Despite blasts, terror cover got cheaper

MUMBAI: The Mumbai blasts may have heightened the terror risk in India, but for insurance buyers terrorism cover will soon cost less. Non-life insurers have decided to bring down the cost of cover provided by the terror pool, which was set up in the aftermath of the 9/11 attacks in the US.

Also, companies have agreed to reduce the minimum deductible — the amount reduced from every claim — to Rs 10,000 from Rs 25,000, sources told ET. A ‘pool’ is a concept in insurance where companies commit money to a fund which will be used to pay out claims. The participants in the pool collectively decide the rates.

Since 9/11 the pool has been in surplus and insurers have increased the limits. They are now covering single risks up to Rs 600 crore. This limit is likely to go up. Sources said that reduction will take place from April 1 ’07 when most policies are renewed.

Members have also agreed to increase the deductible following a representation from Jammu & Kashmir Bank. A reduction in the deductible helps small businessmen like shopkeepers, who have policies with small sum insured.

According to officials, though there have been terror attacks across the country, insurance claims for loss of property have been very low, enabling insurers to bring down the premium and increase the cover available.

Meanwhile, insurance companies have received a major reprieve in implementing anti-money laundering (AML) guidelines. The Insurance Regulatory and Development Authority (IRDA) has said that companies need to scrutinise only those high value policies that were bought after January ’06 for compliance with AML guidelines.

Earlier, the insurance regulator had said that the process of AML should be applied for the policies coming into force on or after April 1, ’04. Insurance buyers will now have to provide proof of identity and residence to companies before purchasing a cover.

Insurers would have to look for suspicious transactions, which include cash deposits, frequent surrenders, assignment to unrelated parties, frequent request for change in address, unusual termination of policy and payment by multiple demand drafts.