Page 11 - Life Insurance Today February 2018

falling on them as a result of errors and omissions Bank Ltd. the company successfully argued at the appellate
committed by them whilst rendering professional service tribunal that the insolvency resolution process (IRP)
or for settlements negotiated in accordance with the violated the code and some of its action resulted in loss
coverage afforded by the policy. of business from longstanding clients. But insurance
brokers such as Marsh India, which is currently working
Professional indemnity helps protect professional advice- with several insurers to design an indemnity cover, believe
and service providing individuals and companies from insurers are themselves hesitant to provide a cover for
bearing the full cost of defending against a negligence insolvency professionals since these are individual,
claim made by a client. Some Professional indemnity whereas a different set of data points are needed to assess
policies go further than the standard cover and provide risk. In the absence of a specific product, the industry has
indemnity 'for any civil liability'. This covers such areas as two options. One is to incorporate an insolvency
breach of contract, libel and slander. Some standard cover practitioner's liability as part of existing plans.
policies may also include libel and slander as extensions
to the policy wordings if required. This kind of instances The other is to create a new product, which is a time-
is common across the country now: consuming affair. If an insurer needs to create a product,
they need to get support of reinsurers and run the product
through the regulator and get the product approved.
Insolvency professionals are taking sufficient precautions
to ensure that potential damages are avoided. Currently,
there is no personal indemnity cover for Insolvency
Professionals unless it is Entity, or IPE, then that IPE will
be covered under professional indemnity.

The biggest hitch is not with the product or risk, but since
rules in India expect individuals and not professional services
firms to do this work, it's difficult to estimate what kind of
claims are going to come, where the claims are going to
come from and what is quantum of claims. Another sticking
point is the low amount of so called deductibles that are
currently being proposed. Deductibles refer to the threshold
limit only beyond which insurance would kick in. In other
No cover for insolvency professionals: words, it's the skin in the game for the insured.
According to the Institute of Company Secretaries of India, Globally these policies carry meaningful levels of
over 100,000 cases (many of them pending with Debt deductibles, but in India since insolvency practitioners are
Recovery Tribunals now) will be tried under IBC, leading individually exposed, large deductibles may not be
to a spurt in the number of insolvency practitioners as acceptable. That, in turn, makes it unattractive for
well. Insurance companies do not cover insolvency insurance companies to provide this cover. In any case,
professionals and modalities are being worked out for at according to a 2014 Federation of Indian Chambers of
least 15 deals that are close to being finalized. Commerce and Industry (FICCI) report, indemnity cover
penetration in India is 0.04% of gross domestic product
Currently, there are at least 100 cases being tried and the against 1.25% globally.
Reserve Bank of India (RBI) has identified 500 large
stressed accounts in total that could go under IBC if banks There are special covers for celebrities too. Some
fail to finalize a resolution plan within six months. The cricketers in India also opt for a personal accident cover,
need for an indemnity cover becomes essential as the which is a temporary disability cover. With multi-year
insolvency professional can be held responsible for endorsements, the loss of income worth crores a year can
mismanaging the company. be a big blow to them. When we talk about insuring
someone's legs, feet or hands, we are covering accidents
In one case that of Starlog Enterprise Ltd which was resulting in the inability to use these and the resultant
referred to the National Company Law Tribunal by ICICI financial loss. As long as one can calculate the financial

Life Insurance Today February 2018 11

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