Collective action in India

Collective action schemes may have existed for a while in India but publicity about recent cases is raising awareness of how people can group together to seek justice, says Parvathi Singh of Tata AIG General Insurance Company. Singh, National Head Claims at Tata AIG, told the 6th International Liability Regimes Conference 2009 that there was significant potential for growth in the Indian liability market.

Under the title of “The Shifting Role of the State relative to the Private Economy: Liability Insurance at the Fulcrum”, some 45 international insurance representatives gathered at the Swiss Re Centre for Global Dialogue on 26-27 October to discuss how the liability landscape is changing, what is driving the changes, and how the industry might react to them.

Singh gave an overview of the claims situation in India, illustrating both the case backlog in Indian courts as the fast-growing economy pushes ahead and the still-embryonic development of India’s liability landscape. Gross premiums for liability insurance were just USD 152 million in 2008, she said, noting that despite the low level, they were nevertheless twice as much as in 2004.

“Penetration and density of liability in India is abysmal,” Singh said. “The potential here is huge.”

Parvathi saw the increasing presence of multinational firms in India, and of Indian multinationals abroad, as a powerful driver for risk consciousness in India, as well as for heightened liability risk exposure from international business and trade: product liability and recall claims are on the rise, for example.

“Globalisation is one of the trends that is having a clear impact. India is no longer an island. Anything that happens in the EU or in the US has a direct impact on India,” she said. The liberalisation of the insurance industry in 2000 has also been a major factor driving the liability business in India, she added. “The third factor is growing activism: issues such as climate change and environmental action are increasingly on the agenda and the media is helping this.”

Recent high profile cases of corporate fraud, including the admission of accounting fraud by the chairman of Indian IT firm Satyam in January 2009, have increased awareness of liability insurance products as well the mechanisms of collective action that are available and planned.

“After Satyam happened we saw an increase in the reporting of claims by 60-70 percent. It is not that larger companies were not buying D&O policies beforehand, but rather that people did not know how and when to use it,” Singh said. “We are now also seeing an increase in demand from the middle and small segment companies.”

“One of the things that Satyam did for us is that people talk about collective action more,” Singh said, noting that the new 2009 companies act is designed to introduce collective action for better stakeholder protection. In combination with a fast-track court procedure, this new bill marks a recent milestone in the development of India’s liability landscape.

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