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Business Standard
10 hours ago
- Business
- Business Standard
Air India plane crash may trigger up to $150 mn in global insurance claims
The crash of the Air India plane in Ahmedabad is expected to result in insurance claims of $130 million-150 million, according to industry insiders. The majority of these claims will likely be borne by global reinsurers because aviation policies are typically structured with primary insurers transferring a significant portion of the risk through reinsurance arrangements. About 10 per cent of the claims are likely to come on the books of Indian insurers and reinsurers, according to industry observers. The claims will include three kinds of liabilities: Damage to the aircraft; loss of lives who were aboard the aircraft; including the crew members; and third-party liability because of loss of lives where the aircraft crashed; and cargo liability. Industry insiders are estimating $80 million-100 million in claims for the aircraft damage following the crash, and over $50 million in claims for the deaths of the passengers and crew members, and the deaths of non-travellers owing to the crash -- part of third-party liabilities. Air India had insured its fleet for $20 billion with Indian insurers including TATA AIG General Insurance, ICICI Lombard General Insurance, New India Assurance, and the other state-owned general insurance companies. TATA AIG has provided coverage for 30-40 per cent of the risk and is the lead insurer among the primary insurers. These insurers, in turn, have reinsured most of the risk with reinsurers, including state-owned GIC Re, America-based AIG, and AXA XL. 'Airline fleet policies are reinsurance-driven. In the case of Air India a significant amount will be with the reinsurers. Aviation policies are agreed-value policies and the agreed value of the aircraft is $80 million. However, putting an estimate on liabilities is tough because the nationalities of the passengers play a vital role in understanding what kind of liability we are looking at. Also, there is some damage on the ground, so there will also be some third-party liability. In such an event, aviation reinsurers are usually quick to respond. Their appointed surveyors and solicitors will swing into action, approach the families of the deceased, and try to settle the claims as quickly as possible. But it is a long-drawn process. This event is likely to have an impact on aviation insurance rates,' said an insurance-industry insider. According to another senior insurance executive, aircraft are comprehensively insured, with the primary insurance subsequently reinsured by global firms. Insurance coverage generally includes damage to the aircraft, the deaths and injuries, as well as damage to cargo and personal belongings. 'In such cases (crashes), Indian insurance companies are usually not significantly burdened financially because most of the risk is transferred to reinsurers. Following an incident, reinsurers often take the lead in advising Indian insurers on the appropriate course of action. However, this incident is likely to affect aviation insurance premiums, with reinsurers potentially increasing rates based on their loss experience,' the person said. While there would not be much of an impact on the profit and loss accounts of Indian insurers, they will certainly take a hit on solvency, with TATA AIG taking the biggest hit since it was the lead primary insurer. 'The solvency of insurers will be affected with a major impact on the lead insurer. However, most insurers involved have strong solvency and are not a major concern,' said an insurance executive. The Air India place was a Boeing 787-8 Dreamliner, one of the most modern passenger aircraft in service. Reports suggest it was the first crash for the Dreamliner, which began commercial flights in 2011. 'The loss will be fully paid because it is a total loss with no salvage value. This means the entire $80 million is payable to cover the aircraft. However, additional claims for passenger liabilities and third-party liabilities make the situation complex. The Indian lead insurer will head the claim process, but only about 10 per cent of the payout will come from Indian insurers, with the balance placed with reinsurers. The liability portion, which could reach an estimated $50 million, will also be covered, but it will go through a legal process, taking time to resolve. This brings the total potential loss to around $130 million,' said Sourav Biswas, business head (aviation insurance), Alliance Insurance Brokers. Experts say this incident is likely to harden reinsurance rates for aviation policies, depending on the losses the reinsurers make. 'This event will also harden rates for the aviation insurance,' Biswas said. Narendra Bharindwal, president, Insurance Brokers Association of India, said: 'In cases involving large commercial aircraft such as the Boeing 787, insurance coverage is substantial and structured globally. Aviation-insurance programmes for major airlines such as Air India are arranged on a fleet basis and reinsured across international markets like London and New York. No single insurer bears the entire risk. Coverage is widely distributed among global reinsurers, with shares as small as 1.5-2 per cent and a lead reinsurer typically taking 10-15 per cent.' 'The financial impact of such incidents is shared globally across this network. While immediate premium adjustments are unlikely, the cumulative effect of multiple aviation incidents worldwide—including this one—will influence renewal terms and premiums for the sector in the next underwriting cycle. This incident, along with others in recent months, will likely result in a hardening of the aviation insurance market, not just for the airline involved but across the entire aviation sector,' he said.
Time of India
28-04-2025
- Automotive
- Time of India
Why your EV insurance premium is costlier and features you must have in EV motor insurance policy
Driven by the need to save money and the environment, many people have switched from internal combustion engine (ICE) to electric vehicles (EV) in the past few years. However, considering the overall cost of ownership is important as it may overshoot your estimate and render its running financially infeasible. One component that spikes the EV cost is insurance, which is higher than that for regular ICE vehicles. #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" While third-party insurance is mandatory for all cars and the premium gap for EV and ICE cars isn't too large, the own damage component is higher for EVs. The overall absolute premium shoots up for a variety of other reasons. 'This is because of higher purchase prices that result in higher replacement costs, costly specialised parts (especially traction battery), higher repair costs that call for specialised technicians and lack of repair networks with expertise in EVs,' says Neel Chheda, Chief Underwriting & Data Science Officer, TATA AIG General Insurance. Though most insurers peg the premium for EVs to be marginally higher at 15-25%, a quick check at online insurance portals like Quickinsure and Policybazaar shows that the premium for EVs is typically 25-60% higher than that for ICE vehicles. For instance, the premium difference for Tata Nexon's base models in petrol and EV categories is nearly 54% for comprehensive insurance, including third party and own damage components. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 10 Things Flight Attendants Rarely Talk About, Plus Tips to Make Your Flights More Comfortable Enhancing In-Flight Comfort Undo How insurance differs for EV & ICE vehicles What's the cost difference? While third-party cost is only marginally higher, the absolute premium shoots up for EVs. Live Events Reasons for higher insurance cost of EVs Here are some factors that result in higher insurance for electric vehicles. Purchase price: A big reason for higher EV insurance is the cost of the vehicle itself as EVs are 12-30% more expensive than ICE vehicles. Since the market value of EVs is higher, it translates into higher insured declared value (IDV), which in turn leads to higher premiums. Battery cost: 'Battery replacements represent a substantial financial burden, accounting for 50-70% of the vehicle's total cost for most key models in India,' says Mayur Kacholiya, Head, Motor Product, Digit General Insurance. 'The cost of replacing battery alone can go up to Rs.7 lakh, depending on the vehicle model and battery capacity,' says Subhasish Mazumder, Head, Motor Distribution, Bajaj Allianz General Insurance. Hence, the risk of damaging it will result in a higher premium. Repair cost: 'Repair costs for high-voltage batteries and motors are significantly higher in EVs because most original equipment manufacturers (OEMs) do not offer child parts for these components,' says Gaurav Arora, Chief Reinsurance, Underwriting & Claims for Property & Casualty, ICICI Lombard . Electric motors in EVs generally have a long lifespan and require less frequent maintenance than ICE vehicles, but when repairs are needed, they can be significantly more costly, says Mazumder. 'Besides, the infrastructure for EV repair, including service centres and availability of specialised tools and equipment, is still developing. Also, there's relative scarcity of skilled labour proficient in handling the unique complexities of EV systems, which can lead to longer repair times and higher labour costs,' adds Kacholiya. Cover features to include Given the advanced technology used in EVs, a comprehensive insurance policy can prevent significant financial burdens. Car owners should be especially mindful of the battery, which is not only the most critical component of the vehicle, but also one of the most expensive, says Mazumder. Besides, ensure the policy includes mechanical and electrical breakdown coverage, and protection for digital systems. Battery protection & charging supplies: Battery damage is usually the top reason for claims in EV vehicles mainly due to floods and inundations. Says Kacholiya,'The most frequent issues in EVs leading to insurance claims is flood damage resulting in battery failure and a higher frequency of fire loss claims.' 'This is why first and foremost, thorough battery coverage is essential since it guards against losses arising out of risks like accidents, natural calamities and malicious acts. Along with your charging supplies included with the vehicle, you also need to make sure portable cables and home chargers are insured,' says Chheda. Zero depreciation: Due to the advanced and expensive parts used in EVs, repairs can be very costly and this feature can help you claim the amount required for replacing or repairing parts without deducting depreciation, minimising out-of-pocket expenses. Roadside assistance: This can help you get back on the road by either swapping your battery or arranging for mobile charging. Since EVs are heavier than ICE vehicles, they also need special machines for towing. Exclusions 'Depreciation, which refers to the normal wear and tear of EVs due to usage over time, is not covered. Similarly, any intentional damage caused to the vehicle is explicitly excluded from coverage,' says Mazumder. 'Beyond the standard exclusions common to all vehicle insurance, EV insurance may have specific exclusions related to battery. Claims could be rejected if battery charging or maintenance doesn't follow OEM guidelines, or if unauthorised repairs are done without prior approval,' says Kacholiya.
