Stock brokers not happy with cover policy, appeal to Sebi

Feb 27, 2007
Ashish Rukhaiyar
MUMBAI

THE stock broker’s indemnity policy is fast becoming a cornerstone for a heated debate with brokers, up in arms against insurance firms. Brokers allege that insurance companies have been behaving in a very high-handed manner and are not sharing important policy-related issues with them. Currently, New India Assurance and Oriental Insurance of India, are managing the insurance cover of brokers across the country.

In fact, brokers have appealed to Sebi to look into this matter. Brokers opine that an indemnity policy should not be mandatory. They believe what is required is an unbundling of policy clauses so as to include only the relevant parts once the policy is renewed. The issue has gained importance as insurance policies will come up for renewal over the next couple of months.

According to sources, while the premium has seen a threefold jump in the past couple of years, the claims, more often than not, result in being rejected by the insurance entities. Meanwhile, an email sent to the insurance firms remained unanswered.

A compliance officer at a domestic brokerage told ET on conditions of anonymity that the insurance companies include a lot of riders in the policy that are not really needed. They further, indirectly, penalise the brokers for putting forward a claim.

“First and foremost, the premium amount has witnessed a three-fold jump in the past couple of years. Secondly, the insurance companies have discontinued offering no-claim bonus that was done earlier. To make matters worse, the policy has a clause saying that if any claim has been filed, then, irrespective of it being accepted or not, the premium amount goes up by 75% when the policy comes up for renewal,” he says.

Many brokers also allege that the two insurance firms seem to have formed a consortium of sorts, as the policy papers have been exactly the same with no difference. “Earlier, there used to be some difference in the language of the policy papers given by the two companies. But the latest policy given out by both the companies are verbatim,” said a member of a brokers’ forum.