Premiums for Air India's annual insurance policy may increase marginally. The new premiums—to be renewed on October 1—are likely to be $30 million (Rs. 160 crore), according to media reports.
In 2011, the national carrier’s premium outgo was $28 million. The marginal increase in the premium was attributed to AI’s strict conditions of the tender, higher rates in the foreign market compared to last year and depreciation of the rupee. Also, there were no major claims over the past couple of years and it is operating with almost the same fleet size which was part of the reason behind stable premium rates, the reports added.
Among the AI’s strict norms included upfront payment in the case of claims and low margins. In 2011-12 (October-September), the premium rates increased to 15%-20%. However, AI’s overall premium outgo was lower, as its fleet declined to $9 billion from $9.5 billion. Air India paid a premium of $30 million in 2010-11 for insuring its fleet, valued at $9.5 billion at that time. This was 15% higher than the previous year, the reports further pointed out.
Besides an increase in the fleet size, the Mangalore air crash in May—which killed 158 people—led to an increase in premiums and the cover. The policy would cover three types of risks—aviation hull, terrorism and war cover, and the deductibles insurance. Premiums are generally based on the claims, time-performance and fleet conditions. Usually 85% of the risk in the case of Indian aviation policies are reinsured with international reinsurers, as the capacity of Indian general insurers is limited.