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New Technology Pushing Up Insurance Claims

Engines and new materials cited as drivers of the rising cost of repairs and groundings.

One goal of new materials and systems is intended to make airframes and engines more resilient and extend their time between overhauls.

However, many believe that although the new technology might require fewer maintenance events, each shop visit will require more complex work and end up being more expensive.

Definitive proof of that suspicion will remain elusive until new technology ages and signifcant maintenance demand emerges, yet some evidence is appearing from insurance claims.

Insurer Allianz notes that new-generation aircraft are leading “to more expensive aviation insurance claims,” with engines and new materials “driving up the cost of repairs and groundings.”

Of the roughly $16 billion of aviation insurance claims over the last five years, Allianz says that 13% were related to poor maintenance, while another 27% were caused by collisions or crashes.

It also notes that complexity of repairing composite materials means that replacement is often chosen over repair, contributing to an increase in the severity of claims.

“We recently had a claim where an aircraft wing was damaged during maintenance. However, the manufacturer’s repair and inspection protocols meant repair was not cost-effective. The result was a new wing, costing $10 million,” said Dave Watkins, regional head of general viation, North America at Allianz.

Watkins also highlighted the difficulties caused by maintenance bottlenecks for engine overhauls and the costs that can ensue.

“An airline may have to wait six months just to get in the line for [an engine] repair.”

In the meantime, it will need a spare engine.

“We recently handled a claim where a rental engine was required while the aircraft’s engine was repaired. The value of the rental engine was more than the entire aircraft, including its original remaining engine,” said Watkins.

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