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Aviation Insurance
Sunday, January 1, 2012
Faulty limits

We had 37 fatal crashes in 2011 but these produced only 515 fatalities. This includes passengers and crew and compares to the previous annual average over the last ten years of 30 accidents with 777 deaths.  The principal reason for this state of affairs is that there were relatively few big jet crashes, most of them being turboprops with small passenger loads.

The worst accident was an Air Iran B727-200 in which 77 of the 105 persons on board were killed.
So far there has been little sign of intended rate increases in the market, but keep your fingers crossed as there are some nasty indications of financial disasters that may rear their ugly heads and bring rate increases across the board.

Malta cuts landing fees

In a recent article in Tom Chalmers’ World Airnews there was mention that Malta International Airport wanted to stimulate activity and income. They planned for the Winter Schedule, which over there ends on 31st March, to refund all the landing fees for scheduled airlines. Compare this to the plans for RSA airports where extra fees, charges and expenses are dumped on the aviation community at large. This action will in all likelihood have the effect of reducing activity, and thus income, as people begin to find flying too expensive.
When you think of the comparative size of the two countries it’s a bit strange that tiny li’l old Malta seems to have the brains and intelligence so absent from our operations.

US brokers imposing liability limits

It seems that following the take-overs of insurance brokerages here and overseas by US owned monoliths, some disturbing factors have come to light.
The one that worries me most is the new culture of broker requiring his clients to agree that he cannot be held liable for errors for more than a fixed figure. In the one instance the US broker has forced on to a new RSA subsidiary an agreement that the limit will be a mere R15 million. This is weird when the broker is selling insurances with limits of R500 million and even more.
The question I asked was, “Who will pay the shortfall of R485 million when the insurer refuses to cough up because the broker made an error in submitting the proposal to the insurer?” The answer I received was, “Let the courts sort it out!”
As a result I recommended to all my clients to move away from that broker.
I am told by a reliable source that another US controlled brokerage, one of the largest in the world, is also following this route as a means of protecting the company against large claims for errors and omissions. All very strange as the broker has to carry Insurance against mistakes - PI Cover as it is called.
Then to my shock and horror I find that the brokers’ association, known as the FIA, proposes a letter of appointment to be used by brokers for all their clients which limits the exposure to R1 million! I don’t know where they got this from, but it looks like the old insurance principle of Utmost Good Faith just flew out of the window. I can’t find any reason for supporting this move. If a broker makes a mistake why shouldn’t he pay for it? He sells cover to his clients for their mistakes, so why not buy some himself?
Oh, and I forgot - the Americans have a neat clause in their agreements - if you don’t like the limit of R15 million you can ask them to increase it to R100 million or suchlike - but you, the client have to pay the premium for it. In other words, the insured must pay for covering the mistakes of the brokers.
What absolute nonsense. Thank goodness it only applies to one or two brokers and that the majority of them still run professional offices. By Henry Tours, Aviation Consultant and Claims Negotiator.

Copyright © Insurance Times and Investments® Vol:25.1 1st January, 2012
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