Companies cover may lapse on shutdowns

MUMBAI: Large corporations risk lapsing insurance policies for their plant and machinery as well as people since both insurers and corporates are forced to shut shop because of the coronavirus lockdown.

Insurance brokers have approached the regulator Irdai on behalf of their clients, asking for a law to be diluted that prevents the insurers from providing cover until the premium is received. Most non-life policies are annual contracts. While they can be purchased at any time of the year, on most occasions it is done to coincide with the fiscal as it makes accounting for the premium much easier.

The Insurance Brokers Association of India (IBAI) has written to the regulator to consider permitting extension of existing policies for a minimum of 60 days by paying pro-rata premium at existing terms and rates. For this extended cover to be seamless, insurance companies need to receive the premium before the earlier policy expires.

“The Indian insurance market adheres to Section 64VB of the Insurance Act, which further increases the complexity of policies expiring on March 31, 2020,” said IBAI president Sanjay Kedia in a letter to the chairman of sector regulator Irdai.

According to Kedia, Lloyds of London has already allowed an extension to existing policies due to the Covid-19 threat. Most global insurance markets have also provided relaxation to policyholders through an auto-extension clause.

“Administratively ensuring compliance to Section 64VB will be very challenging for both policyholders as well as insurers. Thus, we request the authority to consider temporarily waiving the 64VB clause for another 30 days, so that policyholders may continue their coverage and make premium payable at a later date,” IBAI said.

Source: The Times of India