Insurance regulator IRDAI has advised general insurers that all policies issued under the commercial lines of business must have an arbitration clause.
Policies issued under the retail lines of business, however, will not have any arbitration clause as alternative forums such as insurer’s grievances system, Insurance Ombudsman and Consumer Courts as well as Civil Courts are available for retail/individual policyholders for redressal of grievances/ disputes.
Stating it undertook a review of existing arbitration clause across various lines of business in the general insurance industry and held discussion with stakeholders, following a reference made by the Supreme Court of India, IRDAI said “the extant arbitration clause is limited in scope and need to be amended.”
All policies issued under the commercial lines of business ought to have an arbitration clause stipulating “The parties to the contract may mutually agree and enter into a separate arbitration agreement to settle any and all disputes in relation to this policy. Arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996,” IRDAI Executive Director (NL) Randip Singh Jagpal said in a circular to general insurers.
This clause will apply to all new policies issued on or after the date of the circular, while existing arbitration clause will be deemed deleted from all retail policies.
For existing policies, the existing arbitration clause will remain valid till term of the policy or unless the policyholder specifically requests the insurer to replace it with the clause stipulated by the regulator. IRDAI has advised insurers to take necessary steps to create awareness of the changes to policyholders and to amend relevant provisions of such policies.