India issues indemnity guidelines for insurance intermediaries

Policies issued will cover damages resulting from breaches of duty.

The Insurance Regulatory and Development Authority of India (IRDAI) will now require insurance intermediaries dealing with policy distribution and solicitation to take out professional indemnity (PI) cover, effective 1 July.

The guidelines will apply to intermediaries such as brokers, corporate agents, web aggregators and marketing companies. 

"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,” IRDAI said.

The ratio of the limit of indemnity for one accident to any one year will not exceed 1:1.

Moreover, the standard policy shall have the mandatory covers specified in the guidelines and shall be uniform across the market.

The premium rates and other conditions of PI policies will be determined by insurers, depending on risk factors and the approved underwriting policy. 

Every general insurer should take pains to offer the standard professional indemnity, the regulator noted.