Approximately 16 million people, who commute by train every year, are covered for a premium of Rs 34.35 crore (Rs 343.5 million), industry sources said.

In the case of accident, ICICI Lombard will pay up to Rs 4 lakh per passenger, with the insured amount depending on the seriousness of the injury, or death.

All rail passengers and platform ticket holders are insured against death or injury on account of train accidents and other unfortunate incidents like bomb blasts.

ICICI Lombard was the lowest bidder for the lucrative contract. All the four public sector firms - New India, Oriental Insurance, United India and National Insurance - along with Reliance [Get Quote] General Insurance were also in race to grab the contract, with bids ranging from Rs 38 crore to Rs 74 crore. Reliance General had provided the insurance cover last year to railway passengers.

ICICI has designed the cover with adequate reinsurance support.  The reinsurance support is to ensure that a portion of the risk is transferred to reinsurance companies.

"The premium per person is low as passengers are covered during the travelling time only, which is normally 24-48 hours. The reinsurance cover will protect ICICI Lombard in case there is excess claim due to some unfortunate incident," said Rahul Aggarwal, CEO, Optima Risk Management Services.

With trains being the target of recent terror attacks, there were 486 claims in 2006-07 on account of deaths. Around 315 people lost their lives in train accidents in 2005-2006.