IRDAI requires insurance intermediaries to acquire professional indemnity cover

Insurance intermediaries engaged in the distribution of insurance products and solicitation will have to take out professional indemnity (PI) cover, under new rules issued by the IRDAI.

To this end, the regulator released guidelines on a standard PI policy for insurance intermediaries, which include brokers, corporate agents, insurance marketing firms and web aggregators. The guidelines will take effect from 1 July.

The IRDAI says that there have been numerous instances in which a PI policy taken out by an intermediary failed to meet regulatory provisions. Hence, the guidelines are issued to specify elements so that the PI policy would meet requirements.

Scope of coverage

"Policies issued will cover all damages resulting from any claim for breach of duty of the insured, fraud and dishonesty of any employee which the insured becomes legally liable to pay arising out of claims first made in writing against the insured during the policy period including legal costs and expenses incurred with prior consent of Insurers, subject always to the limits of indemnity and other terms, conditions and exceptions of the policy. The ratio of the limit of indemnity for any one accident to any one year will not exceed 1:1," according to the guidelines.

The IRDAI says that the standard policy shall have the mandatory covers specified in the guidelines and shall be uniform across the market. The premium rates and other terms and conditions of such insurance policies will be determined by the insurance company depending upon various risk factors and its board's approved underwriting policy.

Every general insurer should endeavour to offer the standard professional indemnity, say the guidelines.

Source: Asia Insurance Review