Mumbai, March 6: Demand for insurance cover providing protection against liability arising out of fraudulent activities of employees is likely to get a boost after the Punjab National Bank fraud case rocked the banking system last month.
According to reports, PNB has been severely under-insured as far as liability due to fraud instances are concerned. While the scam relating to Nirav Modi and associate companies is currently pegged at more than Rs 12,000 crore as per initial estimates, the public sector lender has only bought a basic banker’s indemnity policy covering employee fraud to the extent of Rs 2 crore.
Industry experts are of the opinion that domestic insurance firms provide liability insurance policies covering such losses.
“Indian insurance industry provides very sophisticated products to cover fraud related losses, which are at par with its international counterpart. But, the decision to take the amount of cover lies with the insured party,” secretary general of General Insurance Council, R Chandrasekaran told The Finapolis.
He also said blanket policy covering all kind of losses for banks is also available with the domestic insurance firms.
Notably, Directors and Officers (D&O) liability insurance is a very popular form of cover which corporates usually opt for to protect them from instances of fraud. It also provides cover when directors are held personally liable for their own and fellow directors' decisions.
Similarly, a Bank Indemnity Policy is available for banks, which provides cover against financial loss arising from forgery, fraud and dishonesty. It also provides protection against any loss arising during transit of money.
“There is no limit to cover which a client can take in these kinds of policies. So, it is upto the insured to decide the amount of cover,” Chandrasekaran said.
Analysts are also of the opinion that as Kotak Panel report has made D&O policies mandatory for independent directors of top 500 companies, liability insurance cover of these kinds will definitely see a rise. In the aftermath of PNB scam, bankers are also likely to seek higher insurance cover for such kinds of risks. With most policies coming for renewal from April 2018 onwards, policy value will definitely see an upward revision in coming months.