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Aviation History
1920
1920 - 1108.PDF
should be so designed that they could be removed as a -unit from the machine in a very short time. He would also call attention to the matter of control cables. This might seem a very small item, but he could assure the Conference that in practical work they were a very serious item, requiring frequent renewal. Magnetos, he said, were placed in the very worst position, where they were absolutely smothered in OCTOBER 21, 1920 oil. On the matter of training pilots in the future he thought that there would be no time for training them at schools as in the past. Machines would probably be designed with an extra seat in the pilot's cockpit so that the prospective pilot would be trained by making a number of trips at the side of the pilot, learning during the actual journey of the machine on its regular service. ^ CORRESPONDENCE -" The Editor does net hold himself responsible for opinions expressed by correspondents. The names and addresses of the writers. Hot : . necessarily for publication, must in all cases accompany letters intended for insertion in these columns facilities or indeed any other facilities. The good business must then pay for the losses of the bad business with the unhappy result that those conducting aviation enterprises on the best lines pay a higher rate of premium than would otherwise be the case. This is due to the blindness of underwriters, and in order to better that state of affairs Lloyd's has lately established an Aviation Record for the purpose of affording essential information to underwriters— information as to the types of aircraft, individual aircraft, aerodromes, air routes, pilots and technical personnel, etc. There is at present no attempt at classifying aircraft, but merely an endeavour to collate facts for the information of underwriters. The Committee responsible for the Record includes representatives of not only underwriters, but also representatives of the Society of British Aircraft Con- structors, individual aircraft constructors and Aviation Transport Companies, and I would especially emphasise the fact that its objects are as much for the benefit of the aero- nautical trade as for underwriters. It is then hoped that all those commercially interested in aviation will support the Record by assisting it with information as to aircraft and the technical qualifications of the personnel engaged in operating the aircraft. In this way underwriters will be in a far better position to discriminate between risks (that is indeed to a great degree the art of underwriting) and, once in that position, the right kind of risks, the risks attending those ventures most likely to succeed and bring profit to their backers and the Empire, may be covered at far less premiums than is at present the case. That is my first suggestion which may be summed up in the six words " all the cards on the table." Secondly, I would advise those who wish to have their risks covered at reasonable premiums to regard the other side, i.e., the underwriters' side. Underwriters are not in business as supporters of a charitable institution. They have to live like other people and they must make a reasonable profit or vanish in which case with them must disappear the stabilising factor of insurance without which no commercial enterprises can be permanently s&jjg^ When the late War finished there at once appeared a •strong forward movement in commercial aviation. It all happened at once, and so there arose a large and immediate demand for insurance protection. Of course, the full strength of this could not last. The risks once covered would not be renewable for considerable periods, and it was bound to tone down to a very much smaller, though possibly steady, demand for aviation insurance policies. This was not fully understood by many, who, up to that time, had gained little or no ex- perience of aviation risks. It was thought that a new and extraordinarily large field for underwriting activities had come into being, and that it was ready for permanent cultivation on a large scale. The result was that a great many people tumbled over one another to " get in," and accepted a mass of risks at premiums which could not possibly pay. Well, it was a good thing for those running aviation ventures while it lasted, but it was unsound. Large losses were made by underwriters and those times are now over. The insurance market for aviation risks is rapidly becoming more restricted, and rates of premium are stiffening. The low rates of the past eighteen months have not been altogether a blessing for those with commercial interests in aviation. The amount of insurance premiums play a large part in their calculations for the future, and it is obvious from the figures given at the Air Conference that many are at sea as to how much to allocate for the purpose of securing the necessary insurance protection without which no commercial results can be reasonably certain. At the Conference the figures of 15 per cent.-and 33 per cent, were mentioned as the rate of premiums to cover aircraft risks ; 15 per cent, would be reasonable provided the assured contracts to relieve the underwriter of a certain amount in respect of any claim, and 33 per cent, would be more or less reasonable in the case of the assured bearing no part of any such loss. Such arrange- ment is very customary and of long standing in the Insurance AIRCRAFT INSURANCE AND THE AIRCONFERENCE [2031] At the Air Conference which has just closed, the matter of the insurance of aircraft was more than once mentioned. One speaker, in dealing with the costs of operat- ing an aeroplane service, specified a premium of 15 per cent, of the value of the aircraft as about the premium which might be expected to cover the risks, presumably the usual risks of accidental damage, third party liability, etc. Another speaker suggested 33 per cent, as the premium to cover airship risks. These figures are of sufficient magnitude to make the matter of aviation insurance one to bulk largely in aviation finance. The figure of 33 per cent, represents a colossal amount when one considers the large values of airships, and might well make all the difference between the profit and loss of an airship enterprise. Perhaps then the views of an underwriter of aviation risks may be of some interest to your readers. I think I may safely say that other underwriters share the views I submit. I have been an underwiter of aviation risks since 1912. In those early days it was stated and proved on paper that no underwriter could possibly afford the protection of in- surance to those engaged in aviation and at the same time make a reasonable profit.for himself. I am happy to say that I successfully disproved that theory from the commence- ment of my operations, and it is now quite possible to secure the necessary protection at fairly reasonable rates of premium, if only you know how to do it. I say " fairly " reasonable advisedly since there is much room for improvement con- cerning which I venture to make several suggestions in this letter. I hasten to say that the figures of 15 per cent, and 33 per cent, mentioned at the Air Conference are both of them right, both wrong, and mean nothing at all as they stand ; but I am getting ahead of my theme and I shall recur later to those figures which must have given food for furious thought to any experienced financiers present at the Air Conference. From what we heard during the Conference it is clear that civil aviation is not yet profitable, that it is, indeed, financially unsound as any business must be which cannot show adequate return for capital invested. On the other hand, I think we must all agree that the future is full of promise, and that with the many technical and other improvements in sight, and the vigorous spirit which the Conference has made so apparent, Civil Aviation will before long come into its own as a perfectly sound commercial business with extraordinary possibilities of profit, not only for those with the enterprise to seize the opportunities the new-Age of the Air heralds, but also for the Empire in general. At the moment, however, we must perforce regard Civil Aviation as financially unsound and it is quite obvious, I think, that the risks taken as a whole of any business in that condition are uninsurable at commercial rates of premium. I say "as a whole," because it is quite clear that only clean policies are of any real use to the assured. Policies containing burdensome conditions and so forth intended to lighten the risk for the underwriter cannot be regarded as adequate protection for the assured Underwriters then who cover aviation risks in toto must charge premiums in excess of anything which a good business man would care in the ordinary way to pay. That creates a very difficult position, for no business now-a- days can be safely conducted without adequate insurance protection, and none less than aviation enterprises carrying as they do risks of a very hazardous nature. The position appears at first sight to be one of stalemate until civil aviation finds its commercial feet, and yet I think a good deal may be done to make aviation insurance more commercially possible almost at once, and if that is done I think it would mean a distinct forward step towards sound aviation finance. Firstly, underwriters are very blind as to the nature of aviation risks, with the result that they accept much bad unwholesome business at rates of premium which are too low—business which it is not perhaps in the best interests of British Aviation to encourage by freely granting insurance "V.: * mo
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