Collisions and crash incidents accounted for over half of all aviation insurance claims (63%) by value, and one-third (33%) by number over the past five years, according to analysis of more than 30,000 industry claims with a value of $15 billion over that span, according to Allianz Commercial’s “Aviation Risk, Claims and Insurance Outlook: 2024 Trends to Watch” report.
“Faulty workmanship/defective product is the second top cause of claims by value and by frequency while natural catastrophes (including turbulence) rank third by value of claims,” the report continues. “Travel issues (including property damage, personal injury, baggage claims, lost/stolen goods, etc.) rank third by number. Other top causes of claims include fire and slip and fall incidents.”
Aviation Issues Driving Claims
“There has been a significant increase in aircraft repair costs in recent years, driven by higher labor rates and the cost of aircraft parts, among other factors, such as inflation,” the report states. “The shift to next generation aircraft continues to impact claims, especially when it comes to engine disassembly and repair costs. Claims costs related to certain aircraft spare parts have increased by 10% to 15% over the last few years, which has resulted in a greater number of aircraft being deemed Constructive Total Losses (CTLs) than in the past.”
Insured clients, maintenance, repair and overhaul operations, and insurers are all impacted by supply chain issues, which continue to increase the cost of claims, according to the report. “Delivery times for mechanical and avionic components are challenging for all involved,” the report states.
Furthermore, “there has also been a noticeable rise in ground handling claims at large airports worldwide, including towing, fueling, catering, and wheelchair services related to commercial aircraft operations, as well as vehicle collisions on the tarmac,” states the report. “Pandemic-related layoffs have resulted in new hires and less experienced employees in some cases, contributing to these claims.”
A Shift in Claims
“Over the past year or so, Allianz Commercial has also witnessed a shift in certain types of ‘everyday’ claims being lodged by commercial airline passengers,” according to the report. “For example, claims that were once prevalent and in the news, such as ‘air rage’ claims after the pandemic, and claims involving animals on board aircraft, have now dwindled.”
Other factors that may impact future claims include a growing shortage of aircraft mechanics, as well as a growing demand for helicopter sightseeing trips and getaways.
Commenting on the report, CLM Fellow Scott Jones, director of transportation and logistics claims, Veritas Administrators, LLC, says, “As aviation companies continue to struggle with the increased cost of coverage, driven by more claims and fewer insurer options, third party resources will be an important part of the equation. Increase in unique risks posed by runway incursions and GPS interference, coupled with the projected increase in usage of air travel creates the need for expert third party resources to ensure accuracy is sustained while increasing the capacity of the carrier.
“For this to be successful, third parties must have a high level of expertise in new technologies such as eVTOL. In this way, we can become an extension of Allianz’s claims handling capacity.”