MC EXPLAINER Unpacking insurance claims for the Air India plane crash: Who pays what and how

From compensating the families of the deceased to reimbursing for destroyed property and the aircraft itself, here is how insurance claims for each party fits into the picture.

What is the claims process like in the aftermath of a major crash like this?

In practice, all over the world, aviation insurance, whether for passengers, third parties (in this case, hostel residents and residents surrounding the crash), or property, is largely a ‘pull’ product, meaning that claims are initiated by the affected parties or their families, not automatically disbursed by the insurer.

After a crash, insurance companies don’t proactively reach out to victims; instead, families or affected parties are expected to approach the airline or insurer with relevant documentation, like the death certificate, identity proof, ticket details, and in some cases, succession certificates, to initiate a claim.

While there is no official “waiting period,” the earliest families can practically approach the insurer is usually within a few weeks of the crash.

The payout, however, can only be processed once all required documentation is complete, and that can take anywhere from a few weeks to several months, depending on the complexity of the claim and responsiveness of the authorities.

According to experts, in relatively straightforward cases, such as when the body is identified quickly and there are no disputes over kinship or cause of death, families can approach the airline or insurer within 2 to 4 weeks of the crash, and the payout will be issued within a couple of days.

However, they said, in many cases, especially when there are multiple potential claimants or when documentation is unclear, succession certificates or legal heirship certificates may be required.

These can take 3 to 6 months or longer to obtain through the civil courts, especially if there’s no registered will or if family disputes arise.

This is often the biggest cause of delay in third-party or passenger death-related claims, experts pointed out.

What insures the aircraft itself, and how does the hull insurance claim come into play?

In aviation, “hull insurance” covers the physical aircraft, including the body, engine, and onboard equipment.

Air India’s Boeing 787-8 was insured for about $150-200 crore, a cover that had been raised just months earlier after a recent engine replacement.

When a plane is entirely destroyed, as in this case, the hull insurance claim is triggered for the full insured value. However, Indian insurance companies rarely retain the full risk.

As Moneycontrol had earlier reported during the time of the crash, the domestic insurers such as Tata AIG and New India Assurance typically underwrite 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, most of the financial burden of replacing the aircraft will be borne by global players.

What kind of insurance covers the passengers who died in the crash?

Passenger compensation comes under what is called “passenger legal liability insurance.”

This is a mandatory part of aviation coverage and is governed by the Montreal Convention, which India is a signatory to.

Under the Convention, Air India is liable to pay a fixed amount, around Rs 1.75 crore per deceased passenger, without families needing to prove fault.

If families pursue further legal claims, higher compensation may follow if negligence is established.

Under the Montreal Convention, adopted in 1999 by over 130 countries, including India, 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. Higher compensation is possible if negligence is established.

This ensures a standard minimum level of protection for international flyers, though it does not cover personal insurance products.

While the airline may owe compensation under the Montreal Convention, say, Rs 1.75 crore, separate payouts from personal policies can add to this, provided claims are properly filed.

The total passenger-related liability in this case is expected to be around $350 million, according experts, and just like with hull insurance, the liability is largely reinsured.

Indian insurers retain a nominal portion, while the rest is shouldered by international reinsurance firms.

The Rs 1 crore compensation announced by the Tata Group is an ex-gratia payment, meaning 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, according to experts.

The compensation is likely an immediate relief measure, aimed at helping grieving families cover urgent expenses such as funerals, legal costs, and financial support for dependents.

How are people on the ground, such as those who died or were injured in the hostel, covered?

This falls under third-party liability insurance, another key component of aviation insurance.

It covers loss of life, injury, or property damage caused to people not on board the aircraft.

Since the plane crashed into a functioning student hostel, killing 38 people and injuring dozens more, this part of the policy is likely to see a large number of claims, said experts, while unsure about the exact amount of money involved.

Compensation to the families of the deceased, medical expenses for the injured, and even psychological trauma damages can be claimed under third-party liability insurance.

Again, the families must approach the airline or its insurer directly, claims are not processed automatically. They need 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’s 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.

What should the family do if they were not aware of insurance policies availed by the deceased passenger?

In such situations, one valuable tool available in India is the Insurance Information Bureau (IIB) portal, maintained by the Insurance Information Bureau of India, which operates under the Insurance Regulatory and Development Authority of India (IRDAI).

The IIB portal acts as a centralised database of insurance policies issued by various insurers across India. It is primarily designed to assist in identifying and verifying insurance coverage.

For instance, if a family is unsure whether the deceased had any active policy - travel, life, or group - the portal can be used to search for records by submitting basic personal details like the deceased’s name, date of birth, PAN, address, and mobile number.

Some insurers now require policyholders to nominate beneficiaries at the time of purchase, which helps simplify the claims process, provided the necessary documentation is available.

What portion of the damage is covered under international travel insurance, and how does travel insurance work?

Most passengers on international flights are covered under mandatory passenger liability insurance, built into the ticket price and provided by the airline. This isn’t optional - international conventions like the Montreal Convention, to which India is a signatory, require it. It ensures compensation in the event of death or injury, regardless of whether a separate policy was purchased.

However, this airline-provided coverage is limited to death or injury as defined by law and does not extend to trip cancellations, baggage loss, or medical emergencies. And that’s where personal travel insurance comes in - either bought separately or bundled through credit cards, corporate travel policies, or tour packages.

This personal insurance is not automatically triggered and must be identified and claimed by the family. It can offer additional benefits such as accidental death coverage, emergency medical evacuation, hospitalisation, and compensation for delays or lost baggage.

Premiums for these policies are relatively modest.

Domestic accidental death cover of Rs 25–50 lakh may cost Rs 30 to Rs 200 per trip. For international policies offering Rs 50 lakh to Rs 1 crore in coverage, premiums typically range between Rs 500 and Rs 2,500, depending on factors like destination, age, trip duration, and coverage type.

Often, these benefits are bundled into corporate travel or premium credit card plans, and passengers may not realise they’re covered. But in case of a tragedy, such policies can significantly enhance the compensation received, if they are identified and claimed on time.

Who pays for the damage to the hostel building and the surrounding property?

The destruction of the hostel and any other damaged infrastructure is also covered by third-party liability.

The owner of the damaged property - in this case, 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.

Since Air India has third-party liability insurance coverage, it will not pay this compensation out of pocket.

Instead, the claim will be passed on to the insurer that underwrote the third-party liability policy, which in Air India’s case is likely a domestic player such as Tata AIG or New India Assurance, who will yet again pass on a large amount of exposure to the reinsurers, who had earlier agreed (under treaty or facultative reinsurance contracts) to take on the bulk of the financial risk).

The insurance will pay for the cost of repairing or rebuilding the property, along with compensation for any loss of income or operational disruption the institution faces. These payouts are based on an assessment of the market value of the damage.

While the initial claim is processed by the Indian insurer, most of the financial responsibility again lies with foreign reinsurers, who have the capital to absorb such large claims.