The cost of insurance for aviation companies may rise if the Directorate General of Civil Aviation goes ahead with its plans to make it mandatory for pilots to undergo psychiatric test before takeoff as any failure to clear the test could lead to flight cancellations and claims.
This might be just another burden for an industry already facing higher cost of insurance after a Malaysian Airlines flight vanished over South China Sea with 239 people aboard last year and due to accidents in the aviation industry.
Airlines in India, mostly loss-making, may be squeezed further if the DGCA implements the plan. Insurance companies are yet to ascertain the liabilities of such an event since there is no available model to factor in such risks into a policy.
“Initially, there will be loading, but based on experience in the first two years, there will be better understanding of the risk,” said T. R. Ramalingam, head of underwriting at Bajaj Allianz General Insurance.
Insurers are waiting for the final word on the mandatory test, which the DGCA is contemplating following the crash of the Germanwings aircraft in the French Alps last month, which killed at least 150 people.
“There will be an increase in premium for pilot’s loss of licence cover but reinsurance companies could look at it positively and reduce reinsurance rates,” said Yogesh Lohiya, MD and CEO, Iffco Tokio General Insurance.
