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The Air India Flight 171 crash on June 12, 2025, near Ahmedabad, India, resulted in a devastating loss of life, claiming the lives of 241 passengers and crew, and at least 38 individuals on the ground. This tragic event has not only caused immense grief but has also brought the complex world of aviation insurance into sharp focus. The financial implications of such a disaster are substantial, involving various types of insurance coverage, including hull insurance for the aircraft itself, passenger legal liability insurance for the deceased and injured, and third-party liability insurance for those affected on the ground. The process of navigating these insurance claims can be intricate and time-consuming, requiring careful documentation and adherence to established legal frameworks. The article seeks to unpack the complexities surrounding these insurance claims, examining who is responsible for payments and how the entire process unfolds in the aftermath of such a catastrophic event. The immediate aftermath of the crash is marked by investigations into the cause of the accident, a process that can take considerable time. However, parallel to these investigations, the process of addressing the financial fallout through insurance mechanisms begins. Understanding how insurance claims are handled in aviation incidents is crucial for the affected families, the airline, insurance companies, and the broader public. Aviation insurance operates on the principle that claims are initiated by the affected parties or their families, rather than being automatically disbursed by the insurer. This means that families or affected individuals must proactively approach the airline or insurer with the necessary documentation to start the claims process. Typically, required documents include the death certificate, identity proof, ticket details, and, in some cases, succession certificates. The absence of a proactive outreach from insurance companies emphasizes the importance of families taking the initiative to understand their rights and pursue the claims process. While there is no officially mandated waiting period, it is generally understood that families can practically approach the insurer within a few weeks of the crash. However, the actual payout can only be processed once all required documentation is complete, which can take anywhere from a few weeks to several months, depending on the complexity of the claim and the responsiveness of relevant authorities. In relatively straightforward cases, where the body is identified quickly, and there are no disputes over kinship or the cause of death, families may be able to approach the airline or insurer within 2 to 4 weeks of the crash, with the payout potentially being issued within a couple of days. However, such scenarios are often the exception rather than the rule, particularly in situations involving multiple potential claimants or unclear documentation. In many cases, succession certificates or legal heirship certificates may be required, which can take 3 to 6 months or even longer to obtain through the civil courts, especially if there is no registered will or if family disputes arise. This often proves to be the biggest cause of delay in third-party or passenger death-related claims. The process of obtaining these certificates can be both emotionally taxing and administratively challenging for grieving families, adding further burden to an already difficult situation.
In the realm of aviation insurance, “hull insurance” plays a crucial role in protecting the physical aircraft itself. This type of insurance covers the body, engine, and onboard equipment of the aircraft. In the case of Air India’s Boeing 787-8, the aircraft was insured for approximately $150-200 crore, a cover that had been increased just months earlier following a recent engine replacement. When an aircraft is completely destroyed, as was the case in the Air India crash, the hull insurance claim is triggered for the full insured value. However, it is important to note that Indian insurance companies rarely retain the full risk associated with such high-value assets. Typically, domestic insurers, such as Tata AIG and New India Assurance, underwrite only a small share, often less than 5 percent, and pass on the majority of the risk to global reinsurers like London AIG or Lloyd’s of London. This means that while Indian insurers issue the primary policy, the financial burden of replacing the aircraft is primarily borne by international players. Reinsurance is a common practice in the insurance industry, allowing insurers to spread risk and protect themselves from catastrophic losses. In the context of aviation insurance, reinsurance is particularly important due to the high value of aircraft and the potential for significant financial losses in the event of an accident. Passenger compensation in aviation accidents falls under what is called “passenger legal liability insurance.” This is a mandatory component of aviation coverage and is governed by the Montreal Convention, an international treaty to which India is a signatory. Under the Montreal Convention, Air India is liable to pay a fixed amount, approximately Rs 1.75 crore per deceased passenger, without requiring families to prove fault. This provision ensures a minimum level of compensation for families affected by aviation accidents, regardless of the circumstances surrounding the crash. However, if families choose to pursue further legal claims and can establish negligence on the part of the airline, they may be entitled to higher compensation. The Montreal Convention, adopted in 1999 by over 130 countries, including India, stipulates that airlines are strictly liable for compensation up to around 1,28,821 Special Drawing Rights (approximately Rs 1.4 crore) without requiring the family to prove fault. This ensures a standardized minimum level of protection for international flyers. However, this coverage does not extend to personal insurance products that passengers may have purchased separately. While the airline is obligated to provide compensation under the Montreal Convention, separate payouts from personal insurance policies can supplement this amount, provided that claims are properly filed. The total passenger-related liability in the Air India crash is estimated to be around $350 million. Similar to hull insurance, the liability is largely reinsured, with Indian insurers retaining a nominal portion and the rest being shouldered by international reinsurance firms.
The Rs 1 crore compensation announced by the Tata Group is an ex-gratia payment, a voluntary payout made out of goodwill and not necessarily as part of any legal or contractual obligation. It is separate from and does not replace the compensation owed under passenger legal liability insurance as mandated by the Montreal Convention. This ex-gratia payment is likely intended as an immediate relief measure to help grieving families cover urgent expenses, such as funerals, legal costs, and financial support for dependents. The article highlights that compensation for those on the ground, such as the individuals who died or were injured in the hostel, falls under third-party liability insurance. This type of insurance covers loss of life, injury, or property damage caused to people not on board the aircraft. Given that the plane crashed into a functioning student hostel, resulting in the deaths of 38 people and injuries to dozens more, this aspect of the policy is expected to generate a large number of claims. Compensation to the families of the deceased, medical expenses for the injured, and even damages for psychological trauma can be claimed under third-party liability insurance. As with passenger claims, families must approach the airline or its insurer directly to initiate the claims process. They are required to submit documents such as the death certificate, ID proof, and legal heir certificates. In straightforward cases, payouts can begin within a few weeks. However, when succession certificates are required or multiple claimants are involved, it can take 3–6 months or longer. The compensation amount is assessed based on the victim’s age, income, and number of dependents. Courts may award higher payouts if the case goes into litigation. While there is no fixed cap, third-party compensation in India has ranged from Rs 20 lakh to over Rs 1 crore in previous aviation and industrial accident cases, depending on the victim’s profile and circumstances. The article also provides guidance on how families can locate insurance policies availed by the deceased passenger. The Insurance Information Bureau (IIB) portal, maintained by the Insurance Information Bureau of India under the Insurance Regulatory and Development Authority of India (IRDAI), serves as a centralized database of insurance policies issued by various insurers across India. Families can use the IIB portal to search for records by submitting basic personal details like the deceased’s name, date of birth, PAN, address, and mobile number. This portal can be invaluable in identifying and verifying insurance coverage. Furthermore, the article discusses the role of international travel insurance. Most passengers on international flights are covered under mandatory passenger liability insurance, which is built into the ticket price and provided by the airline. This coverage ensures compensation in the event of death or injury. However, this airline-provided coverage is limited to death or injury and does not extend to trip cancellations, baggage loss, or medical emergencies. Personal travel insurance, either purchased separately or bundled through credit cards, corporate travel policies, or tour packages, can offer additional benefits such as accidental death coverage, emergency medical evacuation, hospitalization, and compensation for delays or lost baggage. The destruction of the hostel building and any other damaged infrastructure is covered by third-party liability insurance. The owner of the damaged property, likely the medical college or hospital trust that operates the hostel, will file a compensation claim with Air India, the airline responsible for the crash. Air India, in turn, will pass the claim on to its insurer, which will likely pass on the exposure to reinsurers.
Source: Unpacking insurance claims for the Air India plane crash: Who pays what and how