The Insurance Regulatory and Development Authority of India (IRDAI) on October 27, 2023, issued an amendment to the Arbitration Clause in General Insurance policies.
The Hon'ble Supreme Court of India issued a reference, and IRDAI responded by thoroughly reviewing all of the existing arbitration clauses that are used in the general insurance industry's various business lines. Following thorough stakeholder consultation, IRDAI has determined that the current Arbitration Clause needs to be modified due to its narrow reach.
The following has been directed:
• All policies issued under the Retail Lines of Business shall not have any Arbitration Clause.
• All policies issued under the Commercial Lines of Business shall have an Arbitration Clause as under:
“The parties to the contract may mutually agree and enter into a separate Arbitration Agreement to settle any and all disputes in relation to this policy.
Arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996.”
• Transitory provisions –
a. For all the new policies issued on or after the date of this circular:
o Arbitration Clause shall be deemed deleted from all the retail policies.
o Clause at ‘II’ above shall be deemed to be the Arbitration Clause in General Conditions of all the commercial insurance policies.
b. For all the existing policies:
o The existing Arbitration Clause shall remain valid till the term of the policy unless a policyholder specifically requests the insurer to replace it with the clause at “II” above.
o The clause at “II” shall be deemed to replace the existing Arbitration Clause in all the commercial policies from the date of renewal falling on or after the date of this circular.
This circular comes into force with immediate effect.
[Circular No. Ref: IRDAI/NL/CIR/MISC/188/10/2023]
