A look at the how insurance rates, liability limits and more might play out for eVTOL aircraft
As with any brand-new aviation sector, there’s a lot riding on the safety of eVTOL aircraft, including insurance rates if even one accident involving personal injury or death should occur.
Insuring this industry is a hot topic, with many unknowns at this stage — before a single aircraft of this type has even been certified for commercial flight.
Will operators have a difficult time securing affordable insurance to operate eVTOL aircraft? Will some designs be more expensive to insure than others? There are significant safety differences in the view of some, between multirotor designs like EHang’s EH216, fixed-wing lift-plus-cruise models like Archer Aviation’s Midnight aircraft, and single-rotor helicopter-style eVTOL aircraft like Jaunt Air Mobility’s Jaunt Journey.
How will underwriters evaluate and price the risks associated with this new class of unproven aircraft? What data will insurance companies need to collect to properly evaluate eVTOLs? How will the cost of insurance factor into how much passengers pay for an air taxi ride?
James Viola, President and CEO at the Helicopter Association International (HAI), told Vertical that it’s hard to predict the status of eVTOL insurability at this early point.
“The volatility within the insurance sector is a significant issue for the vertical aviation industry,” Viola said. “I am the owner of a light helicopter, so I am intimately familiar with rising insurance rates. It’s also something the HAI board of directors wants to address, so HAI is forming a new working group focusing on insurance issues for the vertical aviation industry.”
Chris Proudlove, senior vice president and underwriting executive at Global Aerospace, is currently leading a team of underwriters and claims specialists examining eVTOL liability and operational risks. He said the company is already insuring “many” eVTOL firms as they move toward type certification, as well as some uncrewed drone aircraft systems.
Insurance availability
Proudlove does not seem to believe eVTOL operators will have a difficult time securing affordable insurance for business operation.
“It’s unclear how availability of insurance will develop, but as the safety case is demonstrated and more aircraft reach operational readiness, I expect that there will be a good selection of insurers,” he said.
There may be significant differences, however, in how eVTOL makers are insured versus companies with integrated business models that plan to produce and operate their aircraft.
Proudlove noted that the integrated model is new to aviation. He said that while the fully-integrated model puts all the risk on a single entity, it can also be argued that the automation and autonomy built into every eVTOL aircraft puts a greater level of risk and contractual responsibility on the manufacturer when there is a separate operator.
As aircraft come to market, insurers will have to assess each scenario on its own merits.
Liability limits
Actual premiums are always hard to assess for any aircraft, Proudlove added, “and much will depend upon the limits of liability required and the valuations placed on the aircraft. Like with the introduction of all new technologies, once enough data has been collected and hours flown without incident, the premiums will adjust to reflect both that safety record and also the market appetite for these risks.”
For its part, HAI is also concerned with aviation-related liability limits.
“Insurance payments for loss of life are often placed at a higher value for aviation accidents than other modes of transportation,” Sweet said. “We believe it is in the best interest of our industry, and the insurance industry, if these limits were standardized across all platforms.”
Proudlove and his team have been examining the liability limits of existing airline operations, which are generally measured in billions of dollars, while current commercial helicopter operators have much lower limits.
“Our assessments and discussions with industry are ongoing,” he said. “One key thing for the AAM [advanced air mobility] sector to appreciate is that the aviation industry is highly litigious and, with social inflation compounding things, liability limits in that industry tend to be higher than in most other industry sectors. Companies looking to launch air services should start working with their insurance broker early in the process to ensure that a broad group of insurers are familiar with their aircraft before the insurance is actually needed.”
eVTOL companies that are trying to hurry their certification represent a large risk — and that’s only one of many risks in a situation like this, where completely new designs and technologies are being introduced — but one other stands out to Proudlove.
“Primary in the eVTOL space is the use of battery-powered motors,” he said. “There have been fires both with aircraft and other vehicle types, and I believe that achieving a satisfactory level of battery safety is one of the biggest challenges.”
Impact of a crash
If there is even one eVTOL accident, the impact of that on insuring the industry is hard to predict, but Proudlove looks to the past for insight.
“The aviation insurance industry has proven highly resilient to accidents over the decades as new aircraft and technologies have been introduced,” he explained. “I don’t see AAM being any different.”
Accident rates in other aviation sectors and across the entire aviation spectrum will also inform eVTOL insurance rates, Sweet said.
“Unfortunately, there is no current repository of information to help inform these rates,” he said. “I recently read a prediction that indicates we are approaching another period of rising rates as the insurance companies prepare to pay settlements for several past accidents, including both [Boeing] 737 Max accidents.”
In Sweet’s view, “it’s up to all of us who fly any aircraft — including future autonomous or remotely-piloted aircraft — to do everything we can to conduct safe flights. By reducing the number of preventable accidents, we have the best chance to help stabilize or lower future insurance rates.”
Proudlove believes that the greater impact of an accident lies not in insurance rates for the eVTOL sector, but in the reputation of the company involved. Potential passengers will certainly think twice about getting into that model.
However, any towns and cities in which eVTOL aircraft hope to operate in will also be affected. “The entire industry will benefit from a smooth roll out of services,” Proudlove said, “but there will likely be some bumps along the way.”
