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India Today
13-06-2025
- Business
- India Today
Air India crash: How airline insurance works and why premiums may rise
In the aftermath of the catastrophic Air India crash in Ahmedabad, there has been a significant focus on the role of airline insurance in such unfortunate events. The incident is expected to trigger India's costliest aviation insurance claim, with the payout likely to exceed $120 million, people familiar with the matter said, as quoted by The Economic what exactly does airline insurance cover, and how long does it take for victims' families and the airline to get the money? Let's break it down in simple DOES AIRLINE INSURANCE COVER?Airline insurance primarily comprises three main components: physical damage to the aircraft, passenger legal liability, and third-party liability. According to Evaa Saiwal, Business Head Liability, Cyber, and Speciality Risk at PolicyBazaar for Business, commercial airlines typically invest in comprehensive aviation insurance, which usually includes hull insurance, passenger liability, third-party legal liability, cargo liability, and crew personal accident cover."Hull insurance covers physical damage to the aircraft itself, whether on the ground, during taxiing, or in flight. Liability insurance protects the airline from legal claims arising from bodily injury, death, or property damage caused to third parties, including passengers, airport personnel, or people and property on the ground," she Saiwal further mentioned that hull coverage reimburses the airline, whereas liability coverage benefits the victims or their families, in line with global frameworks like the Montreal this incident, the hull loss is pegged at around $80 million, mentioned the report. Passenger legal liability, covering injury or death of passengers, and third-party liability, for damage or injury to those on the ground, are also included in the coverage. Such liabilities, especially in the case of high-net-worth passengers as seen in the Air India crash, could push the claim amount significantly ARE AVIATION INSURANCE PREMIUMS AND RISK ASSESSMENTS INFLUENCED BY SUCH ACCIDENTS?Incidents like the recent Air India crash can result in a total loss, meaning the aircraft is beyond repair with no salvageable parts. In such cases, the losses can reach around $130 million, roughly $80 million for the plane and $30-50 million in high-cost claims often lead insurers to reassess risk factors more strictly. Underwriters may tighten criteria, especially focusing on the aircraft's condition, before issuing or renewing legal liability covers injuries or fatalities, while baggage loss, including electronics, is also compensated. Additionally, travellers with personal travel insurance may receive extra benefits for emergency medical care and trip to Rakesh Goyal, Director at Probus, "In situations as devastating as the Ahmedabad plane tragedy, passenger insurance is critical in providing financial assistance. It offers compensation to families or survivors in the event of accidental death or injury, based on the specific terms of the coverage. For airlines, such policies are typically mandated under aviation regulations and offer benefits that include accidental death compensation, medical expenses for survivors, and in some cases, even support for repatriation."advertisement"It's one of those protections we hope is never needed, but when something terrible happens, like what happened in Ahmedabad, its necessity becomes undeniable," he IS THE TYPICAL TIMELINE FOR SETTLEMENTS?Settlements for aircraft damage are usually processed relatively quickly. However, claims related to passengers and third parties often take much longer, typically between two to three years or delay is mainly due to legal proceedings, thorough investigations, and the need for proper verification before compensation is following the tragic plane crash, Bajaj Allianz Life Insurance has simplified its claim process. Nominees or legal heirs can initiate claims with minimal paperwork. In cases where the death certificate isn't immediately available, a hospital or municipal certificate will suffice, along with KYC and bank details of the AVIATION INSURANCE PREMIUMS RISE AFTER THE AHMEDABAD PLANE CRASH?The impact of such incidents on insurance premiums is considerable. Experts note that underwriters may introduce more stringent parameters when assessing the policy terms, especially concerning the aircraft's events affect not just the airlines involved but also have a ripple effect across the global insurance landscape. This crash is poised to push global aviation insurance rates higher, particularly affecting markets like India where loss ratios have been relatively Watch
India Today
12-05-2025
- Business
- India Today
IndusInd Bank faces tough questions from auditors over possible fraud: Report
IndusInd Bank is facing serious questions from its auditors about a possible case of financial wrongdoing linked to its accounting of foreign currency derivative are asking the bank to clearly say whether the issue is an error, a technical mismatch, or an actual fraud, reported The Economic far, IndusInd Bank has described the issue as a 'discrepancy'. This is the term it has used in its stock exchange notices and in talks with analysts and credit rating However, with the accounting problems now under review by auditors, the bank's management will need to be more clear and specific in its SEEK CLEAR ANSWERSAs per the report, the issue has reached a point where the bank's board of directors, led by chairman Sunil Mehta, and the audit committee, headed by Bhavna Doshi, must decide how to define the Indian law, if auditors believe that a fraud involving more than Rs 1 crore has taken place, they are required to report it to the government. If it is under Rs 1 crore, they must inform the bank's board or audit this case, the accounting issue may result in losses of nearly Rs 2,000 crore. If the bank officially calls it fraud, the auditors will have to report it to the Ministry of Corporate Affairs. The bank is expected to make its position clear soon, as its annual financial statements are due, and they will reflect the full impact of the losses related to foreign exchange derivatives and its microfinance CAUSED THE ISSUE?advertisementAccording to the report, the problem began from different accounting methods used for two connected transactions. On one side, the bank raised deposits in dollars and yen through internal deals between departments. On the other side, its treasury carried out forex derivative trades in the inter-bank market with other part of these transactions used accrual accounting, where profits or losses are recorded as they happen over time. The other part used mark-to-market accounting, where trades are valued at current market mismatch allowed the bank to delay recording some losses, while gains were reported immediately. Over time, this led to profits being overstated in earlier years. Now, these past mistakes are being corrected, resulting in a reported Rs 2,000 crore main question now is whether this is simply a mistake, or if it was done on purpose. A senior banker told The Economic Times that the bank may have avoided using the word 'fraud' either because internal procedures are still going on or to avoid raising Reserve Bank of India (RBI) defines fraud as including many types of financial wrongdoing, such as breach of trust, fake forex transactions, and even altering financial records. These are covered under Indian laws, such as Section 477A of the Indian Penal Code, which deals with falsifying told The Economic Times that IndusInd Bank may be waiting to go through responses from employees named in the forensic audit done by Grant Thornton. These responses could help the bank decide if the incident should be called fraud. Whatever the decision, it will be reflected in the annual report and the auditors' statement for the 2024–25 financial issue has drawn attention from rating agencies as well. Last week, Moody's downgraded IndusInd Bank's standalone financial rating. The agency pointed to weak internal controls and lack of proper oversight by the bank's management as reasons for the situation is also being closely watched by the banking sector. If IndusInd does report this as a fraud, it will have to file a 'fraud monitoring return' with the RBI, which could set an example for how such cases are handled in of now, both of IndusInd's auditors, MSKA & Associates (a part of BDO) and Chokshi & Chokshi, have not made any public Watch
