Clash of interests

Chennai: At a time when Indian insurers and policyholders are questioning their utility, insurance brokers have come up with a new demand: insurance on credit.

In support of their demand, the brokers say insurance penetration will go up drastically if insurance cover is provided on credit. To substantiate their claim they cite the growth in vehicle population, consumer durable purchases and the housing sector due to easy credit availability.

"This is a ludicrous demand," says a public sector industry official. "The insurance sector is one of the very few financial services industries that has not been embroiled in any scam till date. And measures like risk cover on credit or credit period to brokers are sure invitation for trouble."

Under the Insurance Act, a risk cover could be provided only upon receipt of the premium. In some cases insurers accept bank guarantee to provide a risk cover. Housing and consumer durable loans could not be equated with a non-life insurance policy. In the case of a loan, the lender's maximum risk is fixed and he has also the lien on the financed property.

Further, malpractice by brokers could not be ruled out. For instance, a broker may pocket the transit insurance premium once he comes to know that the goods have reached the destination safely. And, the insurer has no lien on the property insured.