The biggest struggles in the recent past might have been surrounding land and land acquisition, but risk mitigation through an insurance cover is still a far cry.
Thus, in case Tata Motors bids adieu to Singur, where the government passed a Bill to take back the land it had earlier given to the company for setting a factory, it will have no insurance cover to minimise losses.
It may be mentioned, when Tata Motors had decided to set up its small car factory in Singur, it had purchased policy — ‘Erection All Risk Insurance’ — that covers perils like fire, explosions, riots, strike, vandalism and project delays due to unforeseen circumstances from New India Assurance.
However, no claim was paid to the company as the insurer is not liable to pay money in case of a withdrawal from the project.
At present, there are no insurance policies to cover possible failure of government or a company to acquire land for a project.
However, even title insurance was unlikely to cover insurance against resistance in land acquisition for industrial projects, though it might greatly benefit industries in case of other title-related disputes, said experts. In case an ordinance or Bill is passed by the government for land acquisition, no insurance product can cover the risk. This apart, land acquisition by the government is likely to remain outside the purview of title insurance.
However, the insurance sector regulator has turned down proposals by the insurance companies to launch title insurance in India, in spite of a rising demand.
Scattered and decentralised land records has emerged as the most contentious issue in providing insurance for land titles, prompting the Insurance Regulatory and Development Authority of India to seek greater clarity before approving the product, said insurers.
Title insurance, common in the US, insures against loss of an interest in a property due to legal defects. It generally covers unknown title defects, which prevents one from having clear ownership rights, existing liens against the property’s title, encroachment issues, title frauds and errors in survey and public record. However, even in the US, it does not cover native land claims.
Major public sector insurance companies have been mooting the product to the regulator over the last two years.
For example, United India Insurance plans to seek fresh approval for title insurance, after the regulator sought clarifications on it.
“Irda has not yet given clearance for title insurance in India. We are pursuing with them for approval. In India, the land deeds are not computerised and are handled at a decentralised basis. The regulator basically wants to know how claims will settled in such a situation, among other things,” said United India Insurance Chairman and Managing Director G Srinivasan.
Another public sector insurer, National Insurance, too applied for the product two years earlier, but the regulator turned down the proposal, citing improper nature of land records as an impediment to claim settlement, according to a company official.
Also, reinsurers, or the companies that insure insurance companies, expressed reservations on taking the risk of insuring property titles in India. However, companies see huge demand of the product, despite the apprehensions expressed by regulators.
“Title insurance would have good takers, not only at the corporate, but also at individual levels. In future, we will definitely look into the product. We had thought of having this product about two years before, but reinsurers were not comfortable with the product. Also, the states need to computerise their land records before title insurance is launched in India,” said New India Assurance Chairman and Managing Director M Ramadoss.
