Directors and Officers Liability insurance develops in India

Directors and Officers liability insurance (D&O) has become the fastest evolving and most dynamic insurance policy in India. Though the policy was drafted by Lloyds Insurers in the 1930s for an American company, its importance was virtually unknown in Asia and particularly in India for a long time. Only in the last two decades, when overseas investments started flowing into the country, had this product become quite visible and corporations took note of it.

Pharmaceuticals, airlines, IT software and banking were the most crisis prone sectors in the last four years. D&O policy does not belong to a company, even though the insurance is generally bought by the company for the benefit of directors and officers. It is a personal policy belonging to each and every director and officer of the corporation and its subsidiaries.

In commercial crime, internal fraud is on the rise in every country, which is a common development when economic conditions are poor. An increasing problem is the white collar crime involving enormous cost for a company. Company directors believe that absence of any reported fraudulent activity means there is no fraud within and fail to consider the indirect and incidental costs. The most common problem is misappropriation of assets through fraudulent disbursements.

Of crime losses seen by insurers, about 80 per cent came from employee theft and the balance mostly from premises and forgery coverage. The Commercial Crime policy offers a more comprehensive coverage than the traditional fidelity guarantee policy and covered loss caused by unidentifiable employees and loss caused by an employee acting in collusion with a third party.