Insurance intermediaries such as brokers, corporate agents, insurance web aggregators and marketing firms, who are engaged in solicitation and distribution of products, are now required to take professional indemnity insurance policies.
The Insurance Regulatory and Development Authority of India (Irdai) has issued guidelines on standard professional indemnity policy for insurance intermediaries on 11 June. The objective of these guidelines is to specify the professional indemnity policy that meets regulatory requirements. These guidelines will come into force from 1 July.
Irdai said premium, rates and other terms and conditions for such covers may be decided by the insurance companies as per internal underwriting guidelines. Besides, all policies — fresh and renewals — issued in the specified professional indemnity will have to meet regulatory requirements.
Insurers will have to issue an annual policy to the insurance intermediary.
“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 premium rates will be determined by insurers depending upon various risk factors and its board approved underwriting policy. The business turnover/fees figures, wherever required, will be accurately assessed and declared by the proposer at the inception of the policy.
Since all insurance intermediaries for solicitation and distribution must mandatorily purchase a professional indemnity policy and the retroactive date is also from the date of granting a certificate of registration by Irdai, penal provisions shall become applicable in case the prospective insured has not purchased/ had a break in policy continuity, as per the Irdai guidelines.
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