Latest news with #HariRadhakrishnan
Indian Express
12-07-2025
- Business
- Indian Express
Possibility of pilot error not to impact compensation for Air India Dreamliner crash victims
Compensation for the victims of the Air India 787-8 Dreamliner crash in Ahmedabad a month ago will not be affected by the possibility of pilot error, according to industry experts. Both the airline and the families of those who died in the crash are generally entitled to compensation, even when pilot error is involved. In fact, the compensation amount could potentially increase if negligence by maintenance staff or technicians is established, sources said. The exact compensation and legal proceedings vary depending on the jurisdiction and whether the flight was domestic or international. Airlines typically maintain liability insurance that covers passengers or their families in the event of injury or death, regardless of whether the cause is pilot error, mechanical failure, or other factors like pilot suicide. An insurance official explained that pilot error generally does not influence passenger compensation, which is largely governed by international or national aviation laws and the airline's own policies. Under the Montreal Convention, applicable to most international flights, airlines are strictly liable for damages up to a certain threshold –currently around SDR 128,821 or approximately Rs 1.50 crore per passenger — and can be held liable for higher amounts if negligence, including pilot error, is proven. Even if a crash happens due to suicide by the pilot, compensation won't be impacted. If an insurer can establish gross negligence or deliberate concealment by the airline such as knowingly permitting a mentally unfit pilot to operate a flight, it may challenge or reduce the payout to the airline. However, compensation to passengers or their families is generally safeguarded and not affected in such circumstances. Chetan Kashyap, Head- Aviation and Speciality Lines, Prudent Insurance Brokers, said, 'a Hull 'all-risks' policy is a policy that covers all risks with 'named' exclusions. Pilot error, if any, is not an exclusion to it and hence insurance payout remains unchanged. Even machinery failure or system failure is not excluded under the policy wherein the only difference is right of subrogation which gets passed on to insurers in such case against the OEM (original equipment manufacturer) but overall insurance payout remains unaffected. Also, in this case passengers or third-party claimants can also claim damages from OEM for failure of parts.' According to Hari Radhakrishnan, Expert with the Insurance Brokers Association of India (IBAI), Air India will get compensation for the loss of aircraft and passenger liability even if there was pilot error. 'Too early to say this, but even if it was pilot suicide and deliberately crashed, the insurance would pay. Insurers paid claims for Germanwings Flight 9525 crash in 2015 that killed 150 people, where the copilot locked out the captain from the cockpit and flew the plane into a mountain,' Radhakrishnan said. For domestic flights within India, compensation is governed by national regulations such as the Carriage by Air Act and guidelines set by the Directorate General of Civil Aviation (DGCA), which ensure that passengers or their families are compensated regardless of who is at fault. In cases where foreign nationals are among the deceased, families have the option to file claims in jurisdictions such as the country of the carrier, the place where the ticket was purchased, or the home country of the victim. Since nationals from Britain, Canada, and Portugal were among the victims, legal proceedings in international courts are likely. For Air India, both hull and liability insurance are expected to cover the damages. These policies typically include coverage for the loss of the aircraft (hull loss), passenger liability, and third-party liability. Pilot error is also covered under standard aviation insurance policies unless gross negligence or intentional misconduct is proven, which remains rare and difficult to establish. If the pilot is perished in the crash, his/ her family could still receive compensation from the airline's group life insurance and any personal accident insurance policies, unless there was a violation of policy terms such as flying under the influence, said a source. The Tata Group, which owns Air India, has announced an ex gratia compensation of Rs 1 crore to the next of kin of all passengers who died in the crash. Families of people who died on the ground will also be eligible for this Rs 1 crore compensation, and the company has stated it will cover medical expenses for those who were injured. According to insurance industry sources, the crash is expected to result in total claims of around Rs 4,000 crore (approximately $470 million), making it one of the most significant insurance events involving an aircraft accident. The aircraft hull alone is estimated to cost insurers and reinsurers about $80 million, with the engines valued at an additional $45 million. Liability claims related to passenger deaths are expected to reach approximately $350 million, though the final amount may vary depending on the number and nature of claims filed and the jurisdictions involved.
Mint
03-06-2025
- Business
- Mint
To curb mis-selling, finance ministry tells lenders to stop incentives on insurance
The rampant mis-selling of unnecessary insurance plans to loan and deposit customers by lenders has already evoked concerns among the two sector regulators. Now, the finance ministry has asked banks and non-banks to stop offering incentives on insurance sales to eliminate this malpractice. As lenders link employee performance and incentives to selling insurance products, the ministry's department of financial services (DFS) has issued specific instructions, asking lenders to immediately review their marketing practices, according to two people aware of the development, speaking on the condition of anonymity. The DFS has told financial institutions that insurance plans should only be sold as per the customer's requirements, and sales targets should not be linked to incentives, the people said. The ministry directed banks that their core banking services should not be forcibly linked to insurance products, advising them to promote financial literacy among customers and employees for the healthy development of India's insurance market, the first person quoted earlier said. Queries emailed to the finance ministry and the financial services secretary remained unanswered till press time. The Insurance Regulatory and Development Authority of India and the Reserve Bank of India (RBI) have flagged concerns about such mis-selling by banks and non-banking financial services companies (NBFCs). Lenders bundle insurance plans with products like housing loans and locker facilities. At times, customers are even unaware of the terms. Also read | Insurance laws bill set for monsoon session, proposes 100% FDI, composite licenses and sweeping reforms Mis-selling can be deliberate by an insurer or its agent or any intermediary, or a result of poor training of the salesperson, according to Hari Radhakrishnan, sector expert at Insurance Brokers Association of India (IBAI). 'As regards deliberate mis-selling, there should be deterrents or disincentives in place, such as regulator action by way of fines or penalties or de-licensing in egregious cases. Incentive structures that promote mis-selling, such as hard pressure-based selling, compulsive selling, etc., must be removed or discouraged," Radhakrishnan said. 'Non-deliberate mis-selling can be addressed to a large extent by proper sales training and channel development." How mis-selling works A large chunk of about 52,500 complaints received by the insurance ombudsman across the country in FY24 pertained to mis-selling and misrepresenting policy terms and conditions, and issuing a policy not conforming to the proposal–under Sections 13(1) d and Sec 13 (1) g of the Insurance Ombudsman Rules. More than 70% of the complaints were against life insurers under the two sections. After life insurance, health cover-related complaints follow the list of grievances. The Irdai separately received 215,569 grievances in FY24 on its Bima Bharosa portal, of which 120,726 were related to life insurance and 94,843 to general Insurance, largely health covers. A majority of the complaints were against public sector entities in the life segment, while most non-life complaints were against private insurers. Insurance-related grievances were among the 296,000 complaints that the Office of RBI Ombudsman received in FY24-25 compared with 293,000 in FY23-24. Irdai, in its communication on such mis-selling to lenders, flagged numerous instances of an insurance policy being forcibly sold or mis-sold by banks and NBFCs by bundling these with housing or other loans. For availing a locker facility, lenders insist on purchasing an insurance policy and, at times, claim that it is mandatory. Insurance plans have also been issued without the consent of customers, and there have been cases where customers claim not to have signed the policy documents or that they were issued policies with incorrect contact details. Read this | Insurers make up add-ons to entice customers into paying more for car insurance The insurance regulator found that single-premium insurance policies have been issued in lieu of fixed deposit receipts, claiming that these will provide better benefits. Senior citizens have been sold long-term life insurance policies having higher premiums, even though they may not require such coverage. And regular-premium policies were issued in place of single-premium ones, and renewal premiums were debited from customers' bank accounts without any intimation, assuring that they would get double the payment after a certain period. In most cases, when a complaint is lodged, issues are resolved, and the premium is returned in a few cases. Still, that has not deterred mis-selling by financial institutions that act as a corporate agent for insurers. Need for better governance 'Curbing mis-selling has become a key priority for banks, insurers and the regulator, with several targeted measures being undertaken. Insurers are simplifying products, strengthening onboarding with video verification, and enhancing disclosures to improve transparency. Sales teams are being equipped with digital tools for suitability checks, while incentive structures are being aligned with long-term customer outcomes," said Shruti Ladwa, partner and insurance leader, EY India. 'Irdai has further reinforced these efforts by extending the free-look period to 30 days and enabling video-based identification. Eliminating mis-selling will require concerted efforts across all stakeholders to build an empowered and informed customer base." And read | Centre ready to exempt health and life insurance from GST. Then why is the industry pitching for 12%? According to Narendra Ganpule, partner and insurance industry leader, Grant Thornton Bharat, it is pertinent for every bank to instil values of integrity and probity in the sales staff and relationship managers so that customer interest is put at the centre, and not the sales or growth targets. 'Governance across three lines of defence, especially awareness at the operating level, needs to be strengthened to reduce the frequency of mis-selling instances."
