Insurance Regulatory and Development Authority (IRDA) is the regulatory authority in India’s life and general insurance industry; it administers the operations of the insurance companies in India. The sole objective of the IRDA is to ensure the policyholders are safe and there are no discrepancies in the policies or unfair practices by the intermediaries. On 11th June, the regulatory authority officially disclosed the guidelines for the insurance intermediaries like agents, banks, marketing companies, etc., regarding the professional indemnity policy. The new procedures will, however, be effective from 1st July.
Professional indemnity insurance, also known as Professional liability insurance, is used if the companies and firms fail to provide services to the clients. The clients can claim for the loss due to the breach of service guaranteed by the company.
The guidelines as per IRDAI for Insurance brokers/ Corporate Agents/ Web Aggregators/ IMF are:
- The guidelines offer mandatory covers for the standard professional indemnity policy deemed to be followed uniformly across the market.
- As per the regular amendments, the standard professional indemnity policy shall comply with all extant provisions as per guidelines Ref. IRDAI/NL/GDL/F&U/030/02/2016 dated 18th February 2016.
- Every General Insurer bearing the Certificate of Registration to transact General Insurance Business shall offer this Standard Professional Indemnity for insurance brokers, corporate agents, web aggregators, and insurance marketing firms.
The Policy period should be on an annual basis from the insurer to the insurance intermediary. The insurer must issue a long-term validity policy for the period of the certificate of registration. The insurers will have the authority to determine the premium rates after analyzing the risk factors involved, which also adhere to the underwriting policy of the board.
The insurance sector in India is booming currently with robust demand for innovative insurance products; the digital platforms have accelerated average usage by 90% every week. The startup ecosystem is evolving, and the IRDAI has improved channels of investments like infrastructure investments Trust (InvITs) and Real Estate Investment Trusts (REITs) for the insurers. The 2021 Union Budget boosted the FDI limit o 74% from 49% for more capital inflows from overseas. Additionally, the issuance through Digilocker of digital insurance policies brings more convenience to the policyholders.