The Insurance Regulatory and Development Authority of India (IRDAI) recently issued a circular titled "Amendment of Arbitration Clause in General Insurance Policies" dated 27 October 2023 (read here), which limits arbitration clauses in insurance policies only to commercial lines of business.
Key directives from the circular include:
- Arbitration clauses will be excluded from all retail line of business policies.
- For commercial line of business policies, the circular specifies that insurance policies should contain a clause allowing parties to mutually agree on a separate arbitration agreement for resolving any and all disputes related to the policy. The provisions of the Arbitration and Conciliation Act, 1996 will be applicable to such arbitrations.
- To ensure a smooth transition and to prevent retrospective impact on existing policies, the circular maintains the validity of arbitration clauses in existing policies renewal. At the time of renewal, policyholders have the option to adopt the new arbitration clause.
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