India plans built-in ticket insurance allowing up to 80% refund on last-minute flight cancellations

New policy aims to end refund-related passenger distress by offering automatic insurance on air tickets at no extra cost.

India’s aviation ecosystem is preparing for one of its most passenger-friendly reforms, with the government working on introducing an inbuilt travel insurance component in every air ticket. The initiative, expected within the next two to three months, aims to reduce the financial burden on travellers who cancel flights just hours before departure due to emergencies.

At present, cancellations made within three hours of departure are treated as a complete loss, classified as “no-show”, leaving passengers with no refund. Only in exceptional medical cases do airlines sometimes offer refunds, and that too at their discretion. The upcoming mechanism seeks to make the process uniform, predictable, and far more humane.

According to early discussions, the insurance premium, estimated at roughly ₹50 per ticket, will not be paid by passengers but will be covered by airlines through agreements with insurers. Under this system, passengers may receive up to 80% refund if cancellations are made up to four hours before the flight due to urgent reasons.

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Carriers have begun coordinating with insurance companies to evaluate risk, study cancellation patterns, and finalise financial models. Analysts tracking cancellation trends note that typically only a small fraction of passengers cancel at the last moment for genuine emergencies, making the scheme financially viable for insurers.

Online travel platforms already prompt passengers to add optional insurance during bookings, but the new system aims to make consumer protection universal by embedding it directly into the base fare. With airlines bearing the premium, the government hopes to eliminate refund uncertainty and encourage worry-free travel planning.

Refund grievances remain one of the aviation sector’s biggest pain points. The Directorate General of Civil Aviation (DGCA) has already proposed revised refund rules addressing delays in reimbursements, inadequate refund amounts, and restrictive policies that force passengers to accept travel vouchers instead of money. The regulator is now assessing public feedback before issuing final guidelines.

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Authorities maintain that while they do not intend to interfere with the commercial freedom of airlines, the high volume of complaints requires decisive intervention to set minimum refund standards. The initiative is expected to significantly reduce passenger dissatisfaction and create a more transparent refund system across the sector.