The top insurance broker in India sees an opportunity to increase sales to the nation's banks reeling under a string of recent frauds.
Marsh & McLennan predicts the premium pool for insurance against fraud, robbery and other losses at Indian banks will climb as lenders bolster protection. It is seeing a 30% jump in inquiries from Indian banks, with some seeking to double their cover, reports Bloomberg.
Marsh, which says it works with 35 of the top 50 banks in India, declined to share names of banks that are seeking to increase coverage citing confidentiality agreements.
Cover for banks currently forms a minuscule revenue source for brokers and insurers, with annual premium payments totalling about INR1 billion ($15 million)—as lenders would dip into their profits for the smaller frauds that were prevalent. However, while the number of fraud cases has halved over the five years through March 2018, the amount involved has tripled, culminating in the record $2 billion scam that came to light at Punjab National Bank this February.
Local lenders have insurance cover for losses of at most INR250 million or $3 million, while it is common to see limits as high as $500 million for similar sized global banks, according to Marsh.
“Looking at the size of operations of Indian banks, limits purchased have been grossly inadequate,” said Mr Sanjay Kedia, chief executive officer of Marsh’s India unit. “As recent cases showed, some of the claim values are substantially larger than the cover where there is forgery or alteration.”
Recent frauds at banks mean that more insurance cover for Indian banks will come with higher costs. Marsh said they will end up paying higher premiums, which could have been contained if banks maintained a decade-worth of records of losses and remedial actions.