Brokers seek higher cover

Insurance policies of up to Rs 5-cr sought on transaction risk.

With the stock market crossing new milestones every day, brokers have sought higher insurance cover of up to Rs 5 crore.

This is 100 times more than the minimum professional indemnity cover of Rs 5 lakh per broker mandated by the Securities and Exchange Board of India (Sebi).

As the bull run continues unabated "" the BSE Sensex closing today at a record high of 7797 "" brokers have begun to fear that there can be errors in undertaking large transactions.

While executing a large number of trades, it is possible for exchange employees to key in a wrong figure or press the "buy" button instead of the "sell" button. This can expose a broking house to high risks. As a result, brokers have thought it wise to go in for higher risk cover.

"We have received letters from many brokers to increase their liability coverage to Rs 50 lakh plus," said HL Chopra, director and adviser, Edelweiss Insurance Brokers Ltd.

Edelweiss has bagged the mandate as the sole insurance broker to service the 550 BSE member brokers. The New India Assurance Company has underwritten the professional indemnity policy for the stock brokers.

Some large BSE brokers had taken coverage running into crores of rupees, keeping in mind the possibility of errors in keying in the orders, Chopra added. Most of the 550 BSE brokers had gone in for an average cover of about Rs 25 lakh, said a senior stock broker.

Though insurance companies had not received large claims to the day, there had been, on an average, a couple of small claims in the last month, Chopra pointed out. The indemnity professional policy covers comprehensive crime and professional indemnity for the trading members of the stock exchange.

This means, if an employee runs away with a client's money or makes an error in buying or selling shares, the insurance company will pay for the damage. The cost of a Rs 5-lakh indemnity cover for each broker is about Rs 8,000 as annual premium.

The premium charged was not pro-rata when a broker sought an enhanced cover, said Chopra. Edelweiss is further selling other personal line products like house insurance to stock brokers.

FEAR FACTOR

BROKERS SEEK 100 times more than the minimum professional indemnity cover of Rs 5 lakh per broker set by Sebi

EDELWEISS HAS bagged the mandate as the sole insurance broker to service the 550 BSE member brokers

THE INDEMNITY professional policy covers comprehensive crime and professional indemnity for the trading members of the stock exchange