Air India Crash: Higher Insurance Costs Could Lead To Higher Ticket Prices For Passengers In Future

The Air India crash in Ahmedabad on June 12, 2025 has sent ripples across the aviation insurance sector. In what is being cited as one of the most expensive aviation insurance claims in Indian history, an estimated payout of Rs 39.4 billion (around $475 million) is expected, which, according to aviation industry experts will put strain on the aviation insurance and reinsurance ecosystem, not just in India, but globally, as well.

The total claim includes about Rs 10.44 billion ($125 million) for damage to the aircraft, including the fuselage and the engine, and a further Rs 28.74 billion – based on current exchange rate ($350 million) – for liability claims related to loss of life, which includes 241 confirmed deaths, including passengers and people on the ground, after the aircraft crashed into a building soon after take-off in Ahmedabad on June 12, 2025.

This is more than three times the annual aviation premium volume in India in 2023, according to Bloomberg. Ramaswamy Narayanan, chairman and managing director of General Insurance Corporation of India (GIC Re), further told Bloomberg that this could be one of the biggest claims in the Indian aviation sector has ever seen. GIC Re is among the insurers covering Air India’s fleet.

Global insurers to absorb most of the shock

Incidentally, much of the insurance claim has already been transferred to international reinsurers. According to data, more than 95 per cent of aviation insurance direct written premiums (DWP) in India are ceded to global reinsurance firms. This means that the brunt of the payout will land on large international reinsurers. However, this could translate into higher premiums and tighter underwriting, going forward.

Swarup Kumar Sahoor, senior insurance analyst at GlobalData, said that such a claim will lead to “a hardening of the aviation reinsurance and insurance market.” In other words, insurers will push prices up and become more selective in offering cover.

Premiums likely to go up across the board

In India, airline insurance costs are expected to rise sharply, either immediately or when annual policies come up for renewal. The airlines might face increased underwriting scrutiny, and as a ripple effect, the reinsurance market could harden globally. This could particularly affect carriers that operate Boeing aircraft, such as Air India and SpiceJet.

“This could lead to an uptick in premiums for carriers that operate Boeing fleets which also includes Indian airlines, like SpiceJet and Air India,” says Tarun Mathur, co-founder and chief business officer at Policybazaar for Business.

Mathur said that the spike in premiums could trickle down to passengers in terms of higher ticket prices or limited service buffers, all in all making air travel more expensive for the end customer.

What Happens to Victim Compensation

India is a signatory to the Montreal Convention of 1999. Under this, families of airline crash victims are entitled to get compensations up to 151,880 Special Drawing Rights (SDR), which could be Rs 1.78 crore per passenger, without any need to prove fault. Beyond that, additional compensation can be claimed if negligence is established.

Mathur adds, “The Convention mandates interim relief and covers a range of passenger rights, from loss of baggage to delays, making it one of the most comprehensive international frameworks for air travel today.”

The claims process will unfold in phases. First, insurers will settle the aircraft damage claim. The liability claims, covering life, injury, and other damages, will take longer. These will also involve legal processes, especially for foreign nationals on board, since their compensation will be governed by their respective jurisdictions.

A Turning Point for Aviation Risk in India

Though Indian insurers will not face the full financial burden thanks to global reinsurance, the pricing and availability of aviation cover may look different in the months ahead. Insurers, airlines, and global reinsurers will be reassessing how they price, underwrite, and manage aviation risk, especially in fast-growing, high-density markets like India.