Irdai excludes retail sector of insurance industry from arbitration clause

Mumbai, Oct 27, 2023

Following the amendment, the clause will only apply to commercial lines of business

The Insurance Regulatory and Development Authority of India (IRDAI) announced on Friday that it has removed the retail sector of the general insurance industry from the arbitration clause, as policyholders have alternative avenues to resolve their complaints.

Following the amendment, the clause will only apply to commercial lines of business.

According to the regulator, "Retail or individual policyholders may be excluded from the provisions of the Arbitration Clause as they have alternative forums such as the Insurer’s Grievance System, Insurance Ombudsman and Consumer Courts, in addition to Civil Courts, available for redressal of their grievances or disputes."

This decision was made in response to a review by IRDAI of the Arbitration Clause following a reference on the matter by the Supreme Court of India.

Subsequent to the amendment, all policies in the commercial line will be subject to the revised clause, which states, "the parties to the contract may mutually agree and enter into a separate Arbitration Agreement to settle any and all disputes related to this policy," according to the IRDAI circular.

The arbitration will be conducted under, and in accordance with, the provisions of the Arbitration and Conciliation Act 1996.

Moreover, the regulator noted that the clause will continue to be applicable to all existing retail policies until the term of the policy expires, unless the policyholder requests its replacement with the commercial lines clause.

For all new retail policies, the clause will be considered deleted, while it will apply to all commercial policies from the date of renewal falling on or after the date of the circular, which takes effect immediately.

[The Business Standard]