Aviation can be a potentially hazardous hobby. By asking some additional questions, underwriters can determine the category a pilot falls into and the level of risk involved, explains Kevin Carr
From the mechanical pigeons of ancient Greece to the parachute and beyond, cultures have built devices to travel through the air.
Modern aviation is considered to have begun in 1783 with a hot air balloon designed by the Montgolfier brothers, and while there are many competing claims for the earliest powered flight, the most widely-accepted date is in 1903 by the Wright brothers.
After World War II there was a boom in general aviation, both private and commercial, as thousands of pilots were released from military service and inexpensive war-surplus aircrafts became available. Manufacturers such as Cessna, Piper and Beechcraft expanded production to provide light aircraft for this new middle-class market.
By the 1950s, the development of civil jets grew with the first widely-used passenger jet, the Boeing 707. It is now estimated that there are at least 50,000 commercial flights around the world every day.
There are many different categories of modern aviation. Civil aviation includes all non-military flying, whereas general aviation includes all non-scheduled civil flying, both private and commercial. General aviation may include business flights, air charter, private aviation, flight training, ballooning, parachuting, gliding, hang gliding, aerial photography, foot-launched powered hang gliders, air ambulance, crop dusting, charter flights, traffic reporting, police air patrols and forest fire fighting.
Many small aircraft manufacturers; including Cessna, Piper, Diamond, Mooney, Cirrus Design, Raytheon and others; serve the general aviation market with a focus on private aviation and flight training.
Private aviation is the part of civil aviation that involves flying not for hire. In a private flight, the pilot is not paid, and the aircraft owner or operator does not receive money for the flight, other than rent from the pilot in some cases.
It is the purpose of the flight, not the aircraft or pilot, that determines whether the flight is private. For example, if a commercially-licensed pilot flies a commercially-registered plane to visit a friend or attend a business meeting, most countries would consider that to be a private flight.
So in terms of insurance, which questions should we be asking? For most potentially hazardous sports or hobbies, insurance companies will usually ask for an additional questionnaire to be completed. For aviation this is usually a two page document that includes around a dozen questions. Most pilots will know the answers immediately.
- Type of licence held - private or commercial?
- Type of aircraft - make, model and number?
- Reason for flying - business and/or pleasure?
- How many hours in total have been flown in past 12 months?
- How many hours have been flown in total?
- How many hours do they anticipate flying in the next 12 months?
- Where do they fly - UK, Europe?
- Do they participate in any specialised flying - testing, low-level, aerobatics?
If the client flies as a member of the armed forces then additional questions such as service, duties and rank are also potentially important.
With this information an underwriter can usually determine whether or not a loading is likely to be applied.
In underwriting terms, aviation is interesting because too many - or sometimes too few - hours in the air can make a notable difference. Someone who holds a licence but only flies occasionally could in theory carry a greater risk than someone who flies on a regular basis as they are more used to doing it. Whereas helicopter flying, for example, is typically considered to be a greater risk than fixed-wing aircrafts due to the generally close proximity of buildings and the ability to, at least in theory, take off and land almost anywhere, such as on an oil rig.
Generally speaking, and all else being normal, most private pilots who spend less than 75 hours a year in the air are likely to be accepted at ordinary rates for life cover, whereas anything above 75 hours could lead to a loading on the premium in the region of £2 per mille.
'Mille' is Latin for thousand and is a commonly used expression among underwriters. In plain English it means 'per thousand'. So the rating of £2 per mille equates to £2 extra a year on the premium for every £1,000 of cover taken. A policy for £100,000 would therefore cost an extra £16.66 each month (£2 x 100/12).
For disability covers, there is unlikely to be a rating as the life risk is typically greater than the disability risk. As such the normal occupation class, based upon their main line of work, would likely apply.
Most commercial pilots will be accepted at standard terms for any of the recognised airlines for most types of cover.
For benefits such as serious or critical illness cover, the occupation class is likely to be a list-based definition, such as functional activity/ability tests. This is where a list of activities is applied such as the ability to walk, lift, see or hear, and the claim is paid if the client is unable to carry out a specific number of these tasks without assistance.
- Kevin Carr is director of protection development at PruProtect
Sources: Hannover Re; RGA; LifeSearch.
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