Chennai, April 27 (IANS) With many airlines strapped for cash as almost their entire fleet has been grounded due to the Covid-19 induced lockdown, general insurers are expecting them to ask for refund of premium for the ‘lay-up period’ instead of setting it off at the year end, insurance experts said.
Simply put, lay-up premium refund in the case of aviation insurance means refund of premium for the period an aircraft did not fly. When this refund would kick-in is a subject matter of the policy conditions.
“Even though airlines have been grounded for a month or more, premium refund will not be on pro-rata basis or one twelfth of the annual premium, as an aircraft is exposed to various kinds of risks even while it is on the ground,” G. Srinivasan, Director, National Insurance Academy, and former Chairman and Managing Director, New India Assurance Company, told IANS.
The airlines are not able to refund their customers for cancellation of flights due to the lockdown and are offering to adjust the fare against future journey, and any source of cash is a welcome measure at the moment.
“In fleet airlines insurance, there is a lay-up premium refund clause. Normally it is adjusted at the end of the year,” Sanjay Datta, chief of underwriting and claims, ICICI Lombard General Insurance Company, told IANS.
In normal circumstances, an airline may have a couple of planes grounded due to repair work or other issues. But the lockdown has grounded almost the entire fleet of all the airlines in the country.
Similarly, insurers can also wait for premium refund demands from corporates as their plants were ‘silent’ for more than a month, said an industry expert.
–IANS
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