IRDAI will soon enable a host of new policies in the non-life space innovative products like title insurance and surety insurance in India.
Title insurance
Title insurance policy aims to protect a buyer/developer of a property against financial loss arising due to defect in the title of real property. Simply put, title insurance protects buyers/developers from financial loss if the property face legal tussle.
Sharing the rationale, IRDAI said, “There are a few title insurance products in the Indian market currently. However, considering the requirements of legal protection for promotors in the early stages of development of the project during financial appraisal, registration and approval with Real Estate Development Authority (RERA) and safeguarding the interests of individual buyers after possession of property, there is a need to expand the current title insurance products suitable to promotors/ developers and retail property buyers.”
While the policy protects promoter from legal expenses, it would cover complete financial loss of buyers post its possession if anything goes wrong with the title of the property.
IRDAI has created a working group to suggest product structure and policy wordings.
Surety Insurance
Surety insurance aims to protect parties from financial loss arising out of payment defaults. Simply put, if an entity or an individual fails to honour debt obligation due to default, insurance company will underwrite such a financial loss.
There will be multiple types of surety insurance like advance payment bond, bid bond, contract bond, customs and court bond, performance bond and retention money. These varieties largely depend on parties. For instance: Contract bonds provide assurances to public entities, developers, subcontractor and suppliers that contractor will fulfil contractual obligation.
Currently, this policy is under draft stage.
Trade credit Insurance
IRDAI has issued final guidelines related to trade credit insurance. This policy protects businesses against the risk of non-payment for goods and services by buyers.
The insurance regulator believes that this policy will contribute to the economic growth of the country by addressing trade losses due to payment risks.
Insurance can offer trade credit insurance to banks, financial institution, SMEs, MSMEs and so on.