Optima Insurance Brokers Pvt. Ltd.

Public liability insurance provides cover for any personal injury or damage to the third party which can be attributed to the policyholder’s business operations. It covers damage caused to the general public, customers, or sub-contractor within business premises or claims of damage to others’ property involving the business. The aim of public liability insurance is to avoid costly litigations and stop insurmountable losses.

As per the report on Public Liability Insurance in India, India’s economic development and industrial growth will necessitate the pursuit of public liability insurance. This report provides a holistic overview of the rules and regulations governing liability insurance, its operability, and working both for disastrous public tragedies like 1984 Bhopal gas disaster and commercial liability of global organizations.

There is a need for non-life insurers to spread awareness of liability insurance and the inherent risks involved in any business activity. Develop public liability risk covers in line with market expectations and which aspect of the risk can be covered under such insurance. A high degree of focus is required to improve product coverage, claim conditions, and relief options for victims to improve the low penetration of liability insurance in India.
The report proposes • to make public liability insurance mandatory for all businesses and to fast-track justice and compensation for victims of non-industrial accidents

India’s Insurance regulator has instructed all general and health insurers to offer specialized cover for persons with disabilities (PWD), HIV/AIDS patients, and those suffering from mental illness.

A circular dated 27 February 2023 mandates insurers to have a board-approved underwriting policy so that the above-mentioned categories of people are not denied insurance access on account of the above-stated disabilities and/or illnesses.

All general and standalone health insurers must launch and offer such products immediately. Insurers may determine the price of the product in compliance with health insurance regulations, for a renewable policy tenure of 1 year.

This is in response to a Delhi High Court hearing in December 2022 on the plight of affected people to advise insurers about designing and offering insurance products for persons suffering from disabilities, HIV/AIDS, mental illnesses, as well as for transgender people, and submit a status report before 17 March 2023.

Natural disasters, many driven by climate change, caused global economic losses of $313 bn in 2022, of which less than half was insured. Losses from natural catastrophes covered by the insurance sector amounted to $132 bn, 57% above the 21st-century average, leaving a global ‘protection gap’ of 58%.

While the number of catastrophic events such as floods and hurricanes rose – at least 421 individual events compared to an average of 396 since 2000, the protection gap was one of the lowest on record. It was relatively low due to the fact that many of the costliest disasters occurred in countries with mature insurance markets such as the US or Europe. In contrast, losses in less-covered regions such as Asia were well below average.

Hurricane Ian, which hit Florida in September 2022, was responsible for 75% of the global insured losses that occurred in the United States. It caused insured damages in a range of $50 and $55 bn from total economic losses of $95 bn. Hurricane Ian is the second most expensive natural disaster that the insurance sector has ever faced.

About 31,300 people died due to natural catastrophe events in 2022, of which about two-thirds were linked to severe heatwaves in Europe between June and July.

In Australia, insured losses linked to floods hit a record high of $4 bn as a weather pattern associated with wet weather called La Niña extended its impact into 2022 causing severe rainfall and flooding across the country.

Similarly, in Pakistan, the monsoon season caused 175% above-average precipitation from July to September.

The IRDAI has advised property insurers and reinsurers to stop including the burning costs rate as published by the Insurance Information Bureau (IIB) in their reinsurance treaties for fire and engineering risks. Starting April 1st, 2023, these costs are not to be embedded as “minimum rates” for risks in reinsurance treaties.

IIB rates are derived by estimating the expected losses for a policy based on previous year’s average, after taking into account claims inflation and change in exposure. As per IRDAI, such prescription by any reinsurer that effectively creates or reinstates a market (price) tariff is not according to the de-tariffed pricing regime presently and is distorting the level playing field intended to be provided by the Authority. The regulator suggests that treaty arrangements where IIB-published burning costs are taken as minimum risk rates does not reflect quality or loss history of individual risk and dissuade risk management along with the loss mitigation investments of insurance buyers.

The IRDAI has been propagating reforms in the non-life insurance sector for the ease of business for Insurers and to ensure choices for buyers/consumers of insurance and develop a free-market regime to foster sensible risk management and loss control.

According to new guidelines issued by IRDAI, corporate agents can now be associated with up to 27 insurers – nine each in three branches – life, health, and general insurance. To increase insurance penetration, this step is taken which previously allowed corporate agents to market the products of one insurer from each of the three branches.

In general insurance, the number of insurance products is high and opening to nine insurers is particularly relevant in this kind of insurance. It increases choice. But the restriction on corporate agents in marketing retail and commercial lines of general insurance products for a sum assured not exceeding INR50m ($606,000) per risk continues.

For insurance marketing firms, besides increasing the number of tie-ups, the area of operation has been expanded to the “state” level from the “district” level, increasing the width as well as the depth of operation of Insurance marketing firms in the designated state.