Insurers to refund airlines’ premium over flight cancellations
April 21, 20202.3K views0 comments
With the cancellation of local and international flight operations to check the spread of the COVID-19 pandemic, aviation insurers are beginning to count their losses.
This is because aviation insurers would have to cough up part of the premium paid to them by airlines operators at the end of the pandemic in accordance with aviation insurance contract regulations.
This they would do under the Premium Adjustment Agreement with their airline clients in order to return premium to them.
It was gathered that this is applicable to premium collected under aircraft hull insurance whose premium is paid upfront usually on annual basis.
On the part of the air passengers, investigation revealed that the passengers may be at the losing end as aviation insurance experts said such claims might not be paid to them since the flight cancellations were a state order and not the fault of the airlines.
However, some insurance underwriters, especially those who underwrite air passenger personal accident insurance, said customers have been making requests for claims for flight cancellations.
Sunny Adela, aviation insurance expert and managing director of Alpha Choice Insurance Brokers, said that the pandemic has affected aviation insurance business and passengers due to flight cancellations.
He said the COVID-19, which has negatively affected businesses worldwide, also has same effect on insurance business in the country.
Speaking on how it affects aircraft hull insurance since flights have been grounded, he said at the end of the year, insurers would effect what is called premium adjustment if the flight did not fly over a period of time.
“There is something you call lay off and return premium, which ensures equity for all. You adjust the premium because the risk was minimised but it depends on length of time.
“The hull has been paid for but if it does not fly for 14 or 21 days, there will be lay off and return on the premium for the aircraft hull itself depending on how long you were not flying.
“This does not apply to extra covers like personal accident insurance,” he explained.
He said for extra covers like air travellers’ personal accident cover, passengers would suffer the loss as the flight cancellation was caused by state order for safety and not at the behest of the airlines.
“The flight cancellations were on safety grounds. The state was trying to ensure safety. If the flights were delayed, it is a different thing but this one is health hazard. I don’t think anyone will pay any claims on that. The first concern of airlines is safety,” he stated.
Some air passengers whose flights had been scheduled before the lockdown have already approached their airlines for insurance claims.