Demand for liability insurance on the rise

With companies recording a 30-40 per cent annual rise in the number of liability suits, the liability insurance segment has taken off, recording annual growth of 10-20 per cent. Popular liability insurance policies include credit liability, environment liability, director and officer (D&O) liability, product liability, clinical trial liability, public liability and employment liability.

Anamika Rashtrawar, chief marketing officer, Bajaj Allianz General Insurance, says this segment is still in its infancy. "It will never be a major line of business such as property or health, but would occupy a niche space in the market," she adds. Bajaj Allianz offers casualty and financial liability products. Currently, the overall liability insurance market is estimated at about Rs 1,200 crore, of which Bajaj Allianz holds a share of about 10 per cent, Rashtrawar said. In terms of the new areas, products such as cyber liability insurance might see good demand, considering the rise in cyber crimes, she added.

Mukesh Kumar, head (strategy planning, human resources and marketing) at HDFC ERGO General Insurance, said liability insurance accounted for only about two per cent of the overall general insurance market.

HDFC ERGO offers covers such as D&O, crime, product, cyber security and employment liabilities.

In terms of product growth, Kumar said D&O was the fastest-growing product. "With both Indian regulators, as well as various international ones being very aggressive in investigations and the media carrying out scrutiny, awareness on D&O policies has been on rise. Among the products for which we are seeing increased traction is the crime policy, which responds to employee fraud, among other risks," he said.

Though rates should rise considering the rise in the frequency, as well as the severity of liability claims, currently, there was enough capacity in the market to keep prices low, Kumar said.

Niche products and customised services for different market segments have led to diverse products by various companies. Tata AIG General Insurance, for example, has the product recall insurance, which provides protection to retailers and manufacturers against products that may have to be recalled due to potential danger to consumers. Sushant Sarin, national head (liability lines), Tata AIG, said in segments such as professional liability, the company had tailor-made products for different types of professional service industries and professions.

"Year-on-year, we have grown faster than the market. In financial year 2012-13, while liability insurance for the entire general insurance industry grew 11 per cent, for Tata AIG, it grew 16 per cent," said Sarin. The segment accounts for 27 per cent of Tata AIG's commercial lines business.

Insurers say growth in the liability insurance space is company-specific. Subrahmanyam B, senior vice president (health, commercial lines & reinsurance), Bharti AXA General Insurance, said currently, technology companies and project professional indemnity were recording a rise in demand. Apart from general liability products, Bharti AXA General offers the errors and omission policy (technology) on the financial lines of insurance--the liability is 10 per cent of the overall commercial lines portfolio..

Brokers, too, are seeing an increase in demand for these products. Sanjay Kedia, country head and chief executive of Marsh Insurance Brokers, said companies were eager to know the ideal liability limit they had to purchase. He added the increasing risks among Indian businesses had made liability insurance a sought-after product.

In terms of rates, premiums have been stable and this has added to demand for these products. Rashtrawar said he didn't expect rates to harden in the near future. "However, as many India-based multinational companies are on the rise, regulatory interventions are increasing and awareness about various risks is rising among the general public, one can hope for hardening of rates," she said.

In 2011-12, about 3,28,000 liability insurance policies were sold, accounting for premiums of Rs 1,024 crore, according to Insurance Regulatory and Development Authority's annual report.