Liability insurance takes shape via tailor-made products

Insurers say liability covers form only 10-12% of their overall portfolio, but the number is growing with exposure

Liability insurance is now increasingly getting sold via tailor-made products made not only looking at corporate needs but also sector needs. Both insurers and brokers say that even for similar needs, different sectors would have different products. 

Amit Agarwal, Practice Head-Financial Lines Group, JLT Independent Insurance Brokers said, “We have been providing tailor-made products across liability lines. These are not off-the-shelf products. In the financial lines group, we take a holistic view of organisation’s exposures and then design policies which transfer third party and first party liabilities out of their books.”

Insurance companies say that while corporates are slowly waking up to liability risks, essential covers like Directors & Officers (D&O) Liability and Cyber insurance are not taken by all companies. 

A survey conducted by ICICI Lombard revealed that despite being aware, companies take insurance coverage for only a few risks. 

Sanjay Datta, chief of underwriting and claims at ICICI Lombard, said that Companies Act and global exposure are pushing companies to take D&O covers, though the uptick is not very high.

The Companies Act 2013 has put more responsibility on independent directors and hence sector experts say that it is essential for companies to take D&O covers.  Further, officials say that even small and medium enterprises are taking covers to suit their specific risks.

Agarwal explained that the needs across industry segments are very different, “For instance cyber risk can affect industries such as technology and financial institutions differently and hence the need to prepare tailor made solutions suiting each client segment,” he added.

Companies with large technology-related and internet-related operations and those storing a large quantity of customer data are now opting to take this cover. Several surveys by data security companies have revealed that cyber risks posed the most risk for corporates in India.

A lot of combination covers are also being taken, which could be particular to companies in a particular sector. For example, Agarwal added that firms in the investment banking space take blended insurance policies which are a combination of D&O, professional indemnity and crime insurance since it covers all aspects of their business.

Similarly, on the M&A front, he said that niche covers such as Representations and Warranty are available, which cover the firms for the representations that have been made during the course of transaction - it is a long term cover valid for up to seven years. 

Overall, insurers said that liability is not more than 10-12% of their overall portfolio. However, they added that the year-on-year growth has been in double digits.