The entity “An Approved Surveyor & Loss Assessor” was framed and brought into existence with specific ‘Object & Reasons” gazetted way back in the year 1968; which lead to define the role in 64UM(2) of the Act.
64UM (2) of Insurance Act read as follows;
“(2) No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of insurance, arising or intimated to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance (Amendment) Act, 1968, shall, unless otherwise directed by the Authority, be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from a person who holds a licence issued under this section to act as a surveyor or loss assessor (hereafter referred to as “approved surveyor or loss assessors) provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor or loss assessor.”
The leeway given to an insurer of such limit of claims above a certain limit (Rs.20,000); was mainly due to the reason to scarcity of qualified Engineers, absence of quick communication facilities and inaccessibility of various risk locations for the SLA to get on job; which had a bearing on the costs involved. Now a days; where there are abundant pool of qualified Engineers, instant communications and rapid & widespread net work of transport facilities; such apprehended disproportionate costs have become miniscule of the claims costs; and hence such limits became redundant.
So SLA is an entity envisaged as part of one of steps needed; “with a view to promoting and development of general insurance business on sound lines and eliminate undesirable practices in business, this bill provides for more effective supervision and control over insurers”.
This is the objective provided in the Bill passed by Parliament, and empowered by 64UM in the Act. The significant role assigned to SLA, places such entity as an extension of “Regulatory Role”, rather than just a service provider as an “intermediary”. It is the SLA who comes into reckoning at the time of any occurrence that gives rise to claim against an Insurance Policy by a policy holder. In such distressing situation of policy holder, the SLA plays the role as an adjudicator to quantify and facilitate the claim ensuring that the fiduciary obligation of an insurer exist as per the policy terms and conditions; at the same time making sure whether the claim falls within ambit of the policy held by the policy holder.
The SLA also examines the truthfulness of occurrence by visiting place of occurrence, inspecting the damage/loss claimed physically and collecting / recording evidence of occurrence or falsification / attempt to defraud.
Thus the SLA is a neutral independent third party entity charged with the responsibility of providing / facilitating just, reasonable indemnity to the policy holder; without jeopardising the interests of an insurance co. Such a noble an balancing role can only be effectively played; only if the SLA is not an interested party and is not a party to either party to insurance contract (Insurer or policy holder).
Such neutrality, just nature of duty of SLA was correctly emphasised and proclaimed by authority (IRDAI) in their proclamation as part of Exposure Draft 2012; as follows;
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1.02: Ensure that contractual relationship of SLAs with insurer and the insured is governed professionally and that fiduciary obligations casted upon them are performed in the interest of the insurance consumers and development of consumer confidence in the Insurance market.
3.40: The legislative intent of : section 64 UM of the Insurance Act, 1938 and rules made there-under, the regulations notified by IRDA for the profession of SLA, circulars and guidelines issued on this subject do enforce an objective that the assessment of loss is based on the principle of independent neutral third party i.e. SLA whose code of conduct, professional ethics, duties and responsibilities do not permit him to align with any of the interests of the parties to the contract of insurance.
-Unquote
Thus there is no ambiguity in the role assigned to SLA, as that of a neutral, independent, third party. This was in practice so long there were only PSU Insurance Companies in the field of ‘General Insurance Industry’. The advent of private insurance companies in the field of General Insurance Industry lead to various improper and unethical practices, in the name of ‘liberalisation’, ‘reforms’ and ‘ease of doing business’. Insurance is an industry where nothing tangible is sold. It is the promise to pay in such and such situations / occurrences that may (or may not) arise in future. Devising or spelling out of such contingencies, applicable terms, conditions, warranties, clauses all form part of an insurance contract, in which the insured has no role to play.
And when any unfortunate event takes place, the interpretation of policy T & C decides the claim admissibility or otherwise; and also the quantum of claim in case of admissibility. In such scenario of claim by the policy holder, fiduciary obligation of the insurance co., it is the SLA whose competence, neutrality and independent status that decides and validates the confidence of the public in the instrument ‘insurance’. If such significant entity of SLA is allowed to be ‘Employees of Insurance Companies’, then the neutrality is compromised and an element of ‘conflict of interest’ comes into play.
The private insurers started this practice of employees as SLAs; in utter violation of the Act. IRDA as regulator failed to curb this unethical practice and numerous representations / complaints made to the Regulator fell on deaf ears, without any enquiry or remedial action.
Insurers resorted to entering into MOUs with Automobile Dealers to market their policies; and this has lead to further unethical practices of prefixing labour schedules without involvement of SLAs; in the name of ‘tie up’ business. Though policy holder got the benefit of ‘cashless settlement’ in such deals., the billing of hyped charges for such tie up deals; resulted in siphoning out of more funds out of premium fund to the repairers / dealers of automobiles than were necessary in case of such repairs without such tie up set up.
The atmosphere in the general insurance industry market has become vitiated with such unethical business practices by the private insurance companies, and the reluctance of the Regulator to assert and enforce the rule position, as the regulating authority of the Industry. The representations made by the SLA fraternity did not find any positive response from the Authority to set right the business environment in the Industry.
The happenings in the general insurance industry are in vivid contrast to the proclamation of objectives of ‘opening up of insurance sector’, and permitting ‘FDI’ in insurance sector. The objectives sought to be achieved were;
- Increase in penetration of insurance; and
- Bringing in new Technology.
In reality, the new private insurers did not pursue any of the objectives; as they concentrated only on major cities mostly through tie up business with automobile dealers; and concentrating on corporate business who are high in insurance coverage aspects. The visibility of these insurers is poor in insurance market, as they mostly operate on tie up and corporate for business; and through call centre and dealer of automobiles.
It is high time the Regulator concentrate on these aspects and ensure compliance of business practices as per law of the land, in the best interests of policy holders; and to ensure increased confidence in the instrument ‘insurance’, such that the spread and penetration follows automatically.
