Bankers Indemnity Policy

We are well aware that banks handle public funds running into huge amounts and are therefore faced with the threat of numerous risks for the cash and securities that they handle. Banks can suffer losses due to fire, riot & strike, malicious damage, terrorist act, burglary, theft, robbery or hold-up theft, misappropriation, bogus, fictitious, forged cheques or drafts as also forged endorsements on genuine cheques or drafts or FDRs for which payment is made, dishonest or criminal act of its employees etc. Banker’s indemnity insurance is designed to cover the risks associated with the banking industry. 

Bankers Indemnity policy is a package which covers all these losses. Policy covers the financial instruments from human perils along with act of God perils. The common terms used in banking are money, securities, collaterals etc.

Money as used in this policy shall be deemed to mean bank notes (signed and unsigned), bullion, coins, currency, jewelry, precious stones  and  ornaments, pledged with banks, postage, revenue  stamps  (uncancelled)  & stamp papers.

Securities means air consignment notes, bank money orders, bills of exchange, bills of  lading,   bonds, certificates  of  deposits,  certificates  of  shares,  stock, cheques, coupons, debentures, demand drafts, and cheques and drafts and all other instruments  of a negotiable  character.

Money, securities,bullion ,jewelry,  currency in transit, bank notes etc. can be easily stolen or lost. Banks today are exposed to cyber threats from customers, hackers, through their debit cards, credit cards and ATM transactions. Liability of the banks increases in this scenario with expert hackers waiting to attack the banks software with malware etc.

A good IT policy will fix these eventualities and a good insurance policy designed specially to cover the risks related to the banking sector will minimize the other losses.

Bankers indemnity policy aids in minimizing the losses that accrue due to various faulty activities.

What does the bank indemnity insurance policy cover?

• Fire, riot & strike, malicious damage, terrorist act, burglary, theft, robbery or hold-up.

• Theft, misappropriation.

• Bogus, fictitious, forged cheques or drafts as also forged endorsements on genuine cheques or drafts or FDRs for which payment is made.

• Dishonest or criminal act of its employees.

• Loss of registered postal sending by robbery, theft.

• Infidelity or criminal act on the part of appraisers.

• Infidelity on the part of Janata agents, chhoti bachat yojana agents / pygmy collectors.

Who buys this policy?

Any banking company as defined under various banking acts such as:

•  Nationalized banks with its branches in India

•  An associate bank

•  Co-operative banks

•  Regional rural banks

•  All Indian branches of a foreign bank

What is the coverage?

• On premises of the bank: Covers money and/or securities belonging to, or in the custody of bank, on their own premises or on the premises of their bankers, against loss or destruction by fire, riot & strike, malicious damage, terrorist act, burglary, theft, robbery or hold-up.

• In transit from the bank to authorized place: Covers money and/or securities if they are lost, stolen, mislaid, misappropriated or made away with, whilst in transit in the hands of its employees whether by negligence or fraud of the employees.

• Forgery or alteration: Covers losses suffered as a result of payment of bogus, fictitious, forged cheques or drafts as also forged endorsements on genuine cheques or drafts or FDRs.

• Dishonesty of employees: Covers loss of money and/or securities suffered due to dishonest or criminal acts of its employees.

• Hypothecated goods: Covers loss suffered due to fraudulent or dishonest acts of employees in respect of goods or commodities pledged or hypothecated to the insured bank and under its control.

• Registered postal service: Covers loss of registered postal sending

• Appraisers who are in the approved list of the bank: Covers loss due to infidelity or criminal act on the part of appraisers

• Janata agents of the bank: Covers loss due to infidelity of criminal acts on the part of Janata agents, chhoti bachat yojana agents/pygmy collectors.

What are the exclusions under the policy?

Even though there are various exclusions for the bankers policy, the more important ones are:

• Losses due to negligence or omission by an insured employee.

• Whole or partial losses arising due to the acts of directors or partners in the insured entity.

• Direct or indirect losses due to trading activities.

What is the sum insured?

Basic sum insured should represent the maximum amount of loss which could be suffered by the bank due to any single incident. Sum Insured is chosen based on the previous experience of the bank and the overall risk perception of the bank.

Mid-term increase in sum insured can be obtained  on payment of additional premium.

What are the add ons?

• On payment of extra premium additional cover can be obtained for additional sum insured for premises and transit covers,

• Coverage for money in ATM

•  Electronic & computer crimes & counterfeit currency, cyber crimes

•  Additional cover for gold in safe

•  STFI, earthquake and terrorism  

Special features

• Policy shall commence and end as per the financial year of the bank.

• Banks are classified as small banks, nationalized banks, district central co-op bank and foreign banks.

• All branches in India of a bank can be covered under a single policy.

• Premium varies with the standing and the number of branches of the banks,moral hazard of the bank, past claims experience, security measures, reporting system and maintenance of records, reliability of the internal check,round the clock watchman/security etc.

Policy  provides cover on loss discovery  basis.  Retroactive period  for discovery of loss is maximum  two  years. In the first policy no retroactive  cover  would operate  and policy should be in force throughout  to effect the retroactive cover. This provision takes into account the long drawn process in concluding the process and quantum of monies due to embezzlement fraud etc. In case of non renewal of policy loss discovered within six months from the expiry of last policy is only considered.

This policy is best suited to banks /financial institutions. The interests of the bank due to various types of losses are covered under the policy.

 

We at Zen Insurance assist in preparing a Comprehensive Insurance Program for all requirements. Please contact us for assistance.

 Disclaimer:   

Zen Insurance is an IRDAI registered broker which facilitates quick & accurate insurance broking services. We deal with only regulator approved products of insurers. We do not underwrite the products.