Can Safer Air Travel Lower Airline Travel Insurance Premiums?

Given that air travel fatalities has been in decline for the past 20 years and 2017 was declared as the safest year for airline travel, will the trend result in lower airline travel insurance premiums?

By: Ringo Bones 

Even though air crash fatality payouts in airline travel insurance policies are de rigueur, most air travel insurance policies are advertised for other reasons. Why buy airline travel insurance? Well, these days flights and hotels are booked but one needs to protect his or her vacation investment after shelling out significant amounts of money and those whose day-jobs involve weekly airline travel trips involving 500 miles or more, concerns arise if… A) You come down with the flu just a few days before your departure? B) The tour operator for your 2-day excursion suddenly declares bankruptcy? Or C) You are unexpectedly laid-off from your job? 

Major insurance providers already provide airline travel insurance to help protect your trip investment by taking the worry out of unforeseen circumstances that could disrupt your plans. Most of them can provide trip cancellation coverage, giving your cash back for up to 100-percent of your trip costs for reasons like: termination by employer, covered illness or injury of you and your traveling companions, airline stopping services for at least 24 hours due to natural disasters such as hurricanes, named severe storms or earthquakes. Affordable plans start as low as 17 US dollars and coverage is usually around 1,500 US dollars per person for flight cancellations and 300 to 500 US dollars a day for trip interruptions. Will these premiums get even lower given that 2017 was declared as the safest year ever for airline travel and airline crash fatalities has been in decline during the past 20 years? 

Despite of the tragic and scary chapter that we call 9/11, the mysterious disappearance of Malaysia Airlines Fight MH 370 back in March 8, 2014, the shooting down of Malaysia Airlines Flight MH17 over Donetsk by a Russian made Buk surface-to-air missile back in July 17, 2014, the number of airliner accidents has been in a slow and steady decline during the past 20 years. Harro Ranter, president of The Aviation Safety Network said: “Since 1997 the average number of airliner accidents has shown a steady and persistent decline, for a great deal thanks to the continuing safety-driven efforts by international aviation organizations such as ICAO, IATA, Flight Safety Foundation and the aviation industry.” 

The Dutch consultancy To70, estimated there was now one fatal accident for every 16-million flights, although its report was compiled before the Costa Rica crash occurred. While the Aviation Safety Network’s report shows that the accident rate now stands at one fatal passenger flight accident per 7,360,000 flights. If cargo planes were included, a report by the Airline Safety Network shows that there were a total of 10 fatal accidents, resulting in 79 deaths for the whole of 2017, compared with 16 accidents and 303 lives lost in 2016. The organization based its figures on incidents involving civil aircraft certified to carry at least 14 people. Given the statistically significant decline in airline accident fatalities during the past 20 years, should these translate to lower airline travel insurance premiums?

Of Therapeutic Vacations and Travel Insurance

Even though the therapeutic vacation side of the travel industry remains very much an unexplored niche market, will travel insurance providers’ policies on preexisting conditions hinder its economic viability?


By: Ringo Bones


Before being called as such, the concept behind therapeutic vacations and / or therapeutic holidays probably predates the invention of the wheel. When prehistoric men and women set off in pilgrimages – religious or otherwise – for the travel destinations supposed feel-good factor. These days, there are a myriad or more travel destinations that seems to offer therapeutic effects – whether via religious miracles or well-established hagiographic pedigree – just waiting to be tapped by the post-credit crunch travel industry. Sadly, the concept of therapeutic vacations may well remain just a dream due to an overwhelming majority of travel insurance providers’ preoccupation with their policyholders’ preexisting conditions.

The issue of insurance providers somewhat unhealthy fetish over their policyholders’ preexisting conditions became a cause célèbre during the height of President Obama’s campaign for healthcare reform in America. Cancer survivors being recommended by their doctors for therapeutic vacations or therapeutic holidays at present usually can’t afford it due to the fact that their insurance providers provide them with travel insurance policies as expensive as or even more expensive than their planned therapeutic vacations.

Knowledgeable individuals involved in such quandary are now questioning whether insurance underwriters and risk assessors under the tenure of big insurance companies truly understand the true nature of risks faced by cancer survivors. Blatantly so when the hike in travel insurance premiums doesn’t seem to mathematically coincide with the perceived risks using the latest risk assessment analytical tools at our disposal. Looks like your planned trip to visit the Dalai Lama in Dharmsala, India just to be grateful after your ordeal of a decade-long battle with leukemia might be a very expensive proposition from a travel insurance perspective.

Better Risk Assessment: Keeping Insurance Premiums Reasonable?

One sure-fire way of selling insurance policies is to maximize your coverage while keeping premium rates reasonably low. Had we now got this down to a science?


By: Vanessa Uy


Back in the good old days – the previous 25 or more years to be exact – insurance company actuarial mathematicians used to statistically assess risk using a figure called the expected loss. They got it by multiplying the probability of an accident occurring times the damage done by the accident.

Henceforth, policymakers and statisticians of almost every insurance company around the world grown content in using the concept of expected loss as the sole measure of risk. But since insurance companies are always in a perpetual search of ways to “streamline” their economic “bottom line”, the quest is on to create policies that are more ambitious than the one that precedes it. An insurance policy that not only provides coverage for “catastrophes” other insurance providers won’t touch with the proverbial ten-foot pole but also can keep the client’s premium rates down to the absolute reasonable minimum (from the insurance providers perspective at least).

That fateful day came around in 1986, when a mathematician from the University of Virginia named Yacov Haimes and his team developed the partitioned multi-objective risk method or PMRM. Haimes and his team argue that insurance company actuarial mathematicians need to account for catastrophes separately from ordinary accidents in order to provide a better-structured insurance policy, one that maximizes coverage while minimizing premium rates. Rare but expensive (in monetary terms) accidents, the team pointed out could have a small-expected loss given their improbability of occurring.

In his book “Risk Modeling, Assessment and Management”, Yacov Haimes discusses the art of risk management after years of being acquainted and gaining expertise on the subject. Especially it’s important applications in such areas as engineering, science, and even the politically tinged vagaries of public policy. Haimes’ writing style equally covers the quantitative and qualitative aspects risk management by emphasizing how to quantify risk via construct probability together with real-world decision-making problems without ignoring the host of institutional, organizational, political and cultural considerations which these days often accompany such challenges.

Since developing his PMRM, Haimes has co-developed an even newer method of risk assessment called risk filtering, ranking and management or RFRM. The usefulness of RFRM in risk assessment is supported by several case studies cited in Haimes’ book. Given that Yacov Haimes has provided a new focus on minimizing the high cost associated with today’s more extensive risk management, how can all of this benefit us, the lowly policy holder, or for that matter, the whole global economy as a whole?

Ever since our on-going global economic downturn slowly – but inexorably – continues to drive all of us into an uncomfortable sense of fiscal austerity. Whoever can provide products that provide the maximum performance for the least amount of money will not only survive, but can even prosper during these times of economic hardship. If insurance companies can manage to provide us with insurance policies that offer more for less, then both – the insurance provider and the “mere” policy holder – can weather out the on-going global “financial storm” with a comfortable margin of confidence.