Chartered accountants can now avail 100 per cent professional indemnity cover for the first time in the country in the event of clients claiming loss on account of breach of professional duty.

The need for higher coverage comes in the wake of major changes made in the Indian accounting standards following the brouhaha over audited accounts of Indian corporates and concerns raised over the rampant overstatement and understatement of profits.

Chartered accountants feel that with more complications in the provision of the law, the number of claims will increase. Tata AIG General Insurance Company today launched a professional indemnity policy tailored specifically for chartered accountants.

The cover provides a comprehensive liability protection to CAs against breach of professional duty, loss of documents, defence costs and discovery period. The cover has been designed in consultation with the Bombay Chartered Accountants’ Society and it will be sold solely through the composite broker K M Dastur Reinsurance Brokers Pvt Ltd.

Most CA and CA firms have not taken out much indemnity cover to date, as the same has not been made compulsory.

Further, the limit of indemnity per occurrence is currently restricted by the state-owned general insurers to 25 per cent of the aggregate coverage limit. CAs thus prefer to be self insured instead of paying four times the premium cost for the same cover, pointed out S R Pandit, partner at P D Kunte & Co (CA).

Tata AIG is offering competitive rates for the product. These said Pandit work out cheaper that the existing premium rates when one considers that the per occurrence coverage today has been restricted to 25 per cent of the liability amount.

For a Rs 5 lakh cover, Tata AIG is charging a premium of Rs 3,000. This, said Pandit, is the same in the case of covers offered by the state insurers. For a Rs 2.5 crore liability cover, Tata AIG charges a premium of Rs 1.3 lakh.

Unlike most other indemnity covers, Tata AIG will appoint lawyers on behalf of the CA, instead of reimbursing the legal cost subsequently. "We are bringing to the Indian market worldwide covers," said Tata AIG managing director Dalip Verma, speaking at the launch of the product.

The CA firm seeking this cover cannot have more than five partners and the firm’s client list cannot include more than five multinational companies. Further, as per the Sebi rules, the firm’s revenue from auditing of corporates listed on exchanges cannot constitute more than 30 per cent of the total revenue, said Tata AIG head of liabilities Uttara Vaid.