Company directors rush for insurance cover

Six months ago, directors of Kolkata-based AMRI Hospital were part of a closely-knit industrial circle in the city. Since the last couple of days, they are in jail on charges of culpable homicide not amounting to murder, following a fire in the hospital that killed at least 90 people on Saturday.

It is this increasing vulnerability of senior corporate executives towards litigations that has set the ball rolling for directors and officers’ liability cover for insurance companies.

With the upcoming Companies Bill 2011 seeking to introduce a more rigorous regime for board members, especially independent directors, insurance companies are recording numerous inquiries for insurance for directors.

Directors and officers’ liability insurance provides cover against legal expenses in various cases like shareholders claims, accusations of accounting irregularities, exposures related to mergers and acquisitions, corporate governance and compliance with various legal statutes.

“There is definitely an increase in the number of companies opting for directors and officers’ liability insurance. We have seen more inquiries from corporates in the last few months,” said Sanjay Datta, head (customer service- health and accident), ICICI Lombard General Insurance.

In the aftermath of the Satyam scandal, in which Ramalinga Raju, former head of Satyam Computers, was accused of massive accounting discrepancies, insurance for directors gained steam. More recently, the 2G spectrum auction scam and the bribes-for-loans scandal that involved state-controlled banks and lenders, too, landed senior corporate executives in jail.

The Companies Bill 2011, tabled in the Lok Sabha on Wednesday, proposes to introduce class action suits for the first time in the country. This would empower investors to sue a company for ‘oppression and mismanagement’ and claim damages.

Ashok Pareek, central council member, Institute of Companies Secretaries of India, and executive director of Srei Capital Markets, said, “Currently, less than five per cent of listed companies have bought such cover, but going forward, the Companies Bill 2011 would pave the way for many companies to opt for directors liability insurance cover.”

A National Insurance executive said, “In the last few months, we have seen more inquiries for insurance cover for directors. This is especially true for corporates with foreign board members. Outside India, directors’ liability insurance has been quite popular, but it is gradually selling in India as well.”

Interestingly, the scope of the policy differs from companies to companies, as these provide insurances against varied risks.

Bajaj Allianz launches guaranteed maturity insurance plan

Type of policy: A single premium Unit Linked Plan. The investment objective of this fund is to provide capital appreciation by investing in a mix of debt and debt-related securities.

Premium: Minimum premium is 5,000 and in multiples of 5,000.

Term of the Policy: The tenure of the policy is 10 years and you are allowed to make partial withdrawals after five years, limited to 1/3rd of the single premium.

Maturity benefit: Higher of the guaranteed maturity value of all the'guaranteed maturity certificates' held at maturity or the fund value as on maturity date. The plan guarantees 200% returns on maturity - that means your money doubles in 10 year (CAGR of 7.18%).

Death benefit: It is calculated as higher of the prevailing sum assured reduced by the value of the units withdrawn through partial withdrawals from the fund value in two years prior to the death, or fund value as on date of receipt of intimation of death.

The sum assured under the plan is five times the single premium in the first policy year and will, for subsequent years, reduce to 1.25 times of the single premium for those who enter the policy before they are 45, and 1.10 times of the single premium for those entering after 45.

Click here to apply Bajaj Allianz Life Insurance

Eligibility: The minimum age at entry in the plan is eight years and the maximum is 60 years

Charges: There is no premium allocation charge. But the policy administration charges are 1.85% per annum of the total single premium in the first five years of the policy, subject to a maximum of 6,000 and 0.70% per annum of the total single premium subject to a maximum of 6,000 per annum.

Policy administration charges and mortality charges are deducted monthly through cancellation of units. Fund management charge is 1% per annum adjusted in the unit price.

The good: It is a simple plan to understand and offers minimum guaranteed return on maturity

The bad: The policy offers reduced life cover from the first anniversary of the policy. Hence, it doesn't serve the purpose of insurance. Also guaranteed returns under the policy are less than the current 10- year G-sec yield or interest rate offered by most banks, without taking tax benefits into account.

Insurance industry to grow from next fiscal: Swiss Re

India's insurance industry is likely to witness significant improvement by next fiscal, both in life as well as non-life categories, triggered by health, micro-insurance and innovative products, global reinsurance major Swiss Re said today.

"The non-life segment is expected to grow by 7.9 per cent in 2012 and 8.5 per cent in 2013, while in the life segment is expected to rise by 7.5 per cent in 2012 and by 11 per cent in 2013. The main drivers for this growth will be health, micro-insurance and innovative product offerings," Swiss Re Vice-President Amit Kalra told reporters here after launching Asia economic and insurance market outlook.

However, this growth trend in non-life is lower than that of 2010, as the motor and trade-related lines are likely to see a slight slowdown, he said.

This segment will mainly be driven by premia from the health sector, he said, adding there are huge untapped opportunities in retail personal lines, liability, micro- insurance and agriculture.

Foreign direct investment in retail could have boosted premium for the non-life industry as international companies take insurance for their establishments, Kalra said.

Globally, in the life segment, premia growth will recover, led by India and China, he said. "We expect strong demand for life insurance, protection and group insurance."

Growth will be supported by recovery in unit-linked products, he said, adding there is also down side risks if the capital markets continue to be suppressed.

Meanwhile, global outlook, he said, remains uncertain due to the world economic crisis, but it would still perform better than banks, he said.

Forum to insurance firm: Pay woman 2.5 lakh

The district consumer disputes redressal forum ordered an insurance company to pay a complainant Rs 2.5 lakh for her treatment of a cardiac ailment.

The insurance company was rejecting her claim saying that the illness for which she was treated was not covered under the policy.

The woman had purchased a 'health first' insurance policy from Tata AIG Life Insurance Company Limited, valid for a period of 13 years, from January 9, 2004, to January 9, 2017.

As per the policy, the insurance company had to pay the complainant's hospital and medicine expenses, in case of a serious ailment. The policy amount was Rs 5 lakh. In July 2005, the woman felt pain in cardiac region and consulted several doctors for treatment, even in Mumbai. In October 2005, the woman was given a permanent pace maker by doctors. She was admitted in a hospital in Mumbai for treatment. The treatment cost her Rs 4.5 lakh and she filed a mediclaim with the insurance company.

The insurance company paid her Rs 1,500 only, for being admitted in the hospital for three days, at Rs 500 per day, as was defined in the policy. The company denied paying other expenses saying her illness was not a 'critical illness'.

After being taken for a ride by the insurance company, the aggrieved woman filed her complaint with the consumer forum.

The company confessed that it had rejected her claim because the illness for which she was treated was not covered under the said policy. The illness necessitating a permanent pace maker was also not specified in the policy taken by the woman.

The critical illness cover promised the woman 'a lump sum payment of up to Rs 5 lakh' in case she was diagnosed with a critical illness.

The policy further said that it will ensure that woman has access to the most technologically advanced treatment, and can pay for medicine related costs and other recuperation costs.