Aviation Insurance Underwriting and Rating
There is no precise scientific basis of rating in aviation insurance because of the small number of units involved. It is normal for underwriters to base their rates from statistics derived from past experience and from their own assessment of the risk. A proposal or a brokers’ slip may be used to gather the information required for underwriting purposes. The key items of information which the underwriter will require are known discussed.
Types of Risk
These would for example be hull and liability insurance.
- Particulars of the insured
- The insured will be required to give his name, address and other contacts
- Period of insurance
- A twelve-month period represents no problem but most underwriters are averse to short period request such as a single ferry flights unless the pilot has route experience
- Interest to be noted
The insured will be asked to to indicate any interest of the financier of the aircraft, the extent of such interest and any requirement the financier may have in respect to insurance.
- Sum Insured
This will indicate the aircraft value and the limits of legal liabilities per any one accident, limit per passenger and for the period of insurance.
- Situation/ Territorial Limits
This will indicate where the freight will be operating and this factor will be assessed in the right of the experience of the pilot
This will give the claim experience of the proposer and try to find out whether there are indications of moral hazards.
Other Factors Affecting the Risks Include
- The type of aircraft and its experience as reflected by the underwriter’s experience and opinion
- The use to which the aircraft will be put, e.g. private private pleasure, commercial or rental i.e. lease or hire and the like
- Pilot details such as age, accident record, their experience in terms of flying hours and in respect of given type or make of aircraft
- Geographical limits in relationship to temperatures, terrain, landing facilities or communications
- Previous claim record and insurance of the applicant
- Airfield used by the operator
- Value of the aircraft
Underwriting Considerations for Airport Owners and Operators
The underwriter will take into account the following;
- Name of the proposer and address
- The period of time that the operator has been in business
- Whether the proposer is the owner or operator of the airport
- Whether the proposer is responsible for maintaining the airport
- Estimated annual receipt from all activities for which cover is to be provided
- Rate at which the airlines visit or use the airfield.
- Whether the proposer give directional information to aircrafts in the air
- Information on whether the proposer provides public catering
- Size of car park, if any
- Whether air field comply with all national and international regulations
- Limit of indemnity required
- Past claim experience
This list is no means exhaustive but it gives an indication of what the insurer looks for while considering this type of risk. Similarly, the insurer considers other risks underwritten in this classes of business such as,
- Product liability insurance
- Grounding liability underwriting
- Air display underwriting
- Freight underwriting
- Loss of use
The majority of aircrafts are rated for hull damage at a rate or percent of the insured value rate varying depending on the factors discussed above. The hulls and liabilities are covered in one policy. For fleet of aircrafts, premium is calculated on the total fleet value and the amount of flying expected to be done by those aircrafts during the period of insurance. Other methods used for calculating premium for short time cover, such as fix amount per hour flown
In passenger legal liability, premium is assessed as amount per passenger seat for for large or medium sized airlines, the premium is often calculated on the basis of the total volume of revenue passenger miles or kilometers flown by the insured. This is important because the insurer receives a premium related to the actual exposure. In Aviation, personal accident insurance, premium is based on a scale of benefits selected by the insured. Third party liability premium is assessed on flat premium per thousand revenue passenger miles or kilometers