India mulls rolling out inbuilt insurance in airfares to enable last-minute cancellation refunds

NEW DELHI: Cancelling your air ticket just hours before flight departure time due to pressing reasons could soon not mean losing the entire booking amount. India is planning to roll out an inbuilt travel insurance component in air tickets within next 2-3 months that could mean getting anywhere upto 80% refund for last-minute exigency cancellations.

As of now, a cancellation within three hours of departure time is treated as a no-show and no refund is given. If passengers are able to prove their medical emergency for their last-minute cancellation, airlines may give a full refund. But this is purely discretionary.

Sources say the aviation secretary is in discussions with Indian carriers to see how best the inbuilt insurance plan can be rolled out atno cost to passengers with the premium being borne by airlines through their arrangement with insurance companies. As of now, insurance is an add on service that travellers can buy if they opt for the same.

A leading airline has begun talks with insurance companies for having this as an inbuilt component. “We are exploring whether an insurance element can be added in the lowest fare (category) so that passengers get some refund. The details are being worked out,” said a senior official of this carrier.

"The uncertainty of being able to travel and then the fear of losing money or facing trouble in getting the refund is a big factor in many people avoiding booking flights. We keep getting complaints about someone not being able to travel due to a tragedy in immediate family and then not getting a refund. This uncertainty of getting money back has to go and refunds have to become seamless. Our very rough estimate is that a reasonable premium amount of about Rs 50 on every ticket can lead to refunds of upto 80% on tickets cancelled upto four hours before departure time," said sources close to the development.

Airline officials say online travel agencies (OTA) already "nudge" travellers to take an insurance while booking tickets. "We are working out the math with insurance companies. Eventually these companies have to figure out the risk-reward ratio to see what they can offer. In case of last-minute cancellations, insurance companies will have to pay the refund. If 2-3 out of 200-300 people do so for genuine reasons, the math will work out,” said an airline official.

According to OTAs already offering this, insurance companies dive into historical cancellation data that includes the ratio of last-minute cancellations and the reasons for doing so. If the ratio is low, then the reward outweighs the risk for them. Higher the chances of getting a claim, higher is the premium. Accordingly, there are tailor-made insurance products that people can opt for.

Aviation authorities realise refunds have become a major pain point for travellers. Apart from this inbuilt insurance being planned by the aviation ministry, the Directorate General of Civil Aviation (DGCA) is in the process of changing its current refund rules to make them more passenger-friendly.

"Issue of refund of tickets by airlines has become a major source of grievance amongst airline passengers. Large number of complaints are regularly received which can broadly be divided into: delay in refund of unused tickets; amount refunded by airlines against cancelled tickets and policy of not refunding ticket amount but adjusting against tickets to be purchased by the passenger for future travel in the same airline that too valid for a limited time," the DGCA said in its draft rules regarding “refund of airline tickets to passengers” while seeking comments from the public on the proposed changes. The final rules will be issued after taking into account stakeholders' comments.

While govt does not want to interfere in the commercial practices of airlines, “the volume of complaints necessitates some affirmative action to safeguard the interest of the traveling public…. onus rests with govt to fix some minimum benchmarks, as far as the refund policy is concerned, in order to stem the growing dissatisfaction among the passengers regarding the refund procedures adopted by some airlines.”

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