increased from 1.5 per cent in 199$91 to 15.68 per cent
in 199899. The share of transport( stora!e and communications has
!ro*n from 5.6 per cent to 2.61 per cent in the &ears under reference.
The share of construction has remained nearl& the same durin! the
period *hile that of financin!( insurance( real estate and #usiness
services has risen from 1$. per cent to 11.,, per cent. The fact that
the service sector no* accounts for more than half the GDP pro#a#l&
mar%s a *atershed in the evolution of the Indian econom&.
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Insurance ma& #e descri#ed as a social device to reduce or
eliminate ris% of loss to life and propert&. nder the plan of
insurance( a lar!e num#er of people associate themselves #& sharin!
ris%s attached to individuals. The ris%s( *hich can #e insured
a!ainst( include fire( the perils of sea( death and accidents and
#ur!lar&. n& ris% contin!ent upon these( ma& #e insured a!ainst at
a premium commensurate *ith the ris% involved.
Definitions
In the *ords of ohn ;a!ee( valuation of ris%
Pa&ment on happenin! of a special event
The amount of pa&ment depends on the nature of losses
incurred.
The success of insurance #usiness depends on the lar!e num#er
of people insured a!ainst similar ris%.
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AVIATION INSURANCE
Insurance is a plan( *hich spreads the ris% and losses of fe*
people amon! a lar!e num#er of people.
The insurance is a plan in *hich the insured transfers his ris%
on the insurer.
Insurance is a le!al contract *hich is #ased upon certain
principles of insurance *hich includes utmost !ood faith(
insura#le interest( contri#ution( indemnit&( causes pro"ima(
su#ro!ation( etc.
CHAPTER:-2
DEVELOPMENT OF INSURANCE
Origin and Devel!"en# $ In%&ran'e
Insurance in the modern form originated in the Mediterranean
during 13/14th century. The earliest references to insurance have been
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found in abylonia! the "ree#s and the $omans. The use of insurance
a%%eared in the account of &orth Italian merchant ban#s 'ho then
dominated the international trade in (uro%e at that time. Marine
insurance is the oldest form of insurance follo'ed by life insurance and
fire insurance. The %atterns that have been used in (ngland follo'ed in
other countries also in these #inds of insurance. The origin and gro'th of
Marine Insurance! life Insurance! )ire Insurance and miscellaneous
insurance are given belo'*
1( Marine In%&ran'e
The oldest and the earliest records of marine %olicy relates to a
Mediterranean voyage in 134+. In the year 14,,! a boo# 'ritten by a
merchant of )lorence! indicates %remium rates charged for the shi%ments
by sea from -ondon to isa. Marine Insurance s%read from Italy to
trading routes in other countries of (uro%e.
Marine In%&ran'e in India
There is evidence that marine insurance 'as %racticed in Indiasome three thousand years ago. In earlier days travelers by sea and land
'ere e%osed to ris# of losing their vessels and merchandise because of
%iracy on the o%en seas. Moreland has maintained that the %ractice of
insurance 'as 0uite common during the rule of #bar to urangeb! but
the nature and coverage of insurance in this %eriod is not 'ell #no'n. It
'as the ritish! insurers 'ho introduced general insurance in India! in its
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modern form. The ritishers o%ened general insurance in India around
the year 1+,,. The first com%any! #no'n as the un Insurance ffice
-td. 'as set u% in 6alcutta in the year 1+1,. This follo'ed by several
insurance com%anies of different %arts of the 'orld! in the field of marine
insurance. In 17+2! the government of India nationalied the general
insurance business by forming "I6.
2( Li$e In%&ran'e
The early develo%ments of life insurance 'ere closely lin#ed 'ith
that of marine insurance. The first insurers of life 'ere the marine
insurance under'riters 'ho started issuing life insurance %olicies on the
life of master and cre' of the shi%! and the merchants. The early
insurance contracts too# the nature of %olicies for a short %eriod only.
The under'riters issued annuities and %ension for a fied %eriod or for
life to %rovide relief to 'ido's on the death of their husbands. The first
life insurance %olicy 'as issued on 18 th9une 1583! on the life of :illiam
"ibbons for a %eriod of 12 months.
Li$e In%&ran'e in India
The ritish com%anies started life insurance business in India! by
issuing %olicies eclusively on the lives of (uro%ean soldiers and
civilians. They sometimes issued %olicies on the lives of Indian;s by
charging etra.
'as formed to issue life assurance %olicies in India. "radually! the first
Indian 6om%any named as ombay Mutual -ife Insurance ociety -td.
'as formed in
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gave much im%etus to fire insurance. The
&ineteenth century mar#ed the develo%ment of fire insurance.
Fire In%&ran'e in India
In India! fire insurance 'as started during the ritish regime. The
oldest of these com%anies include the un Insurance ffice! 6alcutta
=1+1,>! -ondon ssurance and $oyal (change ssurance =1+2,>!
hoeni ssurance 6om%any =1+82>! etc.
)( Mi%'ellane&% In%&ran'e
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ut for my %roAect I have ta#en the to%ic of AVIATION
INSURANCE 'hich is again a ty%e of miscellaneous insurance!
concentrating on each and every as%ect of aviation insurance and ho' it
has affected the service sector in recent times. viation is the most
e%ensive industry means of trans%ort today.
This sector gained im%ortance and created a'areness after the 7/11
attac# on the t'in to'ers of merica. fter this attac# lot of changes
too# %lace in the aviation sector and also lot of amendments 'ere made
by the la' to regulate the aviation insurance contracts. o let us see 'hat
these changes are and ho' aviation insurance forms one of the im%ortant
%art of any country;s insurance sector.
CHAPTER:-)AVIATION INSURANCE
1,
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?ITI@A IA/BA3>
istor&
Avia#inInsurance 'as first introduced in the early years of the
2,th 6entury. The first aviation insurance %olicy 'as 'ritten by -loyd?s
of -ondon in 1711. The com%any sto%%ed 'riting aviation %olicies in
1712 after bad 'eather and the resulting crashes at an air meet caused
losses on many of those first %olicies. It is believed that the first aviation
%olices 'ere under'ritten by the marine insurance Under*ri#ing
community.
In 1727 the+ar%a* 'nven#in'as signed. The convention 'as
an agreement to establish terms! conditions and limitations of liability for
carriage by air! this 'as the first recognition of the airline industry as 'e
#no' it today.
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AVIATION INSURANCE
y 1733 realising that there should be a s%ecialist industry sector
the International Bnion of Marine Insurance =IBMI> set u% an aviation
committee! and by 1734 eight (uro%ean aviation insurance com%anies
and %ools 'ere formally established and the International Bnion of
viation Insurers =IBI> 'as born.
The -ondon insurance mar#et is still the largest single centre for
aviation insurance. The mar#et is made u% of the traditional Ll,d% $
Lndnsyndicates and numerous other traditional insurance mar#ets.
Throughout the rest of the 'orld there are national mar#ets established in
various countries! this is de%endent on the aviation activity 'ithin each
country! the B has a large %ercentage of the 'orld?s general aviation
fleet and has a large established mar#et.
&o single insurer has the resources to retain a ris# the sie of a
maAor airline! or even a substantial %ro%ortion of such a ris#. The
6atastro%hic nature of aviation insurance can be measured in the number
of losses that have cost insurers hundreds of millions of dollars
Avia#in a''iden#% and in'iden#%.(
Most airlines arrange Dfleet %oliciesD to cover all aircraft they o'n
or o%erate.
The Bis%s
H&ll /All Ri%0%/
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AVIATION INSURANCE
The hull Dll $is#sD %olicy 'ill usually refer to something li#e Dall
ris#s of %hysical loss or damage to the aircraft from any cause ece%t as
hereinafter ecludedD.
irline hull Dll $is#sD %olicies are subAect to a standard level of
deductible =that is an uninsured amount borne by the Insured> a%%licable
in the event of %artial =non@total> loss. 6urrently! this deductible can
range from E5,!,,, in res%ect of a T'in tter to E1!,,,!,,, in res%ect of
a 'ide@bodied Aet aircraft! such as a oeing +4+.
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:hat the %olicy 'ill cover is the reinstatement of the aircraft to its
D%re@lossD condition! if re%airable damage is involved! or some other
form of settlement in the event that more substantial damage is sustained.(actly 'hat form of settlement 'ill de%end on the %olicy conditions.
Today! the vast maAority of airline hull Dall ris#sD %olicies are
arranged on an Dgreed Falue asisD. This %rovides that the Insurers
agree 'ith the Insured! for the %olicy %eriod! the value of the aircraft and
as such! in the event of total loss! this greed Falue is %ayable in full.
Bnder an greed Falue %olicy the re%lacement o%tion is deleted.
>"clusions
:ear! tear and gradual deterioration @ in common 'ith most non@
marine %olicies these %erils are thought to be a trading e%ense and
not a %eril to be insured.
Ingestion damage @ caused by stones! grit! dust! sand! ice! etc.!
'hich result in %rogressive engine deterioration is also regarded as
D'ear and tear and gradual deteriorationD! and as such is ecluded.
Ingestion damage caused by a single recorded incident =such as
ingestion of a floc# of birds> 'here the engine or engines
concerned have to shut do'n is not regarded as 'ear and tear and
is covered subAect to the a%%licable %olicy deductible.
Mechanical rea#do'n @ li#e'ise is thought by aviation insurers
to be an o%erating e%ense! but subse0uent damage outside the
unit concerned is usually covered. Co'ever! it is %ossible to obtain
insurance coverage against mechanical brea#do'n of engines by
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'ay of a se%arate %olicy. This coverage has a high degree of
e%osure and as a result is relatively e%ensive. The maAority of
airlines do not %urchase it %robably vie'ing such e%osure as a
%art of the DengineeringD budget.
S!are%
)irst of all 'e must identify 'hat 'e mean by a Ds%areD or %erha%s
@ D'hen is a s%are not a s%areD to 'hich a sim%le ans'er is D'hen it is
attachedD. Bnder most DCullD %olicies the 'ord DircraftD means Culls!
machinery! instruments and the entire e0ui%ment of the aircraft
=including %arts removed but not re%laced>. nce a %art is re%laced it is
no longer! from an insurance vie'%oint! %art of the aircraft. 6onversely
once a s%are %art is attached to an aircraft as a %art of that aircraft =not in
the hold as cargo or on the 'ing as an etra %od> it is no longer a Ds%areD.
If the e0ui%ment is insured on the hull Dll $is#sD %olicy the
automatic transfer of coverage from DaircraftD to Ds%areD and vice versa is
automatically accom%lished.
Caving established 'hen a s%are is a s%are ho' is it insured as
suchG Bsually in one of t'o 'ays. (ither under a Ds%aresD section of a
hull %olicy or by a se%arate %ares olicy. In either case the sco%e of
coverage 'ill %robably be similar. ll $is#s 'hilst on the "round and in
Transit for a limit of Hso much any one item or sending or any one
location. :ar $is#s can also be covered =in res%ect of transits>! tri#es!
$iots! 6ivil 6ommotions can be covered in accordance 'ith standard
mar#et clauses. %ares coverage is usually subAect to a small deductible
ece%t! ho'ever! in res%ect of ground running of s%are engines 'hen the
a%%ro%riate Ingestion deductible 'ill be a%%lied. %ares are normally
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covered on an agreed value basis @ usually their re%lacement cost =be it
ne' or reconditioned @ as is re0uired>.
%ares installed on any aircraft are not covered by the %ares
Insurance. They become! from an insurance stand%oint! a %art of the
aircraft u%on 'hich they are installed and a %art of the greed Falue for
'hich it is insured. This becomes %articularly im%ortant if the %arts are
loaned to another airline.
H&ll +ar Ri%0%
The hull Dll $is#sD %olicy 'ill contain the eclusion of D:ar and
llied erilsD. "enerally s%ea#ing! throughout the aviation insurance
'orld! D:ar and llied erilsD have a defined meaning. In the -ondon
viation Insurance Mar#et the standard eclusion is called the :ar! Ci@
Aac#ing and ther erils (clusion 6lause =currently #no'n by itsreference @ F&48 for short> this lists and defines these so@called 'ar
and allied %erils.
ar Definition :
:ar @ this includes civil 'ar and 'ar 'here there is no formal
declaration.
The detonation of a 'ea%on of 'ar em%loying nuclear fission
or fusion.
tri#es! riots! civil commotions and labour disturbances.
olitical or terrorist acts.
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Malicious or sabotage acts.
6onfiscation! nationaliation! re0uisition and the li#e by any
government.
Ci@Aac#ing or any unla'ful seiure or eercise of control of
the aircraft or cre' in flight.
The eclusion also a%%lies to any loss or damage occurring 'hilst
the aircraft is outside the control of the o%erator by reason of any of these
D'arD %erils.
The maAority of the ecluded D:ar and llied erilsD! other than
the detonation of a nuclear 'ea%on and a 'ar bet'een the "reat o'ers
=the aviation insurance 'orld identifies these as the B...! the $ussian
)ederation! 6hina! )rance and the BJ>! can normally be covered by 'ay
of a se%arate D:ar and llied erilsD %olicy. ircraft deductibles are not
normally a%%lied in res%ect of losses arising out of D:ar and lliederilsD.
ther eclusions insurers 'ill usually a%%ly are! as follo's*@
6onfiscation etc. by the DstateD of registration =this eclusion can
often be deleted in res%ect of financial interests @ albeit! in some
instances at an additional %remium charge>
ny debt! failure to %rovide bond or security or any other financial
cause under court order or other'iseK
The re%ossession or attem%ted re%ossession of the ircraft either
by any title holder or arising out of any contractual agreement to
'hich any Insured %rotected under the %olicy may be %artyK
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using small airstri%s incurs considerably less %otential e%osure than an
aircraft flying into and out of maAor air%orts.
General 4ia#ilities
The other category of liability covers %remises! hangar#ee%ers and
%roducts liability and is called Dirline "eneral Third artyD @ being the
liability for damage done to %ro%erty or %eo%le arising from other than
the use of aircraft. Many airlines cover their Dirline "eneral Third arty
-iabilityD 'ithin their main liability %rogram.
It is called Dirline "eneral Third arty -iabilityD these days since
the insurers too# ste%s s%ecifically to eclude all non aviation activities
=for eam%le hotel o'nershi% or management> from DviationD olicies
a fe' years ago. asically for a ris# to be considered as Dirline "eneral
Third arty -iabilityD it must arise from 'hat are described as Daviation
occurrencesD being those involving aircraft or %arts relating thereto! orarising at air%ort locations or arising at other locations in connection 'ith
the airline?s business or trans%orting %assengers/cargo or arising out of
the sale of goods or services to others involved in the air trans%ort
industry.
This means that there is a definitive language detailing 'hat is
considered as Daviation e%osureD such that any other =non@aviation>e%osure is ecluded.
Most %olicies are %laced on a 6ombined ingle -imit asis. This
means odily InAury and ro%erty
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include shoc# and mental anguish. Dersonal InAuryD on the other hand is
defined as Doffences against the %ersonD! such as false arrest! malicious
%rosecution! invasion! libel or slander and the li#e.
In res%ect of ersonal InAury the full %olicy limit! 'hatever that may be!
is not available and is usually limited to BE25!,,,!,,, any one offence
and in the annual aggregate.
:hat is ecluded from a liability insurance are such things as*@
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AVIATION INSURANCE
CHAPTER:-3
INSURANCE CONTRACT
4UIN5 AVIATION INSURANCE
CONTRACT:
s 'ith many s%ecialied service or commodity %urchasing!
the use of an e%erienced intermediary or middleman is usually
%rudent for the transaction %rocess. lthough this middleman may
not be re0uired in all facets or industries for successful %urchases!
in the viation Insurance Industry! 'ith only one ece%tion! it is
re0uired. The middleman 'e are discussing is often referred to as
a ro#erK it is 0uite fran#ly the only 'ay to accom%lish this need.
ll the viation Insurance com%anies or grou%s re0uire the use of
a ro#er to secure insurance on behalf of the consumer. o 'hat is
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this viation Insurance ro#er 'e need to utilie and access most
of the com%anies %roviding insuranceG
:ell! the term bro#er refers to an inde%endent insurance %erson 'ho is
licensed by the tate to re%resent and 'or# for the consumer in the
insurance %urchasing and service %rocess. Bnli#e an insurance agent 'ho
re%resents an insurance com%any and re%resents that insurance
com%any;s interest! a bro#er is inde%endent of the insurance com%any
and re%resents the needs and interest of the client. This inde%endence
allo's the bro#er the freedom and o%%ortunity to deal 'ith multi%le
aviation insurance com%anies and is considered to be 'or#ing the client.
The bro#er;s com%ensation is %aid by a %ercentage of %remiums! 'hich
comes from the consumer. This commission structure #ee%s the bro#er;s
attention to re%resent the best interest of the client/consumer and %laces a
res%onsibility that the bro#er %rovides a continuous service and handling
of the insurance needs or re0uirements.
SELECTION OF A 4RO6ER:
The selection %rocess of a bro#er should be more involving for
the consumer! than 'hich insurance com%any to buy the coverage
from. That is a %rocess consumer and the bro#er decide u%on. The
selection of a bro#er should ta#e several considerations! such as the
e%erience the bro#er has in the consumers segment of aviation or
o%eration! the infra@structure or team su%%ort behind the bro#er to
achieve the demands of technical service and document handling! the
mar#et relationshi% and credibility 'ith under'riters =the insurance
com%any>! and the overall re%utation in the aviation community.
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9ust as an etensive intervie' %rocess in conducted to select an
em%loyee for a com%any! so should the hiring %rocess involve searching
for! and selecting the aviation insurance bro#er. This can be conducted
by an intervie' %rocess 'here the bro#er sells themselves and the
organiation they re%resent as 'ell as a chec# u%on their credentials 'ith
a client list of references. nce this %rocess is com%lete and the
consumer feels comfortable 'ith the selection! the long@term relationshi%
the consumer develo%s 'ith his bro#er 'ill %rovide the consumer years
of %rofessional service.
If! ho'ever! the client believes his choice 'as not good or the
bro#er service does not meet his e%ectations for a variety of reasons! the
client can al'ays change the bro#er as in the original selection %rocess
by 'riting a Dro#er of $ecordD letter 'hich is %rovided to the current
insurance com%any. This letter 'ill re%lace or fire the current bro#er 'ith
the client;s ne' selection! 'hich is based on his criteria and not that of
any insurance com%any. :hatever the %rocess by 'hich the client select
or remove the bro#er re%resentation is controlled by the client.
+HAT DOES OUR 4RO6ER DO FOR OU7
Bnderstanding the bro#er;s Aob should hel% the client during the
selection %rocess. The bro#er 'ill gather the Dunder'ritingD information
on the clients Dris#D! the aircraft or o%eration! and submit this
information to the insurance com%any. This gathering of information can
be as sim%le as a one@%age a%%lication for small ris# such as %rivate
aircraft usage or as com%le as boo#lets of information for large
commercial o%erations. In any event it is im%ortant that the bro#er #no's
'hat information to secure! ho' to %resent it and understands com%letely
its contet. That;s because the net im%ortant %art of the bro#er;s
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AVIATION INSURANCE
res%onsibility to the client is to negotiate the best combination of
coverage and %rice for client;s ris#. This can only be achieved 'ith a
bro#er;s level of understanding of clients; ris#! their e%erience in this
area! and for larger ris# having a su%%ort mechanism the under'riter can
relate to. It is in this %rocess the bro#er;s s#ill is utilied to create the
com%etition bet'een insurance com%anies to obtain best industry %rices
at the current time.
nce the bro#er has negotiated the clients insurance %rogram! they
'ill continue to advise the client from the %urchasing %rocess through the
coverage issues that may arise during the %olicy %eriod! usually one year.
This e%ertise in service can deal 'ith changes in your %olicy during its
term to the most im%ortant reason the client bought the %olicy in the first
%lace and that is handling a claim should one occur during the %olicy
term. This service %rocess from the client bro#er may not involve Aust
one %erson! but multi%les of su%%ort %ersonnel de%ending on the sie and
com%leity of your ris#. s stated earlier! this is 'hy the selection
%rocess is im%ortant and should involve understanding the structure of
the entire bro#erage firm for 'hich to re%resent the client.
+HAT TO 5IVE OUR INSURANCE 4RO6ER:
AIRCRAFT INFORMATION $e%ort year! ma#e! model and ac0uisition
value! %lus tail and serial numbers and
information about %assenger and cre'
seating.
4ASE INFORMATION "ive details about home air%ort! hanger
s%ace and ground handling.
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AVIATION INSURANCE
CONTRACTS u%%ly drafts of usage! o'nershi% and
storage agreements.
LIA4ILIT LIMITS 8
PROVISIONS
$e%ort average %assenger load and %rofile
and revie' insurance %rovisions! deductibles
and 'arLris# %erils.MAINTENANCE DETAILS (%lain 'hether you;ll outsource it! use an
in@house mechanic or do a little of both.
MISSION INFORMATION
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thought until net year. nd this %attern often re%eats itself for many
years.
There are t'o very big %roblems 'ith this scenario. )irst! thingschange. our aircraft! 'here you fly! 'ho you fly 'ith! ho' much you
flyNmany of these things can change over the years! and they should be
reflected in your %olicy. econd! and even more serious! it is 0uite
%ossible that your %olicy 'asn?t the right one for you to begin 'ithO In
that situation! you are sim%ly rene'ing your mista#e year after year. In
either case! your aviation insurance %olicy deserves a little bit of your
time once a year. Cere are the five things you should do to ma#e sure you
are ade0uately %rotected.
1( C9%e ,&r r0er
:hen you insure your home or your business! a bro#er can choose
from doens and doens of insurance com%anies. s a result! sho%%ing
around 'ith a fe' bro#ers can ma#e sense. 6hances are! they may not
even a%%roach the same com%anies for your 0uote.
In the case of aviation insurance! ho'ever! there are only four or
five com%anies in 6anada to choose from and even fe'er that s%ecialie
in light aircraft. bviously! it doesn?t matter ho' many bro#ers you go to!
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the odds are that they 'ill be a%%roaching the very same com%anies on
your behalf. This can actually be a serious disadvantage for you! as some
com%anies 'ill sim%ly refuse to 0uote in these circumstances in order to
avoid the feeding freny that can result 'hen a number of bro#ers vie for
the same account.
o! as you can see! choosing your bro#er is the first ste%. ut ho' do you
chooseG nd are there any alternatives to a bro#erG
-et?s loo# at alternatives first. The only alternatives to a bro#er are
the direct sellers and s%ecial %rograms. In these cases you are dealing
'ith a sales%erson 'ho can only offer you the one %roduct they re%resent.
s a result! these o%tions tend to be %romoted on the basis of chea% rates
Lbut li#e PbargainsQ any'here! they do so by cutting coverage and often
leaving you seriously underinsured. If you really 'ant to #no' 'hat they
can offer you! chec# them out. ut before you ma#e your decisionK be
sure to tal# to a bro#er 'ho 'or#s for you and not any one com%any.
o ho' do you choose the right bro#erG tart by finding an
aviation s%ecialist. lthough any general insurance bro#er can sell you
aviation insurance! they sim%ly do not have the e%erience or familiarity
'ith the field to be your best choice. (ven more im%ortantly! they
usually can?t get you the best rates.
If the insured is an aviation s%ecialist! he may deal 'ith the
com%anies and under'riters every single day. Ce gets to #no' them
%ersonally and may %lace a lot of business 'ith them. &o' com%are that
to the average general insurance bro#er 'ho maybe %laces one or t'o
%olicies a year 'ith that com%any. :ho do you thin# 'ill get you the
better resultsG )inally! ma#e sure that you are comfortable 'ith the bro#er
you choose. 9ust because someone s%ecial in aviation insurance doesn?t
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could be in for a rude a'a#ening. ircraft values have soared in recent
years! 'ith many doubling in %rice over the last decade.
Bnli#e home or auto insurance! aviation insurance is a Pstated
valueQ %olicy. That means that the o'ner is res%onsible for declaring the
value of the insured aircraft. If you undervalue your %lane! you ris# losing
it after even a minor accident. s I have e%lained many times in this
column! the Pstated valueQ is the maimum the insurance com%any 'ill
%ay outand they will keep the plane as salvage.
)( Revie* ,&r liaili#,
Ma#e sure your %olicy doesn?t have %assenger or family member
restrictions. This is the most common 'ay that com%anies offer PbargainQ
%olicies. It is also the most common 'ay o'ners lose everything they
o'n 'hen courts a'ard large inAury settlements that are not covered by
their PbargainQ %olicy. I regularly see %eo%le 'ith limits of only
E1,,!,,, %er %erson. ou?d never consider such a lo' amount for your
home or auto insurance! so 'hy allo' it on your aviation %olicyG :ith
the high court settlements being a'arded today! one to t'o million
dollars should be the least you consider.
3( 5e# #9e rig9# 'verage $r ,&r need%
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t every rene'al! you should discuss your flying habits 'ith your
bro#er. Many com%anies have territorial restrictions to the and some have
restrictions for dirt or grass landing stri%s. Ma#e sure your %olicy covers
the #ind of flying you do.
If you have madeLor are %lanning to ma#eLany u%grades or
changes to the configuration of your aircraft! you may need to ma#e some
adAustments to your %olicy. ther'ise! you may find yourself out of luc#
in case of an accident.
( Pr#e'# ,&r in#ere%#%
)inally! you should discuss any other unusual circumstances
regarding your aircraft. ou may need to arrange for s%ecial coverage to
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%rotect your interests.
ne common eam%le I run into is an o'ner 'ho has his aircraft
on lease to a flying school or commercial o%erator. If the lessee commitsan illegal act or omission! your aviation %olicy could be nullified. In these
situations! you should obtain Preach of :arrantyQ coverage 'hich 'ill
%ay a lien holder?s interest des%ite the %olicy being other'ise invalidated.
)ollo'ing these sim%le ste%s once a year at rene'al time is an easy
'ay to ma#e sure that your aviation insurance %olicy continues to %rotect
you. o don?t ta#e the easy 'ay outNdon?t Aust say renew it as is for
another year.
CHAPTER:-
AVIATION INSURANCE IN INDIA
AVIATION INSURANCE IN INDIA: TA6E OFF
STA5E
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The unbridled gro'th in the aviation sector has come as a bonana
for the insurance sector. Than#s to ca%acity addition and the entry of ne'
aviation %layers! a host of insurance com%anies are eyeing this gro'ing
mar#et to offer insurance cover to ne' %lanes that are being brought to
India.
RRThe aviation insurance mar#et is loo#ing u% and is currently at
$s 35, crore. ut 'ith ne' aircraft being bought by ne' %layers
entering the business and the eisting one on an e%ansion mode! the
aviation mar#et is set to ta#e off!;; said aAaA llian "eneral
Insurance;s Cead@Bnder'riting J. Jrishnamoorthy. :ith the entry of
several lo' cost airlines along 'ith fleet e%ansions by eisting ones and
increasing cor%orate aircraft o'nershi%! the Indian aviation insurance
mar#et is all set to ta#e off in a big 'ay.
Industry trac#ers believe that 'ith several airlines including
Indi"o! (ast :est irlines and Magic ir set to enter the mar#et in the
coming 'ee#s! the airline %remium income could be u% 5, %er cent in the
net t'o years.
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Though India;s contribution to the total global insurance %remium
%aid by airlines 'hich stands at B E 5.8 billion is miniscule! the
gro'th in aviation %remium %ayout is highest in 6hina follo'ed by
India! e%erts say. irline insurance 'hich is ty%ically offered to
%assengers! cargo airlines or com%any or individually@o'ned aircraft
generally consists of coverage to the aircraft and liability to %assengers.
efore the boom in the Indian aviation sector! the airline insurance
mar#et 'as dominated by the four state@o'ned general insurance
com%anies* &e' India ssurance 6om%any! riental Insurance
6om%any! &ational Insurance 6om%any and Bnited India. Co'ever!
'ith the gro'th in the Indian aviation story! %rivate %layers li#e I6I6I
-ombard! aAaA llian! Iffco To#yo "eneral Insurance and $eliance
"eneral Insurance 6om%any are also trying to muscle their 'ay into this
lucrative sector.
The un%recedented gro'th in this sector is also seeing %rivate
%layers Aoin hands 'ith each other to bid for accounts. The latest such
case is the I6I6I -ombard@aAaA llian tie@u% 'here they are Aointly
bidding for ir India;s insurance account 'hich includes %roviding cover
for 5, %lanes valued over E3 billion.
6urrently! a consortium of %ublic sector insurance com%anies including
&e' India ssurance! riental )ire and "eneral Insurance and Bnited
)ire and "eneral Insurance handle ir India;s account for 'hich the
airline is %aying an annual %remium of close to B E 14 million.
viation insurance business is a high severity loss business and in
the future you could see a lot of Indian insurance com%anies Aoining
hands to manage airline accounts.
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(%erts say that the role of an reinsurer L generally foreign insurance
com%anies L is also bound to increase in the future. Indian insurance
com%anies do not have the financial muscle to address claims of airlines
and generally go in for reinsurance 'hich means sharing the ris# of loss
'ith another insurance com%any.
The role of an reinsurer is im%ortant in the Indian contet as most
of the com%anies do not have the re0uisite e%erience of handling a
mar#et of this sie. The reinsurer hel%s in %roviding the technical
e%ertise! ca%acity to under'rite the business and their ability to handle
such large ris#s!Q the official said.
(stimated to be in the region of $s.3.5 billion! aviation insurance
%remium business is gro'ing at a fast cli%. t %resent the government@
o'ned four non@life insurers are the maAor %layers in this segment as they
cover %ublic sector airlines li#e ir India and Indian.
ut of the eight %rivate %layers! aAaA llian "eneral Insurance
6om%any and I6I6I -ombard "eneral Insurance 6om%any -imited are
most active in this segment.
The une@based aAaA llian is co@insurer for Jingfisher irlines!
"o ir! Indigo ir among the scheduled airlines and has also insured
aircrafts o'ned by cor%orates li#e the aAaA uto consortium! )orce
Motors! $anbay grou%! hamanur ugar grou% and rient )light
chool. I6I6I -ombard has insured around +5 aircrafts.
viation insurance is offered to scheduled airlines =%assenger or
cargo airlines> and non@scheduled airlines =com%any or individual@o'ned
aircrafts> and also crafts o'ned by flying clubs.
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The basic coverage offered is to the hull of the aircraft! liability to
%assengers and third %arty and also can include %ersonal accident cover
to the cre' members.
&ormally the ty%es of insurance covers available are*
ircraft o'ners / o%erators
ircraft hull %olicy @ covering loss of or damage to aircraft
ircraft liability %olicy
-iability of aircraft o'ner/ o%erator in res%ect of
accidental bodily inAury or %ro%erty damage.
-iability to'ards %assengers both in res%ect of accidental
bodily inAury and also to'ards loss or damage to baggage
and %ersonal belongings of %assengers.
viation 'ar and allied %erils
viation %roduct?s liability
ir%ort o%erator?s liability
viation service %rovider?s liability
The %olicy covering aircraft hull insurance is usually on an agreed
value basis. In the event of a total loss the stated amount can be %aid as
agreed and the o%tion to re%lace the aircraft can be avoided. This
fre0uently occurs because of develo%ment of ne'er and faster ty%es of
aircraft or due to %urchase of an aircraft on mortgage.
The insurers base their rating on variables li#e* aircraft age! ty%e
of aircraft i.e. fied 'ing or rotor! geogra%hical area of flying o%erations!
maintenance facilities! %ast e%erience! e%erience of the %ilots! claims
e%erience of the fleet and the carrier! the number of %assengers! etc.
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&ormally the %remium 'ould de%end on the aircraft and its sie besides
o%erations. Co'ever it 'ould vary from 1 to 2.5 %er cent of the aircraft
value. Interestingly the aviation insurance %remium is highly
reinsurance@driven as the value of ris# covered is so huge that the
%rimary insurers do not 'ant to shoulder on their o'n. )or instance
riental Insurance 6om%any -imited retained Aust $s., million out of
the $s1.5 billion aviation %remium earned last fiscal.
In terms of loss e%erience the domestic aviation business is 0uite
%rofitable 'ith very fe' claims @ ece%t for a fe' im%ro%er landing and
bird hit damages @ registered in the recent %ast.
Mean'hile! %layers also feel that airlines can also benefit from this
gro'th in the mar#et as gro'ing com%etition could mean lo'er
%remiums. RRThe Indian aviation industry has had a fe' good years 'ith
no maAor losses re%orted and hence the %layers can have the benefit of
reduction in %remiums for good records. This 'ould encourage clients to
go for higher covers or o%timie it!;; Jrishnamoorthy says.
CURRENT SCENARIO OF AVIATION
INSURANCE*
The magic of multi%lier effect is no' 'or#ing for the aviation
ancillary industry. $ea%ing the benefits of the aviation boom is not only
maintenance! re%airs S overhaul =M$> o%erations but also the
insurance sector. In fact! the s%iraling gro'th in the aviation sector has
given an u%shot to the insurance segment.
s %er an airline ris# management survey @ commissioned by
international magaine irline usiness and global airline insurance
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bro#er on @ airlines are s%ending no less than E8.3 bn a year on ris#
management! 'ith around +,! or E5.8 bn! s%ent on insurance
%remiums. viation %remiums are! on an average! gro'ing by 15.5
%ost@7/11! the survey re%orts. It further states that 'hile the industry?s
loss record has been res%ectable in the last four years! traffic and
%assenger numbers have risen significantly! increasing the e%osure to
ris#.
In India! a maAority of the %rivate %layers! including aAaA llian!
I6I6I -ombard! $eliance and the four %ublic sector general insurance
com%anies @ riental! &e' India ssurance! Bnited India! &ational
Insurance @ offer aviation insurance in the mar#et.
lthough there are no official estimates! industry %layers %ut a
ball%ar# figure of the Indian aviation insurance mar#et at some'here
around $s 4,, cr to $s 5,, cr. D:ith ne' aircraft being bought by ne'
%layers entering the s#y and the eisting one in e%ansion mode! this
segment 'ill only gro'!D says T $amalingam! head! under'riting!
aAaA llian.
aAaA llian is one of the most active %layers in the mar#et and a
co@insurer 'ith Jingfisher irlines! "o ir! Indigo ir and ir India
among the scheduled airlines and also insured aircraft o'ned by India
com%anies such as aAaA uto consortium! )orce Motors! $anbay
grou%! hamanur ugar grou%! rient )light school! sia viation! a %art
of the I-T grou%! Mundra ort and (U -td! an dani grou% com%any.
In India! this segment is highly reinsurance@driven. maAority of
the %layers have re@insured the value of ris# covered 'ith foreign
com%anies. Ta#e the case of ir India 'here almost 7, of the ris# is
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insured overseas through reinsurance arrangements! 'hile the remaining
cover rests domestically.
ccording to (rnst S oung! a global consultancy firm! Indians#ies 'ould have over +,, aircraft @ from 235 currently @ by 2,12! an
increase of almost 2,,. The numbers s%ea# for the %otential of this
segment in the mar#et! 'hich is one of the fastest gro'ing in the 'orld.
Dredictions for aircraft deliveries to meet the increasing demand
for air travel! %articularly in sia! mean that some 4!,,, ne' airliners are
on order! 'ith this region at 1!242 leading the 'ay. "ro'th in %urchasing
%o'er of %assengers and entry of lo' cost airlines has driven the u%'ard
movement of the airline industry both in terms of e0ui%ment and staff
and o%ening ne' o%%ortunities for this niche segment!D believes Jarti#
9ain! head! mar#eting and e@channel! I6I6I -ombard. The com%any has
insured more than +5 aircraft till date.
The shot in the arm for this industry has further come from the fact
that aircraft are becoming bigger in sie 'ith large seating ca%acity. This!
in turn! increases the ris# for insurers! sometimes even catastro%hic. :ith
the emergence of bigger aircraft such as irbus 38, and oeing +++
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maAor ris#s %ertaining to energy/ off@shore ris#s/ %ac#age %olicies of
large clients and strong net'or# of international under'riters. D&ational
reinsurer! "I6! leads our reinsurance treaties.
s reinsurance su%%ort is essential in getting com%etitive 0uote in
aviation insurance! 'e aim to increase our share considerably in this
financial year!D says J omase#haran! 6(! $eliance "eneral
Insurance. Ty%ically! the %remium de%ends u%on under'riting factors
such as age of the aircraft! e%eriences of the %ilot flying the aircraft!
ma#e and model and use of the aircraft. It is generally 1 to 3 of the
aircraft value.
n the %rofitability %art! riental Insurance chairman@cum@
managing director M $amadoss says that the domestic aviation business
is enAoying the benefits of a softening mar#et 'ith claim ratio being very
lo'. ave for a fe' cases such as im%ro%er landing or bird hit damages!
there are not many claims made in the recent %ast. The com%any?s client
includes 9et ir'ays! aramount ir'ays! and ir India! among others.
Industrialists! ho'ever! does not antici%ate terror ris#s %ushing u%
the aviation insurance costs. This s%ace is very %rice com%etitive. The
number of %layers in the mar#et are increasing! 'hich has led to
insurance rates steadily coming do'n in s%ite of recent air crashes in the
'orld.
MA;OR PLAERS OF AVIATION INSURANCE IN
INDIA
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6IN5FISHER AIRLINES
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Jingfisher irlines is IndiaVs first and only %rivate airline to
receive the %restigious! Vest &e' irline of the earV a'ard in the
sia@acific and Middle (ast region from 6entre for sia acific
viation =6>. Jingfisher irlines has also been voted as the 3rd
Most uccessful rand -aunch of the ear 2,,5! in the annual rand
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Jingfisher irlines offers )ull ervice at True Falue and
%romises an un%aralleled e%erience to the Indian air traveler. n offer
are etra@'ide seats and s%acious leg room! delicious gourmet meals!
international@class cabin cre' and a 'hole host of comforts and delights.
Jingfisher irlines also facilitates doorste% delivery of tic#ets on guest
re0uest.
Jingfisher irlines has further raised the bar by introducing the Indian
business traveller to a %remium %roduct@ Jingfisher )irst! the finest
e%erience in the Indian s#ies.
AIR INDIA
ir India is India?s finest flying mbassador. The urge to ecel
and the enthusiasm! 'hich characterised ir India?s first flight! 'ay bac#
on ctober 15! 1732! is 0uintessential even today @ than#s to ir Indians
'ho have #e%t alive the tradition of flying high.The recent merger of ir
India and Indian! the country?s leader in the domestic sector! has hel%ed
the airline to emerge as a maAor force in the airline industry. The re@
branding eercise is currently under'ay and %assengers are getting to see
the unified face of the ne' invigorated ir india.
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=P":IQ> 'hich! as a short and medium term measure recommended the
setting u% of an international mechanism funded by insurance %remiums
to %rovide noncancellable third@%arty aviation 'ar ris# coverage through
a non@%rofit s%ecial %ur%ose insurance entity ="--TIM(> 'ith
multilateral government bac#ing for the initial years. s a long@term
solution the ":I recommended that an international convention be
develo%ed 'hich 'ould limit the third@%arty liability of the aviation
industry for losses arising from 'ar! hiAac#ing and allied %erils.
Un'er#ain#, a9ead7
ome four years on from 7/11! most governments have 'ithdra'n
guarantees for hull and liability 'ar cover to airlines and air%ort service
%roviders. &otable ece%tions include the Bnited tates! 6hina and
inga%ore. The mar#et has no' res%onded 'ith certain insurers offering
maAor airlines limited noncancellable third %arty coverage.(nthusiasm for "--TIM( has 'aned and a ne' convention on
damage caused to third %arties on the ground has yet to be agreed. In
sia at least! the airline industry has e%erienced a dramatic turnaround
in fortunes 'ith rene'ed %ros%erity. Co'ever! as 'ith other classes of
catastro%he business! there remain underlying uncertainties in the
aviation insurance mar#et that could dramatically change the
environment. ne of those uncertainties is the %ros%ect of a catastro%hic
event caused by dirty bombs! bio@chemical and electromagnetic devices
or 'ea%ons of mass destruction =P:M. The fear is that the use ofa
Pdirty bombQ at a maAor international air%ort could not only lead to
immediate multi%le aircraft! %assenger and third %arty losses! but also
long term contamination of sites %reventing access and the uncontrolled
s%read of diseases.
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Cnven#in and %#a#r, li"i#%
The Montreal 6onvention 1777! 'hich governs the liability of
airlines in relation to %assengers and cargo interests! re0uires airlines to
obtain ade0uate insurance to cover their liabilities under the 6onvention.
In addition! airlines are re0uired by many states to have minimum
insurance limits to cover such liabilities including third %arty surface
damage.
fter the e%tember 11! 2,,1! terrorist attac#s on the Bnited
tates! the insurance costs for commercial airlines and college aviation
%rograms rose shar%ly. The %revailing assum%tion is that increased
aviation insurance costs are the result of an increased ris# of life and
%ro%erty loss from additional terrorist attac#s. This %a%er 0uestions the
assum%tion and %osits that the e%tember 11! 2,,1! attac#s 'ere a
catalyst for and not the cause of increased insurance costs. T'o
alternative e%lanations for the increased costs are offered. )irst! after
e%tember 11th! insurance managers became a'are that they had not
been ma#ing the incremental rate increases necessary to maintain
acce%table %rofit margins. econd! shar% declines in the value of the
insurance com%any stoc# %ortfolios eroded %rofits. Increases in aviation
insurance cost 'ill be com%ared to increases in other ty%es of insurance!
such as medical insurance! to determine if the rate of increase in aviation
insurance cost is significantly higher than in other sectors of the
economy. The im%act of these insurance rate increases on domestic and
international air trans%ortation and commerce is %resented.
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s the industry enters into the millennium! the insurance industry
must loo# at several %roblems that face the aviation industry. -egal
concerns! in many cases! they;re influenced by our society. The court
system %lays a big %art by their decisions that are %assed do'n. It;s rare
'hen an aviation case goes to court! because insurance agencies #no'
they;ll lose 'hen the Aury hears the case. It;s Aust too easy to %rove %ilot
negligenceK most aviation accidents result from %ilot error. lso! 'hen
they do go to court! they very seldom mount a defense due to the
unreasonable verdicts! and ridiculous a'ards. These %ractices has forced
aircraft o'ners to stay a'ay from ne' %olicies and let their insurance
coverage la%se. ircraft o'ners %ay three to five times the amount for
ade0uate liability coverage than their counter %arts else'here in the
'orld. urvival for the small business o%erators is getting harder each
day due to the "eneral viation $evitaliation ct ="$>K the threat
of financial devastation is real 'hen it comes to la'suits. The ="$>
defects la'suits from manufacturers to aviation service %roviders.
)s; insurance rates are s#yroc#eting because of this! 'hich
contributes to the cycle by causing higher re%air cost. Many small
business o%erators really don;t 'ant to ta#e the chance and can;t afford
the rising cost that;s associated 'ith liability insurance. s of )ebruary
2,,, at least three aviation insurance under 'riters ceased 'riting
coverage for the small business o%erators! saying it;s a maAor ris#. ne of
the main reasons is the cost to the under'riters. viation insurance
com%anies have %aid out a dollar and 0uarter for every dollar they;ve
ta#ing in! for each of the last several years. &o 'onder so many are
closing do'n! merging! or getting out of the historically ris#ier aviation
activities! "eneral aviation may be forced to change its 'ay of doing
business and become more li#e the military and commercial airlines.
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Maintenance %roblems may be identified by com%uters! and then
re%aired by the manufacturers. The industry is co%ing 'ith the mounting
cost associated 'ith liability insurance. P$emove and re%lace
maintenanceQ is the attitude the industry must lean to'ards. The
manufacturers 'ould set u% ne' factory service centers and re%air
facilities for the general aviation customers. This system 'ouldn;t hel%
the rising cost of insurance! but maintenance and ground liabilities 'ould
rest on the shoulders of the manufacture.
The mar#et itself is shrin#ing! 'e;ve had a generation of %ilots
from ::II! Jorea! and Fietnam that 'as introduced to aviation and
trained at the government;s e%ense. ecause of modern technology!
'e;ll never again have the numbers that 'e once had. The ageing fleet
and %ilots can;t hel% the situation that the industry is facingK the average
aircraft age is 15 to 2, years! and the %ost Indian %ilot is no' 5, to ,
years of age. The under'riters are very 'orried about the age of both the
%ilots and the aircraft.
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isn;t feasible. The )s; are facing insurance that;s inade0uate and
e%ensive! and its forcing com%anies to reduce their o%erations or even
cut them all together. 'ners of flight schools are having a hard time
Aust staying in business. The shortage of 0ualified instructors has slo'ed
the flo' of ne' %ilots! 'hich in turn is %utting a hardshi% on the
industry. The future of the industry could hold a brighter out@loo#. ne
can only ho%e that society 'ill change their attitude to'ards litigation!
this 'ould ho%efully drive do'n cost of liability coverage insurance.
The industry ho%es that 'ith the use of simulators at all levels of
training 'ill increase the number of betterWtrained %ilots and ho%efully
lo'er insurance cost at the same time. Insurance can be one of the most
e%ensive elements in the fi cost of o'ning an aircraft. To #ee%
insurance cost under control in this difficult environment! aircraft and
aviation business o'ners are going to have to ma#e some changes in the
'ay they %urchase and thin# about insurance. There are 'ays to reduce
your insurance cost! remember buying chea% insurance isn;t al'ays the
best 'ay to go! and it;s not heavily regulated by our government.
6om%anies can 'rite %olicies %retty much the 'ay they 'ant to! you
must %ic# the right com%any for you and your aircraft. :hen sho%%ing
you can as# your friends 'ho they do business 'ith and as# them their
feelings on that com%any! and are they treated 'ell. -oo#ing in one of
the aviation trade magaines for information dealing 'ith aviation
insurance com%anies is a great sourceK get a %hone number or a 'eb
address so you can ma#e contact.
aving money is the #ey 'hen sho%%ing for insurance. nly buy
the needed coverageK if you don;t fly %assengers! 'hy %ay for the
%rotection against themG ou can al'ays change your coverage 'hen the
need arises. Most %eo%le %ay for coverage in the 'inter even if they;re
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not flying. In the 'inter %aying for in flight liability insurance can be a
'aste. :hy not store the aircraft in the 'inter! and change to storage
coverage for that %eriod of time. In most %laces flying 'ithout heater
'ould be very uncomfortable. "et etra training from the ) =Federal
Avia#in Ad"ini%#ra#in. and other 'or#sho%s! and %rove to the
insurance com%any that you;re safe and deserve a brea# on you
insurance. elf@insure 'henever %ossible. 6hoose the highest liability
limits you can 0ualify for and afford! to guard against the catastro%hic
loss! and only as much hull %rotection that you can afford. Match your
e0ui%ment to your needs.
viation has come a long 'ay the last 1,, years! and the future could
hold a brighter out@loo# for the industry. ne can only ho%e that society
'ill change their attitude to'ards the aviation industry and the litigation
that surrounds the industry. In the future! this could drive cost do'n and
ma#e liability insurance affordable to the %rivate o'ners! and to the
);s.
5,
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CONCLUSION
I started this roAect by as#ing the 0uestion ?+9, Avia#in
In%&ran'e i% re@&ired7In the course of the analysis various trends and
develo%ments in the aviation industry 'ere discussed that %rovide %artial
ans'ers to this 0uestion. irlines em%loy a 'ide variety of business
models 'hile ta#ing an aviation insurance contract. )or eam%le! some
com%anies li#e Jingfisher irlines ta#e %olicy 'ith high %remium 'hile
others li#e ir India ta#e an aviation insurance contract 'ith lo'
%remium. It 'as also observed that airlines 'ith huge and e%ensive
airbuses li#e ATR 32-BB aircrafttend to generate high amounts of ris#K
'hile relatively less e%ensive aircraft li#e A))Baircraft tend to generate
less ris#.
The aviation insurance mar#et is highly volatile due to the inherent
nature of the ris# and the under'riting cycle of insurance. Cistorically!
the mar#et 'ide %remium a%%ears to be almost as volatile as the claims!
suggesting a lac# of consistency in under'riting this business.
The maAor caveat to my conclusion is that there is significant
amount of %ublic data available to assist in under'riting and %ricing
aviation insurance. This data can be used to develo% more effective
under'riting rating models for aviation insurance and this should result
in better selection of ris#s and more consistent %rofits for the insurer.
The aviation insurance mar#et! by its o'n nature! is highly
volatile. There are many causes including the overall insurance
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under'riting cycle! the maAor accident ris#! the short@term memory of the
insurance mar#et! and the long@tailed nature of determining res%onsible
%arties.
Co'ever! the increasing involvement of analytical %rofessionals
such as actuaries should introduce more effective methods for %ricing
airline insurance and this should hel% stabilie the %remium com%onent
of the loss ratio e0uation.
viation has come a long 'ay the last 1,, years! and the future
could hold a brighter out@loo# for the industry. ne can only ho%e that
society 'ill change their attitude to'ards the aviation industry and the
litigation that surrounds the industry.
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RECOMMENDATIONS
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-egal concerns are the biggest threat. It;s rare 'hen an aviation case
goes to court! because insurance agencies #no' they;ll lose 'hen
the Aury hears the case. It;s Aust too easy to %rove %ilot negligenceK
most aviation accidents result from %ilot error. Cence! today there is
a strict need that the legal authorities should be lenient and should
also listen to the airline. (very time it;s not the fault of the %ilots.
Bnbiased decision can really enhance and im%rove the 'or#ing of
airlines and also the efficiency of the %ilots gets boosted.
The average age of both our %ilot %o%ulation and the fleet =bothcommercial and general aviation> is increasing. ircraft hull and
liability insurance for the senior %ilot has become a serious
concern. The under'riters are very 'orried about the age of both
the %ilots and the aircraft. Cence! the insurance industry should
develo% a s%ecial tas# force to hel% deal 'ith this %roblem. The
insurable age of the senior %ilots should be etended and ne'
blood should be introduced in the coc#%its to lo'er insurance cost
for the industry.
The airline should only buy the needed coverageK if they don;t fly
%assengers! 'hy %ay for the %rotection against themG They can
al'ays change the coverage 'hen the need arises. Most %eo%le
%ay for coverage in the 'inter even if they;re not flying. In the
'inter %aying for in flight liability insurance can be a 'aste.
$ather they should store the aircraft in the 'inter! and change to
storage coverage for that %eriod of time.
To #ee% insurance cost under control in this difficult environment!
aircraft and aviation business o'ners 'ill have to ma#e some
changes in the 'ay they %urchase and thin# about insurance.
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uying chea% insurance isn;t al'ays the best 'ay to go! and it;s
not heavily regulated by the government. The airline should find
an insurance %layer 'hich ta#es lo' %remiums and has %lenty of
coverage o%tions.
4I4LIO5RAPH
4OO6S:
Insurance in India
@.. alande
@$.. hah
@M.-. -una'at
Insurance =)undamentals! (nvironment and rocedures>
@.. odla
@M.6. "arg
@J.. ingh
)undamentals of $is# and Insurance
(mmett 9. Faughan
Therese M. Faughan
Insurance 6hronicle@ The I6)I Bniversity ress =e%tember!2,,4>
+E4LIO5RAPH
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***(ggle('"
'''.fly#ingfisher.com
'''.airindia.com
http://www.google.com/http://www.flykingfisher.com/http://www.google.com/http://www.flykingfisher.com/