Aviation and Inland Transport

Insurance

Prof Mahesh Kumar

Amity Business School
profmaheshkumar@rediffmail.com
Aviation Insurance-History and Features
 Introduced in the early years of 20th century with
first policy being written by Lloyd’s of London in
1911.
 Aviation insurance has gained significance with the
booming of aviation sector.
 Aviation insurance is highly specialized and is
underwritten by relatively small number of
insurance organizations on account of its
catastrophic nature of the losses.
 Most airlines arrange for ‘fleet policies’ to cover all
aircraft they own or operate.
 In India major chunk of business is owned by GIC
 Aviation Risks
Following are the types of risks involved in aviation
transport:
a) Loss or damage to the aircraft due to fire, collapse,
theft, vandalism or any other peril.
b) Legal liability to third party and passengers.
c) Legal liability for freight, mail, baggage etc. carried.
d) Personal accident risk to the pilots, crew members and
the ground staff.
e) Loss of professional license of pilots and other crew
members.
Thus aviation insurance provides for physical damage
coverage i.e. damage to the aircraft and liability
coverage for property damage and bodily injury arising
out of ownership or use of insured aircraft.
Physical Coverage
Generally three types of insuring agreements for
physical damage to the aircraft:
a) ‘All risks’ basis : All physical damage losses to the
aircraft, including disappearance, are covered except
those losses excluded.
b) ‘All risks’ basis , not in flight: The aircraft is covered
on ‘all risk’ basis only when it is on the ground and
not in flight. Fire or explosion after a crash is not
covered.
c) ‘All risk’ basis , not in motion: The aircraft is covered
on ‘all risk’ basis only when it is standing still. Fire or
explosion after a crash is not covered.
Liability Coverage
 Pays for bodily injury or property damage
arising out of the insured’s ownership,
maintenance or use of insured aircraft. Also
includes for bodily injury arising out of the
premises where the aircraft is parked.
 Excluded losses include liability assumed in
contract, worker’s compensation and damage
to the property under insured’s care, custody
and control, damage or injury from noise such
as sonic boom, interference with quiet
enjoyment of property and pollution losses.
Aviation insurance policies in
India
a) Aircraft Comprehensive Insurance policy: Covers a)
loss or damage to the aircraft b) legal liability to
third party and passengers c) legal liability for
freight, mail, baggage etc. carried d) personal
accident risk to the pilots, crew members and the
ground staff e) Loss of professional license of pilots
and other crew members.
b) Airline Insurance ( Hull and Liability): The hull policy
covers loss and accidental damage (including due to
emergency landing) to air and ground risks; the
liability policy covers the airline against legal action
from third parties or customers in respect of death,
injury or physical damage to the property.
 Aviation Insurance Policies in India
c) Airline Insurance (Hull War): covers for loss of or
damage to their property (aircraft and spares ) arising
due to war or war related activities including a) war
invasion, hostilities, civil war, rebellion, attempted
coup etc. b) strikes, riots, civil commotion or labor
disturbances c) Sabotage d) Hijacking or seizure of
control e) acts for political or terrorist purposes f)
confiscation, naturalization, detention etc for the use of
any government or public authority.
d) Product Liability: liability arising due out of the
defective design or manufacture of an aircraft product
e) General Aviation: insurance of all aircraft all aircraft
other than commercial and military aircraft capable of
carrying less than 40 passengers.
Aviation Insurance –Challenges and Road
Ahead
 High premiums due to huge risk involved is a
major impediment in the growth of aviation
insurance.
 Insurance companies have been posting loses
in aviation business on account of a) the cost
of repairs have increased manifold b) the
number of insured accidents is up c) the value
of aircraft is soaring.
 Road Ahead: a) Self insurance b) Matching
equipment to needs c) Optimize maintenance
cost d) Promote revenues e) promote personal
aviation f) Focus on safety.
Transport Insurance
 Transport insurance deals with risk involved in
transport of goods by air, land or water.
 Risks involved include that
a) Goods may be lost.
b) Goods may be damaged.
c) Goods may be delayed.
 The goods can be protected by ocean marine
contracts or inland marine contracts.
Definition & Scope of Transport Insurance
 Ocean marine insurance provides protection for
goods transported over water. All types of
ocean going vessels and cargo together with
liability of ship owners and cargo owners can
also be insured.
 Inland marine insurance provides protection for
goods shipped on land. It includes insurance on
imports and exports, domestic shipments, and
means of transportation such as bridges and
tunnels. They are also used to insure fine art,
jewelry and other valuable goods.
Major categories of Inland Marine Insurance

Inland marine contracts can be categorized

as:
a) Domestic goods in transit.
b) Property held by bailees.
c) Mobile equipment and property.
d) Property of certain dealers.
e) Means of transportation and communication.
Domestic Goods in Transit
 Domestic goods may be shipped by a common
carrier such as trucking company, railroad or
airline or by company’s own trucks face the risk
of being damaged from fire, lightning, flood,
earthquake or other perils. They can also be
damaged from the collision, derailment or
overturn of the transportation vehicle. These
losses are covered under inland marine policy.
 Exceptions being losses due to acts of God
(such as lightning), acts of public authority,
acts of public enemies (war), improper
packaging by the shipper and inherent vice.
Property Held by Bailees
 Bailee is someone who has temporary
possession of property that belongs to another.
Ex. Dry cleaner, tailors, laundries, watch repair
shop etc.
 Inland marine insurance also insures goods and
property held by a bailee.
Mobile Equipment and Property
 Inland marine property floaters used to cover
property that is frequently moved from one
location to another such as a tractor, crane,
bulldozers, plumbing, heating or air
conditioning equipments can be covered while
being transported to a job site or while being
installed.
 A property floater policy is also used to insure
other types of property such as fine art,
livestock, theatrical property, computers and
signage.
Property of Certain Dealers
 These specialized inland marine policies or
inland marine ‘block’ policies are used to insure
the property of jewelers, furriers and dealers in
diamonds, fine art, antiques or such valuable
goods.
Means of Transport and Communication
 Means of transportation refers to property at a
fixed location that is used in transportation and
communication.
 Inland marine insurance can be used to cover
bridges, tunnels, pipelines, power transmission
lines, radio and television towers, outdoor
cranes and similar equipments for loading,
unloading or transporting.
 Examples: Bridge being damaged due to
floods, a fire in the tunnel when the gasoline
truck overturns and explodes, a television or
power line being blown away by wind etc.