Insurers of flight MH370's passengers have no precedent for policy payouts
Though the Malaysia Airlines case is unprecedented and the flight's fate unknown, insurers are more likely to pay out sooner rather than later
The unprecedented nature of Malaysia Airlines flight 370's disappearance means it is up to the discretion of the passengers' insurers whether or when they make payouts to their families.
However, the high profile of the case and a notice from the China Insurance Regulatory Commission (CIRC) to all mainland insurers to fast-track compensation has prompted many insurers to consider showing flexibility and signing off on the cheques soon, according to several insurance executives.
"While insurers usually only pay families when the airlines confirm a crash has happened, the missing Malaysia Airlines flight is unique, as there was no wreckage or any bodies found," said Peter Tam Chung-ho, chief executive of the Hong Kong Federation of Insurers (HKFI), the industry body in the city.
Most other plane crashes have pictures of wreckage so insurers need no proof a crash has happened. Even in the case of the Air France Flight 447 in 2009, rescuers found two bodies after the flight had been missing five days, which led insurers to take immediate action.
Tam said the HKFI would not issue guidelines to insurers on what to do next so it would be up to individual insurers to decide whether or not to pay out on policies even without concrete proof of a crash.
On the mainland, the CIRC has been more decisive. On Sunday, the regulator issued an urgent notice requiring all mainland insurers to offer quick assistance and compensation to families of policyholders.
Hong Kong-listed AIA, German insurer Allianz, and big mainland players such as PICC, China Life, and Ping An all announced offers of help to relatives of policyholders on the jet.
"Although we hope that all passengers and crew can go home safe, we have prepared for the worst scenario," Lee Yuan Siong, chief insurance business officer of Ping An Insurance, said yesterday. The company had 45 clients on the flight, including a staff member. PICC said 15 of its policyholders were on the plane, while Allianz had nine.
"At this point of time our priority is to offer support to the next of kin of individuals who are involved," an Allianz spokeswoman said. "We have identified five individuals in China and another four in Malaysia who were on the flight. We will continue to monitor the situation closely and provide the service and assistance wherever and whenever possible. At the same time, we extend our thoughts and prayers to all on board and their families."
An AIA spokeswoman said: "We are in constant contact with Malaysia Airlines and the relevant authorities. We stand ready to provide any and all assistance needed by the families of our policyholders during this harrowing period."
Conspiracies and other theories about what happened to Flight MH370:
As the search for Malaysia Airlines flight MH370 enters its second week, some of China's most sober scientists and aviation experts are beginning to consider the wildest possibilities. What if ...
... it was a failed hijacking?
Professor Li Jun, radar expert with the National Laboratory of Radar Signal Processing in Xian , Shaanxi , said MH370 might have been hijacked by terrorists who flew it to avoid detection by civilian and military radar. The plane may have crashed en route to its target. "Obviously they have not reached their destination, or our puzzle would have been solved," Li said.
... negotiations failed?
Professor Yang Xiaoguang , of the Beijing University of Aeronautics and Astronautics, said one theory gaining popularity in aviation circles was that Malaysia Airlines or other authorities actually attempted to negotiate with someone on the plane, but failed. After losing the plane, nobody wanted to take responsibility. "If the plane crashed due to a failed negotiation, the victims' families would be outraged," Yang said.
... the plane was shot down?
Some experts have wondered whether the plane was shot down by the Malaysian military. These aviation and air-traffic-control experts, who declined to be named, said that the pilots might have turned back after an electrical failure or act of sabotage damaged the plane's transponder and radio. In such a situation, they might not have been able to respond to military warnings. This would assume that Malaysian authorities did not follow international rules and send planes to establish visual contact before firing.
...the pilot was suicidal?
Professor Yu Geng , deputy director at the Civil Aviation Institute of Shenyang Aerospace University, speculated in an interview with the China Science Daily that a suicidal pilot might be to blame. That is because most non-human factors could be ruled out. Yu, who specialises in avionics, pointed to EgyptAir flight 990, which crashed off the US island of Nantucket in 1999. That crash was widely attributed to a suicidal crew member.
... it was just an accident?
Wang Yanan , deputy editor of China Astronautics Society's magazine Aerospace Knowledge, told the China Science Daily that the plane probably went down as the result of an accident, but "the crash location is outside the range of estimate, or the crash site is complicated by various situations". He added: "We just haven't found it yet. However, the likelihood of such situations is very small. Even falling like a stone, the transponder should beam some information to the ground. This is very strange."