Air India crash may trigger India’s biggest aviation insurance payout

The tragic crash of Air India Flight 171 near Ahmedabad, which claimed 241 lives onboard and left one survivor, is expected to become India’s most expensive aviation insurance claim. The aircraft slammed into the BJ Medical College doctors’ hostel, causing additional fatalities on the ground.

Air India has announced an ex gratia payment of ₹1 crore to the families of each deceased passenger. However, several layers of insurance, including aviation, life, and personal accident policies, are expected to provide further compensation and support to victims’ families.

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What Air India’s Aviation Insurance Covers

According to insurance experts, Air India maintains a comprehensive fleet-level aviation insurance policy covering multiple risks, including:

1) Hull All Risk: Covers physical damage to the aircraft, excluding wear and tear, mechanical breakdowns, or nuclear risks.

2) Hull War Risk: Covers hijacking, sabotage, and terrorism.

3) Combined Single Liability (CSL): A mandatory global cover that includes passenger liability, baggage and cargo liability, and third-party liability for injuries or damage on the ground.

4) Excess War Liability: Covers war-related claims similar to events like 9/11.

5) Hull Deductible Buyback: Reduces the airline’s deductible burden on claims, allowing even lower-value claims to be covered.

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How Much Will Families Receive?

Under the Montreal Convention—a global treaty regulating international aviation liability—airlines are strictly liable to pay compensation up to 113,100 Special Drawing Rights (SDRs) per passenger. SDRs are an international currency unit defined by the International Monetary Fund. At current exchange rates, this amount equals approximately ₹1.26 crore.

This means the airline must pay compensation without families needing to prove fault or negligence. If damages exceed this limit or negligence is proven, further compensation may be pursued through legal claims.

In addition, EU regulations require a minimum insurance cover of 250,000 SDRs (about ₹2.8 crore) per passenger for flights to or from Europe, which may influence the compensation process for some victims.

Beyond insurance payouts, Air India’s ₹1 crore ex gratia payment provides immediate financial relief to affected families.

Additional Coverages

Passengers who purchased tickets with credit cards that include personal accident coverage may be entitled to an additional ₹1 crore to ₹3 crore in compensation. Most Indian credit cards offer this benefit, which activates only if the ticket was bought using the card.

Many victims might also have had individual travel insurance policies covering accidental death, medical evacuation, and repatriation. Typically, these policies pay lump sums of ₹10-15 lakh for a $150,000 coverage.

Meet Kapadia, Head of Travel Insurance at Policybazaar, said insurers have fast-track protocols in such disasters, including dedicated helplines, expedited claims processing, and logistical support for families.

Global Risk Sharing Through Reinsurers

Narendra Bharindwal, President of IBAI, explained that aviation insurance is globally syndicated and reinsured across markets in London, New York, and elsewhere. No single insurer bears the entire risk; coverage is spread among multiple reinsurers who share portions of the risk.

Major global reinsurers like Allianz, AIG, and Lloyd’s syndicates often take part in this risk sharing and may further cede risks through retrocession arrangements.

Life Insurers Offer Emergency Support

In response to the tragedy, Bajaj Allianz Life Insurance has set up a dedicated claims desk to assist affected policyholders and families, simplifying documentation and prioritizing claim settlements.

LIC of India has also announced concessions, accepting alternate proofs such as government death records or compensation certificates in place of death certificates to expedite claims.