The climax of human culture and the zenith of civilization that we humans are supposed to have reached in all the fields, including insurance, cannot be regarded as important as long as death and disability, accidents and arson continue to haunt society and the souls of the people. When you look at the above statement dispassionately, what has insurance achieved? It is simply nothing. Paying premiums, issuing policies, settling claims, while insurance companies make handsome profits – this is all we have achieved! If this is the insane world of insurance, then I regret having spent my entire life in the field of insurance. I pray to God, the Almighty, that this should not be the achievement of insurance.
Insurance has few principles and one of them is the principle of indemnity. Allow me to go back to the definition of indemnity. The concept of indemnity has developed over the centuries. It is not a development of one day. There are many decided case laws are there which helped the concept of indemnity evolve. Indemnity is an essential pillar principle of insurance. Without indemnity, there is no difference between insurance and gambling; insurance and horse racing. What then is indemnity? Indemnity is keeping the insured approximately in the same financial position as he was before the loss. In other words, if my car were to meet with an accident, then it is the responsibility of the insurer to keep me in the same financial position so that I can buy a similar car of the same value.
The law of large numbers is at work here – where all members of the society are paying premiums to the insurer. Their risks are covered by the insurer. If one person loses something or if he were to lose his property, either through an accident or through other natural perils, then the insurer would step in to indemnify. Yes, the insured has come back to the same financial position as he was before the loss. True. And this is the essence of the principle of indemnity.
Prima facie, I find this principle of indemnity to be egocentric, selfish, and utterly mean. And under the garb of this principle, the insurers are making tons of profits without any regard whatsoever to society. The insurers have forgotten that it is members of the society who are paying the premiums. What is the responsibility of the insurer to society? The members of society are paying the premiums. X, Y, Z are the members. And these members are paying the premiums towards their car insurance, life insurance, health insurance and other kinds of insurance.
If we were to revisit the definition of insurance, it says to keep the insured approximately in the same financial position as he was before the loss, then the insurer has only served one member of the society after taking the premium from all the members of the society, but not society as a whole. The responsibility of the insurer has not ended with the payment of a claim, and in fact, it has just only begun. All these centuries, we have been under the misconceived notion that the responsibility of the insurer ends with the payment of claim. That is the wrong notion.
There is a huge difference between a toothpaste company and an insurance company; a soap manufacturing company and an insurance company. They, i.e., the soap or the toothpaste manufacturing companies are profit seeking companies. There is nothing wrong and no harm in seeking profits. Colgate makes a different kind of toothpaste; Closeup yet another and Sensodyne, totally different.
Insurance companies are not profit-making companies alone. Can, for example, the police department exist for making profit? Can the Department of Agriculture think of making a profit? They are service-oriented industries, not profit-oriented industries. Insurance companies are profit making companies and yes, they should make profits because of the fact of the constitution of the company. Undeniably true. But the responsibility of the insurer has not ended when he makes a buck profit. The responsibility has increased, rather doubled – unfathomably doubled. Is it not the responsibility of the insurer to ensure, to educate, to tell, to take the message of safety, security, and well-being back to society? Is it not the responsibility of the insurer that no person should meet with a similar fate or accident?
Do we sound like we are advocating for charity too much? Let us leave the above argument here and look at it from a different perspective. Let us consider an insurer’s responsibility to earn profits alone. If this is true, then every insurer must work for more profits. One of the many methods of increasing insurer profits is to reduce claims. Less payout, more profit. Less claims, more profit. If this were the case, one of the best methods to enhance profits is to ensure education, to tell, to take the message of safety, security, and well-being back to society?
How then should an insurer do this? How then does the insurer ensure that the message of safety, security, and well-being is taken to society? Do you think distributing medicines, sponsoring the education of few children, or furnishing a school with tables and chairs under CSR, are the methods of educating society? What they are doing, funding education providing furniture, and giving medicines etc., are undeniably good things. But is it the work of the insurer? Is it not the responsibility of the insurer to ensure that nobody should meet with a similar accident or similar fate? Nobody, no member of society, should die in a pathetic accident such as the one for which the claim has just been paid. How is the insurer planning to educate society or take this message to society?
If you say education, I don’t think the present-day society would be interested in educating themselves. Giving a good message? Nah, they would not be interested either. Advertising through YouTube, Facebook, and Insta is not technology. Settling a claim through a computer software is not technology. If you think it to be technology, then you are grossly mistaken. It is just an insignificant offspring of technology.
We must make every insured feel the accident for which a claim is paid. Make them virtually a part of the accident in a manner which creates that emotive feeling in every insured about safety. Make them feel, make them touch, make them see the accident, and make them converse with the victims. And we would say that it is technology if it can do this thing. This is the real meaning of technology. For the past 11 months, we have sincerely attempted to bring about the salient features of the world’s first ever patent in insurance on salvage before you all. We went on to explain that the salvage process is much beyond settling the claim. We went to create utility products through the salvage and gave them all. During these 11 months, we have covered every aspect of salvage patent.
Of course, much more is left unsaid, but we would be willing to talk about it. We would be willing to discuss it with everyone. We could have written all, but the editor of the Insurance Times magazine would give a dry smile and say, ‘thank you, sir. This is enough. We do not have the space to cover it all.
We accuse the insurers of being shamelessly profit-oriented. They sell the salvage to the highest bidder and are content to think that they are reducing their so-called losses, which are not even a drop in the ocean! Cut the shoot of the tree; more foliage will emerge. Cut the root of the tree; the tree will wither away. Go to the root of the accident. Ensure that through the unique products of salvage, people start practicing safety. Do not sell salvage. The insurers should make patented salvage products and distribute them to all their policyholders with a request, with a prayer to be safe.
We are willing to sit with each insurer and discuss the steps that need to be taken to create products of utility, articles of utility through our patented salvage. It may be argued why we should give away our salvage? If we are making a buck on that, why should we not make it? Go to the root – we request all the insurers to go to the root. Make people more cautious, more proactive, and safer so that accidents become negligible. The profits of the insurers are intertwined with the safety of its policy holders.
Authored by:
Dr K. Rajagopal Reddy
PhD, FIII, FCII (UK), FLMI, FT
Chartered Insurance Practitioner
Topspot Insurance Broking Pvt. Ltd.
