Airlines, insurance companies may relook at disruption cover

The sudden spurt in bomb threats may force airlines and insurers to relook at their policies to cover flight disruptions.

Airline insurance policies cover loss and damage to aircraft due to accidents, wars or natural calamities. Policies also take care of passenger liability and third party claims arising from such accidents or events.

While airlines can claim costs for diversions due to medical emergencies, bomb hoax related disruptions or diversions have been rare thus far and are not covered under insurance.

The past week has changed that. Over the last seven days nearly 100 flights operated by Indian carriers received bomb threats posted on social media.

This resulted in flight disruptions, diversions and scrambling of fighter jets in Singapore and the UK. In most of recent cases though a diversion was not needed as threat was received when aircraft was close to its destination.

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According to a media report a single bomb hoax can cost an airline upto ₹3 crore. While investigations are underway to trace the culprits, Bureau of Civil Aviation Security director general Zulfiquar Hasan has said Indian skies remain safe.

There have been informal talks between airline executives and their insurers over applicability of their cover for ongoing bomb hoaxes.

“With increasing number of bomb threats, this is an emerging situation which is being closely monitored by insurers and reinsurers,” TATA AIG said.

“Up until now no one thought for the need of inclusion of bomb hoax related diversions in aviation insurance policies. These used to be one off incidents but things may change now,” an aviation insurance consultant remarked.

Akasa Air declined comment. Air India and IndiGo did not respond to queries. “Business interruption or mechanical defects are not covered under standard airline policies. However, accidents arising out such mechanical defects are covered, “ said an executive of public insurance company.

There are specific policies available covering business disruptions. For instance flight cancellations due to fog can be covered but airlines don’t buy these policies now because of high premiums and stiff conditions.

Policies covering hull can also have clauses allowing emergency expenses for safety of aircraft after damage or forced landing. While some believe this is a grey area, the executive quoted above said such claims would apply only to grave safety risks and not hoax threats.“

While policies are tailor-made for each airline underlying principles remain same. Insurers assess and price the risks and then decide whether it’s viable to offer cover for different conditions,” the executive added.

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