The Insurance Regulatory and Development Authority of India (IRDAI) has set up a Working Group on ‘Title Insurance’ to study and suggest how to make it operational in India.
The group, which has been given two months to give its recommendations, would study the need and scope of Title Insurance in the Indian market keeping in mind existing practices in the international market. Among other things, it will identify the insurable risk and define the compensation structure and suggest the design of the product and suggest the framework for assessment of risk, pricing, reserving and accounting with actuarial inputs keeping in mind the long-term sustainability of the product on stand-alone basis.
So what is Title Insurance and how does it work? FeMoney gives you a few essential ingredients of Title Insurance as it operates worldwide.
What is Title Insurance? It is an insurance which protects the policyholder against possible loss due to defects in title of a property (usually land), disputes or frauds.
Who can take Title Insurance cover? Since Title Insurance is generally for property for which a loan has been taken, it can cover the risk of a buyer and the mortgage lender.
What does it cover? Typically, Title Insurance pays for the loss incurred due to title defects up to the sum insured (which generally is the value of the property) or legal expenses to defend the case. However, additional coverage could be structured based on market needs.
How does it differ from other insurance? While most insurance provides protection against future loss, Title Insurance provides cover for an event in the past which has resulted in unclear title or led to a dispute.
What are the challenges specific to India? Typically, the insurer would do a search of records before taking the risk. Land records in India range from manual records to partial digital in select states. This would increase the cost & time of searches which the insured would need to bear. The policy would also have to factor in risk of unavailability of completely verifiable records and hence price the premium accordingly. “It may be challenging to implement Title Insurance in India,” Yashish Dahiya, CEO & co-founder, Policybazaar.com told FeMoney.