IRDAI form working group to revisit the product structure of title insurance2 min read . Updated: 07 Oct 2019, 04:23 PM IST
- Under title insurance policy a home buyer is protected against possible loss due to defects in title of a property, disputes or frauds
- Developers also say that policy terms and condition is not clear, so does the process of obtaining and transfer of policy to home buyer association or society
One of the sections under Real Estate (Regulation and Development) Act, 2016 made it mandatory for real estate promoters or developers to obtain a title insurance policy before launching a project. Under title insurance policy a home buyer is protected against possible loss due to defects in title of a property, disputes or frauds.
After RERA came into existence, few general insurance companies started offering the title insurance products. However, product features—terms and conditions, scope of coverage and so on—differ based on the support received from their reinsurers. In a circular dated 1 October, Insurance Regulatory and Development Authority of India (IRDAI) stated that, “It is noted that the number of Title Insurance policies sold are minimal despite the availability of product for the last one and half years and the obligation cast in terms of Section 16(1) of RERA."
The circular further stated that the feedback received from the Government of India reveals that the stakeholders, especially the developers’ associations have flagged the need for standardization in the Title Insurance products.
“There are various problems that developers face in order to obtain title insurance policy. One of the main issues is that title’s in India is not clear, in many cases details on the registry papers and the one in revenue records are the two different things," said Niranjan Hiranandani, national president, National Real Estate Development Council (NAREDCO), a real estate developer association.
Developers also say that policy terms and condition is not clear, so does the process of obtaining and transfer of policy to home buyer association or society.
“I have not seen any policy so far which covers all that is required under RERA. Some policy offer coverage for 5 years, some for 7 years and then stop there. Next issue is that, developer is required to pay the premium till conveyance of the land to society, thereafter what will happen? Who will pay the premium? There are no clarity on these and many other aspects of policy," said Suhas Merchant, chairman, Rera Committee, Confederation of Real Estate Developers Association of India (CREDAI), a real estate developer association.
Based on the feedback received, IRDAI has set up a working group on ‘Title Insurance’ to revisit the product structure of Title Insurance.
The terms of reference for the working group includes—examining the legal and regulatory framework in place and its impact on the marketability of Title Insurance in India. They will also study the structure of Title Insurance products available in the current Indian market and analyse the reasons for sluggish demand. Also, working group will develop a standard title Insurance product suitable to Indian market and recommend measures to spur the demand for the product. They are also required to suggest augmentation of reinsurance capacity within the domestic market and examine any other aspect relating to Title Insurance products in India.
The group has been given twelve weeks time to give its recommendations.