Global
communities were stunned by the news with regard to the missing Malaysian
Airlines aircraft MH370 without any trace until today. From Takaful perspectives, what are the
lessons we can learn from the incidents?
The
missing of MH370 and the search and rescue operation are making headlines in
almost all major media be it the print media, electronic media and new age
media. It is no longer a domestic
controversy
debated exclusively in Malaysia but all over the world.
Numerous speculations and theories were suggested, mainly by netizens,
nevertheless we can only confirm which one is correct once the black box is
found and recovered from the now mystery location.
Who are the stakeholders of MH370 or any other plane which ferry passengers as well as aircrews from one location to its final destination? Obviously, first layer of stakeholders are the airline owner i.e. Malaysia Airlines for MH370, the air crews and the passengers themselves. The next layer would be the relevant regulators, families of the aircrews and that of the passengers. This discussion is limited to the first layer of stakeholders only.
The airline owner owns the plane and shall ensure that the plane is fit as prescribed by the aviation authorities to provide the required services for the designated passengers. Despite of having world class Standard Operating Procedures (SOPs) and the best resources to execute the SOPs, nobody can refute that the probability of loss due to exposure to various kind of risk still exists. In simple words, we cannot guarantee 100% that there will never be any misfortune or accident during the course of the flight. Potential risks like engine malfunction, system software errors, bad weather, human errors or hostile action, etc might still occur.
In the event of an accident or misfortune, there would be potential significant losses to the asset or plane as well as injuries or losses of lives of those people travelling on board. In terms of monetary values, we are looking at hundreds of millions (US$) worth of potential losses, whether to the hull (body) of the plane or liabilities to the lives on board.
The airlines, therefore, should ensure that adequate Takaful coverage for the hull and liabilities are obtained from a suitable Takaful operator or consortium of operators. In this respect, engaging services from a professional Takaful broker is advisable as the broker is able to advise on the appropriate coverage to be taken, as well as the sum to be covered. Besides, the broker may also negotiate the best terms and conditions with the lead takaful operator to ensure that the client, i.e. the airline, can obtain the most reasonable protection at a competitive pricing.
Today, none of the Takaful operators are ready to offer a complete and comprehensive Takaful coverage to the aviation industry due to its limited capacity in terms of coverage as well as lack of technical expertise about the industry itself. However, they should form a consortium to share the risk among themselves and slowly build the necessary expertise internally. Active and aggressive participation by retakaful companies will definitely speed up the learning and growth process of the takaful industry in this sector.
Individually, each passenger as well as crew should obtain adequate Takaful coverage for their travelling. Should the covered risk happens, this coverage is usually settled much earlier as compared to liabilities compensated via the airline certificate which takes longer to settle due to legal processes. As in the case of MH370, the search and rescue operation still continues until now (time of this article written) and even after more than a year of search and rescue operation, there is still no significant lead. Thus, the families of the victims may encounter difficulties or hardship to meet their monthly dues if they do not have any other income as compensation from the airline has yet to be received.
The fact is, travel takaful coverage is very affordable for everyone as the duration of coverage is strictly coincide with the travelling period. For instance, during a one week trip to Europe, the most comprehensive travelling takaful coverage only cost about RM14. It covers death and total permanent disability, in-patient and out-patient medical, repatriation cost, loss of baggage, delay of flight, etc. Despite of the very affordable coverage, most travellers are ignorant about the availability of such takaful coverage or the importance of having a coverage while you are travelling.
For those who require higher coverage for death and disability, they may add personal accidental Takaful coverage which usually span for a minimum period of 12 months. This protection is also very affordable where a RM100,000 sum of coverage for a period of 12 months will usually cost about RM150.
It is strongly recommended that employers obtain the necessary and adequate Takaful coverage for all their employees who are required to travel for business reasons.
Besides having adequate Takaful coverage, another lesson to be learnt is pertaining the good risk management practices. In order to minimize the potential of sudden loss of several key executives, many multinational corporations have practiced the unspoken rule to disallow their key executives to travel together in the same transport. This measure is taken to minimise the potential loss of several key executives at one event should any unforeseen misfortune happen if they were to travel together. Losing several key executives would mean significant interruption to the business operation and ultimately impact their bottomline.
Due to the same reason, I was told that a few corporate figures hardly travel together with their families in the same transportation. Instead, they will schedule a different transportations, like a different flight going to the same destination, for the family members to take.
