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Bankers Indemnity Insurance

Bankers Indemnity Insurance is meticulously designed to cover the risks that come with working in the banking industry. There is no denying the fact that banks handle public funds and are therefore vulnerable to risk when dealing with cash and securities. 

The risks are primarily associated with the event of a calamity in the bank’s premises, such as a fire, strike, burglary, theft, robbery, riot, or hold-up case. With a comprehensive combination of coverage sections, Bankers Indemnity Insurance aims to provide multi-faceted protection against the loss of money and securities.

Why Do Banks Need the Bankers Indemnity Insurance?

Over the last few years, banking sectors have witnessed a significant number of fraudulent activities. In most of the cases, the losses were so massive that they left a cavernous hole on the balance sheets.

According to RBI, around 5,152 cases out of 23,000 were incidents of fraud in the year 2017-18, which amounted to at least INR 285.59 billion. One can imagine the loss to the banks as well as the employees working in it. Whether or not these losses will ever be reversible is still a matter of dilemma. However, what is certain is the fact that each bank requires adequate insurance cover. Hence, having a Bankers Indemnity Insurance emerges as a dire need among the banking world.

What Are the Features of Banker’s Indemnity Policy?

Some of the most important features of Banker’s Indemnity Policy are enumerated below:

1. Mixture Is Always Better!

Bankers Indemnity Insurance is a comprehensive policy that caters to the multiple needs of the banking world. The clients can choose from a range of insurance limits, both for the “in-transit” and “on-premises” sections.

2. What’s The Limit of Indemnity?

Under the Bankers Indemnity Insurance, the limit of indemnity doesn’t exceed the ‘Total Sum Insured’ given in the insurance plan.

Usually, the maximum aggregate loss per location or compound is around INR 10,000,000,000. In case the aggregate loss suffered is more than INR 10,000,000,000, the amount payable will be reduced as per the sum insured of the policy.

3. What’s In the Cancellation Clause?

There will be no refund of the premium when cancellation is done by the insured. Only the allocated refund of the canceled policy premium will be authorized if the policy is canceled and rewritten in the middle of the term solely to coincide with the insured’s accounting year. If the cancellation is for any other reason, the premium will only be refunded after short-term scale rates have been applied.

4. How Much Is the Excess?

On a general basis, around 0.5% to 2% of the sum insured is considered as ‘Excess’.

  • For Industrial Risks: A minimum amount of around INR 1,00,000 and a maximum amount of INR 1,00,000,000.
  • For Non-Industrial Risks: A minimum amount of around INR 25,000 and a maximum amount of INR 1,000,000.
  • For Shops & Residences: A minimum amount of around INR 10,000 and a maximum amount of INR 500,000.

5. Retroactive Period Cover – Doesn’t Cover Your Past!

The retroactive period in Bankers Indemnity Insurance refers to the time period before the effective date of the policy. The plan doesn’t exceed two years from the date of discovery of any loss for which this policy will provide coverage. In addition, the insurance will continuously operate during the retroactive period, but in no circumstances shall the insurance company be responsible to pay any claim in respect of a loss or damage received prior to such retroactive period.

6. ‘Money’ – The Real Meaning Under the Policy!

The term ‘Money’ in Bankers Indemnity Plan is used to describe signed or unsigned banknotes, coins, bullion, jewelry, ornaments, revenue stamps, postage stamps, stamp papers, and foreign currencies.

How Banker’s Indemnity Insurance Is Beneficial for Banks?

Enjoy All-Round Protection

Bankers Indemnity Insurance provides multi-faceted protection to various banks in three prominent ways:

  • It provides coverage to the losses caused by employees, such as fraudulent acts, criminal acts, unauthorized alterations, etc.
  • It provides coverage to the losses caused by bank’s clients, such as forged checks, illegal transactions, etc.
  • It covers losses caused by any other third party, such as robbery, forgery, terrorist attacks, etc.

Saves Your Professional Reputation

Having a strong and reliable professional reputation is a must for a bank. Any loss or damage to the customer shall put the bank into various liabilities and risks. Therefore, the Bankers Indemnity Insurance assists several banks to avoid the tarnishing of their names. In case your client or customer loses the money, your bank will have the insurance to convince him/her, and thus to save your reputation.

Loss Due to ATM? – Cover Them Too!

The coverage can be extended to cover loss caused by any money and/or securities in the Automatic Teller Machines (ATM) on the insured’s premises. An additional premium amount is to be paid for the extension and it can be added at any time during the period of insurance.

Cover Losses Caused by ‘Act of God’

The coverage can also be extended to cover the ‘Act of God’ or natural calamities, such as earthquakes, subterranean fire, flood, volcanic eruption, typhoon, storm, cyclone, etc. An additional premium will be charged with respect to the terms, conditions, inclusions, and exclusions of the policy.

What’s Covered?

  • In-Transit Losses: Money and/or securities are covered if they are lost, misplaced, stolen, or misappropriated while in transit in the employees’ hands, whether due to the employees’ negligence or fraud.
  • On-Premises Losses: Money and/or securities belonging to a bank are protected against loss or destruction by fire, strike, malicious damage, riot, terrorist act, theft, burglary, robbery, etc. on the banks or banker’s premises.
  • Dishonest Acts: Covers losses in money and/or securities caused by its workers’ dishonesty or illegal acts.
  • Forgery OR Unauthorized Alterations: Covers losses caused by the payment of counterfeit or fake cheques or drafts. Besides, it also covers forged endorsements on legitimate cheques, drafts, or FDRs.
  • Criminal Acts of Appraisers: Covers losses caused by appraisers’ infidelity or criminal acts, as long as the appraisers are on the bank’s approved list.
  • Hypothecated Goods: Covers damages incurred as a result of an employee’s fraudulent or dishonest behavior in relation to goods/commodities hypothecated to the insured bank.

What’s Not Covered?

  • Losses due to war and nuclear perils
  • Losses caused due to computer frauds/faulty computer programming/manipulation of the data processing system
  • Trading losses
  • Consequential losses
  • Negligent act or omission caused by an employee
  • The wrongful act of directors
  • Money or security pertaining to the loss before the inception of the policy period.

What’s The Claim Process?

In case of occurrence of any event included under the policy, the insured can raise a claim by following the below-mentioned steps:

  • Filing A Complaint: Firstly, the insured person is required to file a complaint against the act or incident of money loss.
  • Apprehending & Taking Actions: Besides apprehending the guilty person, suitable departmental action should be taken against the person.
  • Send Notice to The Insurance Company: Once you are done with the above steps, send immediate notice to the insurance company as soon as possible. 
  • Sending Details & Evidence: The bank now needs to send the information about the insured’s own expenses, amount of loss or damage, and various other particular details to proceed further. Along with details, valid proofs or evidence must also be submitted to the insurance company. 
  • Investigation: An investigation officer of the insurance company will go through the case to give it either a red or green signal.
  • Settlement of Claim: Once the insurance company gives a green signal, a substantial amount of coverage will be provided to the insured bank.

Frequently Asked Questions

As coverage of natural calamities isn’t the basic coverage, you can choose the add-on of ‘Act of God’ to save your bank from such disasters. You will have to pay an additional premium amount for the same.

Yes. Bankers Indemnity Insurance is a low-cost solution for bankers and their clients to protect themselves from future liabilities and risks.

The most important things that you should always check before buying a Banker’s Indemnity Insurance are as follows:

  • The extent of coverage
  • Your budget
  • Risk factors
  • Amount of Sum Insured
  • What’s not covered under the policy?

Yes. Under the policy, the term ‘Money’ is also associated with jewelry items. Therefore, in case there is a loss of jewelry due to theft, robbery, fire, etc., the Banker’s Indemnity Insurance will provide the coverage.

On a general basis, Banker’s Indemnity Insurance doesn’t provide coverage to terrorist activities. However, many insurance companies provide it as extended coverage. Therefore, if you are thinking of covering such aspects, you should check the inclusions and exclusions of the insurance company. Many companies offer this extension with warranties too.