While private pilots and skydivers have to take out extra life insurance to cover the added risk of their pursuits, space tourists do not need special policies on their high flying rides.
That loophole is likely to disappear, slowly, after the fatal crash last week of a test flight of a Virgin Galactic space ship designed to take tourists into space.
The loophole exists because U.S. life insurance policies don’t ask about space tourism or exclude it from coverage, meaning insurers most likely would have to pay if the holder died on a space trip, insurance industry veterans said.
Insurance companies, which say they are considering what to do about space tourists after the Virgin crash, are likely to start adding questions about space travel and may even explicitly exclude space coverage, the industry observers said.
The companies themselves are taking a cautious approach.
“If we had an applicant with such plans, we would postpone any underwriting decision until they returned,” Prudential spokeswoman Sheila Bridgeforth said.
Northwestern Mutual said that it is paying close attention to the issue after the crash, but that there is too little safety data to assess the risk of space tourism. U.S. life insurer MetLife said it doesn’t have imminent plans to offer space tourism insurance.
Still, the industry is starting to gear up for sparce tourists, just as they cover satellite launches. Pembroke Managing Agency offers a policy that pays up to $5 million per space passenger or up to $20 million per trip, according to parent Ironshore International, which announced the policy in June.
“I suspect in insurance company offices all over the country right now – as a result of what’s happened to the Virgin Galactic plane – it’s being discussed,” said Burke Christensen, former insurance lawyer and chief executive who has authored or edited three textbooks on insurance law.
It would take time, perhaps years, for those changes to be approved by all U.S. state insurance commissioners, he noted.
In deciding what to charge, insurers are likely to look at satellite policies, which range between 2.5 percent and 10 percent of insured value, Neil Stevens, a space insurance expert and member of the UK’s Satellite Finance Network advisory board.
At that rate, a policy paying a million dollars would cost $25,000 to $100,000.
“Getting on a space flight is a material change in risk,” he said, akin to strapping rocket boosters onto a car and asking for a new policy. “Put yourself in the place of the insurer. Would you charge the same premium?”
But the data on human space travel is much more favorable, if limited. There have been no fatal suborbital manned flights and three fatal orbital space shots, including the U.S. space shuttles Challenger and Columbia with 14 deaths, and a Soyuz flight that killed one, according to the Seradata SpaceTrak database. That puts the risk of fatal accident on a manned orbital or suborbital spaceflight at 3 in 306 or just under 1 percent, the company said.
Given those numbers, and the few people who are likely to fly on rockets, “you come up with a very, very, tiny, tiny probability” of death, Christensen said, and the company might conclude it is not worth charging extra.
Virgin Galactic’s SpaceShipTwo broke up after its release from a launch plane high over the Mojave desert on Oct. 31, killing one of two pilots. The craft is designed to carry six passengers on two-hour suborbital flights, including a few minutes of weightlessness.
Virgin’s space program, backed by founder Richard Branson and Aabar Investments, a United Arab Emirates investment fund, is the most developed of several projects to develop space tourism, with about 800 deposits for a ride into space at up to $250,000 a seat. Singer Lady Gaga and actor Ashton Kutcher have signed up.
Other companies developing space ships include privately owned XCOR Aerospace and Blue Origin, a startup owned by Amazon.com Inc founder Jeff Bezos.
While current life policies probably would pay in the event of death, applicants for new policies should disclose space plans or risk a dispute with an insurer, said Steven Weisbart, chief economist at the Insurance Information Institute, a non-profit trade association.
Insurers typically have up to two years after a policy is written to contest the application, allowing them to investigate whether the insured person has misrepresented facts.
So it’s possible an insurer could avoid paying if someone bought a policy and died in a rocket crash during the two years period.
“You know that insurers are going to look for some way to invalidate the claim if you had a ticket,” said Glenn Daily, a fee-only insurance adviser based in New York.