In the wake of the Air India flight crash in Ahmedabad on the afternoon of June 12, insurance costs across the aviation industry are expected to rise by up to 30%.
In this accident, all 241 passengers and crew on board the plane, as well as dozens of local people, were killed. This is considered to be the biggest plane accident in India in the last decade. After the incident, there has been a discussion among insurance companies and aviation experts that there may be a sharp increase in the insurance premium for airlines.
According to a report by Bloomberg News, Indian insurance brokers believe that airlines may have to pay 10% to 30% more premium at the time of renewal of their insurance policy.
Policybazaar director Sajja Praveen Chaudhary said, “There is a possibility of a huge increase in insurance covering the hull, war-risk and liability cover. Such accidents become a big risk for insurance companies, the effect of which will be clearly visible on the next insurance renewal.”
Also read: Air India crash: What passenger insurance covers in plane accidents and how claims are paid
Similarly, Rohit Boda, Group MD of J.B. Boda Group, said that “It is common for the premium to increase by 10% to 25% after such incidents, and this time the increase may be more than before.”
Bloomberg’s report suggests that the estimated amount of insurance claims related to this accident could reach around $475 million. This includes compensation for damage to the aircraft structure, engine and life. It is worth noting that Air India’s entire fleet is insured for about $20 billion, and the company pays a premium of about $30 million every year.
Experts say that insurance companies have now become more cautious and they feel that if such accidents keep happening again and again, they will have to suffer huge losses.
Choudhary, director of Policybazaar for Business, told Bloomberg, “This level of devastation can lead to ‘hardening’ of global insurance rates.”
According to people working in the insurance sector, this increase in insurance costs will not be limited to Air India, but all airlines globally will have to face it. If more accidents happen in the future, the insurance premium can reach record highs.
According to a report by Allianz SE, among all aviation insurance claims between 2019 and 2024, the highest number of claims were related to aircraft accidents. At the same time, due to the increase in the number of air passengers in Asia-Pacific and North America, aviation premiums may exceed $8 billion.
It is clear from this development that the operating cost of airlines is going to increase further, the burden of which can also reach the passengers. In such a situation, it will be interesting to see how airlines manage this additional expense and how they coordinate further with insurance companies.