Companies queue up for insurance as Independent Directors get more roles.

Mar 17, 2014

CHENNAI: With the Companies Act 2013 putting more responsibilities on independent directors like directing that majority of the company's audit committee should comprise of such officials, demand from India Inc for D&O (director and officer) liability insurance is rising. 

Such policies cover directors and other top-line managers in the event of fallout of any decision undertaken by them in good faith. So, if a section of stakeholders say they are aggrieved by certain decisions of a company and claim damages, these covers would come into force. "With the Companies Act 2013 putting additional responsibilities on the independent directors, such D&O liability insurance is even more important and desirable for them," T A Ramalingam , chief technical officer , Bajaj Allianz General Insurance, said. 

While D&O covers have been around in India for a while now, there has been greater enquiry and offtake for these products in the wake of stricter regulatory environment and rising stakeholder activism. As per industry estimates, the D&O insurance category is growing at 20% per annum. Till January , the premiums earned stood at Rs 125 crore from 5,000 customers. 

"The demand for this product is emanating from regulatory changes. With the Companies Act 2013 permitting class action suits (essentially a collective lawsuit where a person sues a group of people, a group of people sues another group of people, or a group of people sues a person), there is a growing concern among corporates that they need to be protected against all possible actions," advocate and tax consultant, KVaitheeswaran said.