From time immemorial insurance had been misused for betting and gambling purposes. The betting was done on the lives of great men like Sir Walpole and Napoleon Bonaparte. Since there was a grave danger to the lives of such persons, it was considered as opposed to public policy.
With the introduction of Statute of Frauds, and the decisions in Balfour vs. Balfour, Dolby vs. India & London Life Assurance Society, Castilian vs. Preston, Carter vs. Boehm and Passy vs. National & Scottish Union, the element of fraud was removed and as the decisions contained came in the shape of the principle of “Indemnity”, Utmost Good faith, “Insurable Interest” Subrogation and contribution etc, by which the Insurer was allowed to pay the actual loss and not allowing everybody to insure except the owners or those having some interest, and expecting the insured to tell truth and nothing but truth about the subject matter and such decisions appeared in the policy in the shape of conditions.
Thus the lacuna of wagering had been removed and the insurance contract became the essential part of economic activity and it was rightly considered as a noble activity, since it was intended to help the man in distress, but it is marred by some vested interests with ignoble ends – one side the motivated insurer did not comply with his promise to “pay the promised loss”, on the other side the selfish insured wanted to squeeze as much from the happening of a claim as possible. In that tug the innocent policyholder was always denied with his interest on one pretext or the other.
Either the scissors of the small print is applied to cut down the claim and to make undue gain the insurer started reading in between the lines and sometimes he is charged with the motive of making a false, fictitious or fraudulent claims. In any way the insurer does not give the victim the opportunity to explain and relies more on the findings of the surveyor, who is an independent licensed professional (but paid by the insurer),and often gives the findings in favour of the insurer.
The survey report is considered as a secret document disclosing the claimant’s loss, who is not aware of the findings as to what extent he is affected. Sadly neither the insurer nor the surveyor gives the copy of survey report which would have soothened the insured the basis of allowing his claim or rejection. Moreover the burden of proof for denial of claim lies on the Insurer, but rarely gives him a chance of knowing the same.
Customer Service
The insurer although promises to render good customer service, has only concentrated to make him happy till the premium comes to his books, and in that approach, he make his office attractive, good looking, well equipped with A.Cs and items of comfort including TV provides tea and refreshments with soft and hard drinks followed by sumptuous dinners and compliments. He has made the same customer deprived of such a treat when the claim is reported.
When a claim is preferred by the pampered insured, the insurer made his face sour, his mind becomes suspicious and he becomes the ‘trader without any courtesy’. Although the insurer relied every statement of the insured at the time of insurance, but at the time of reporting of loss, he becomes suspicious either he cross checks what the insured said, or investigate what all is done after the accident.
This makes the genuine insured agitated about the motivated service of the insurer and he prefers to be dishonest as he finds that honesty has no room in matters of insurance. The insurer tool should not suspect the policyholder, unless he behaves to be so, but be broad minded in extending a liberal attitude.
The Role of Agent
The insurer concentrated only on pre-sales service, did not mind to entrust the work to qualified and trained agents but to grab the business, not much attention was paid to give correct advice for the cover he is in need and charge the correct rate, for the correct sum insured, i.e. the value of property declared for insurance which should conform to the market value. The insured may under value the property to reduce the premium payable when the agent should explain the aspect of underinsurance.
He sometimes hides the age and defects in the property and aspects of utmost good faith. It is better to argue with the client at the time of insurance and not at the time of payment of claim. Utilizing the services of qualified agents is useful in many ways. It gives the opportunity of inspecting the property to be insured, gives the idea of the value, helps to advise the insured for what risks he is exposed to. The agent also gets the opportunity of inter-acting many issues with the insured and gets the opportunity of creating insurance awareness personally.
It is, therefore the IRDA insisted for 100 hours training, which was not liked by the insurers thinking that it is expensive and they wished to get it reduced or eliminated, and the Agents license was treated as Municipal license by attending on-line examination even without training. The result being that the insurers preferred to have insurance brokers rather than insurance agents, who would have brought selective business with proper underwriting. Even those Agents were on rolls, emphasis was made to get the business in quantity and not quality.
What the Agent can do!
As a matter of fact the agent should take the opportunity of valuation of property of visualization of risk exposure. He must also be made aware that the money paid by the insured is kept in a fund or poor for payment of claims which occur during the year.
Thus without any doubt the insured should be explained in unequivocal terms that the insurer is the “Trustee” not only to receive the premiums honestly but also to pay the claims conscientiously and not like the “Lord” to make payment what ever he desires to pay lavishly without substantiating the reason of payment at his whims and fancies.
Insurer’ Lobby
Every insurer must have a lobby to make people understand that insurance is meant for timely help and in that they should also state how big claims are paid and apart from this there must be an officer like the liaison officer, not the Insurance Ombudsman, who should go door to door and find out aggrieved the aggrieved insured persons to know their problems personally and to find out the amicable ways to have their grievances sorted out. But the present grievance cells remained to be of no use as they have become more procedural and legal.
Advertisements
Public sector insurers in the past did not take the help of advertisements, but private insurance industry, believed much in advertisements, as it was a permitted expenditure, but this approach did not fulfill the purpose of creating insurance awareness, products knowledge and duties of the insured’s duties after completion of contract. Much high light had to be given that the insurance premium paid by the insured is for the reimbursement of loss of those who suffered actually, establishing the fact that the insurer is the trustee of the premium the Policyholder has paid.
But the present day advertisements show interesting screenplays leading one to see, laugh and forget. Importance should be given in advertisements substance, objectivity and clarity. People see the advertisements and forget the multiple names of insurance companies like MAX BUPA, Religare and ING and soon, while the names of the four pubic sector insurers of the past were too difficult to be remembered by senior officials and ministers.
Simplification of Policy wording
It is the high time to make the wordings of insurance policies simplified, with easy words, simple sentences and clauses and with legible print and clarity of expression, so that the insured is not led in confusion. As an example a pubic sector insurance company printed the Motor Vehicle rules in a policy as its own rules and applied the restriction of carrying hazardous chemicals to bankers and made it applicable to “truck” carrying hazardous goods.
Even an “Act” only policy was so much simplified, that the insured had to every time refer to the Tariff, Motor Vehicles Act & Rules. This is not simplification. Simplification of language, information should be understandable to a common man and this should be complemented by the Agent when he hands over the policy to the insured, but the agent personally delivers the policy like a post man.
A Successful Insurer
A successful insurer is one who trains his agent and deploys him in pre-sales and after sales service of the customers, and in the event of claims he keep him satisfied with the settlement of claim or gives opportunity when the claim is rejected this is customer satisfaction. Anything courteously done apart from this if anything is done in excess is the customer’s delight and it must be the object of every insurer to achieve.
Lack of Sincerity
Although many efforts have been made in the past to bridge the gap of dissatisfaction between the insurer and the insured, I feel the main lacuna is the lack of sincerity between the parties to the insurance transaction viz., the insurer, the insured, the agent and the surveyor. The insurer, in the whim of gaining more by collection of premium and saving by way of scissoring the claims of repudiating, has forgotten the limits of doing justice.
The insured in order to make profit out of insurance has resorted to lodge bogus claims and demand inflated amounts and in that tug of war the sufferer became innocent insured who approaches the insurer for genuine reasons and is satisfied with whatever he gets. The surveyor, who is the assessor of loss, although he holds the axe of justice, could not be of any help, as he is tied with a rope from behind. The agent remains to be a dumb lamb and has to canvass whatever he is asked to do – to praise high of insurer and his products, but not to open the mouth when the claim arises.
Role of Government
To maintain parity the government came forward with amendments in the Insurance Act, 1939 with the passing of IRDA Act, 1999 and IRDA Regulations 2002 (Protection of Policy Holders Interest) ad other regulations for Agents and Surveyors, the IRDA is conferred with enormous powers to regulate the activity of insurance and protect the interest of Policy holders.
What is observed is that the provisions of the enacted laws are not understood or there is no willingness to regularize this area to create harmony, hence it becomes necessary for the Ministry of Finance who is the sentiment of insurance and banking should authorize a better authority to administer justice to the policyholders.
Instance of Injustice
From among umpteen number of cases of injustice, one case is suffice to observe the injustice done by the ‘experts of insurance’, then what is expected of an ordinary person to understand nobility of insurance.
A goods carrying “truck” in return from Mumbai undertook the contract of haulage to carry parcel of goods in packets, not orally informed or given in writing that these were hazardous goods, and in turn, the goods caught fire and the truck was totally burnt. The policy issued had vague conditions and clauses. Motor vehicles rules printed after the conditions were mentioned as though the same are the Rules of the Insurer and the heading of the rules was mentioned as ‘RULES APPLICABLE TO TANKERS CARRYING HAZARDOUS CHEMICALS” indicating that the same were applicable to “Tankers carrying hazardous chemicals” and they were not applicable to “trucks carrying hazardous goods”.
There was no specific condition or warranty on the policy prohibiting the insured to carry hazardous goods in the truck. Since the printed conditions had no specific condition prohibiting to carry hazardous goods, then impliedly it may be a warranty. The insurer not knowing the repercussions of the breach of condition or warranty repudiated the claim. According to the Claims Manual of the PSU insurer, breach of warranty makes the claim “Non-standard and impose a penalty of 25% of the claim and the insured is paid the balance of claim.
Ignoring the bonafides of the truck driver, not noticing the mischief of the transporter, and not exercising the right of subrogation, and overlooking the instructions of Claims Manual, and having the dubious provisions of the policy by wrongly printing the Motor vehicles Rules as the rules of the insurer and not distinguishing the difference between the “Tanker carrying hazardous Chemicals” and the Goods Truck carrying hazardous goods by mistake”, have repudiated the claim. The insurer should have, in fact, considered the bonafides of the insured, and settled the claim in toto and they should have exercised the right of subrogation against the transporter or considering the matter as breach of implied warranty by treating the claim as non-standard.
According to the Supreme Courts ruling the insured was entitled to the claim amount when the provisions of the policy were dubious. On the other hand they have repudiated the claim, whereby the insured lost his fortune, distorted and had paralytic attack and became penniless.
As ill luck would have it, he was given wrong legal advice and a case was filed before the MACT for lack of jurisdiction, it was withdrawn. On wrong pleadings the case was filed before the Consumer Forum and it was lost and further appeal resulted in dismissal. Whatever is the result of the pleadings on the part of the insured, there is a law in the name of the IRDA Regulations, 2002, which questions the insurer’s conduct in dealing with this type of peculiar claim.
Does not the law impose the duty on the insurer and the Regulator to look into such atrocities done to innocent persons, who unaware of the lapses of the insurer could not plead their rights, but the insurer knowing fully well has denied the claim of the insured.
The insured, no doubt lost the claim, distorted, became penniless’ he approached the IRDA, under the IRDA Act 1999 and IRDA Regulations (Protection of policy holders’ interest) for the bad conduct of the insurer in settlement of his claim thus violating the provisions of the said regulations.
While the IRDA is empowered to enquire into the matter and punish the defaulting insurer, for having dubious policy conditions, not treating the claim as non-standard and rejecting the claim unjustifiably, has simply advised him to approach the Insurance Ombudsman, who is not empowered to hear the cases under the said Regulations, thus throwing the distorted policyholder from the frying pan into the fire. Now the question is whether there is any other authority other than the IRDA who has to look into the grievance of such a policyholder whose interest is protected under the IRDA Regulations 2002 to punish defaulting insurers for the failure protecting the policyholders’ interest.
The sum and substance of this approach is the noble transaction of insurance is marred by such many cases which have not feigned from the memory of those suffered the loss and the mouth of such aggrieved persons are shut by forced compromises or threat of litigation.
The existence of grievance cells at company level, Consumer Forums, Ombudsmen etc, are of little used as they are meant to look to the grievances of the policy holders from the angle of cause of action, jurisdiction and limitation only without going into the reality of the grievance and overlooked into the causes and remedies of the grievances.
Hence there is a necessity of entrusting such matters to a superior authority at lest in the cadre of Finance Secretary, to take up such grievances and check up the protection of policy holders’ interest.
The sum and substance of this approach is the noble transaction of insurance is marred by such many cases which have not feigned from the memory of those suffered the loss and the mouth of such aggrieved persons are shut by forced compromises or threat of litigation, which no businessman may resort to do so.
The existence of grievance cells at Company level, Consumer Forums, Insurance Ombudsmen etc, are of little use, as they are meant to hear the grievances of the policyholders from the angle of cause of action, jurisdiction and limitation only without going into the reality of the grievance which challenges the conduct of the Insurer as specified in the IRDA Regulations 2002 (Protection of Policyholders’ interest)
Hence there is a necessity of entrusting such matters to superior authority at least at Central Finance Secretary’s level, when it can be said that proper justice is given to the policyholder and the insurer’s would become alert to notice that there is a higher authority who may look into injustice done from this angle also.
Note :The latest work of the author entitled “Memoirs of My Insurance Life” is available for sale with the Insurance Times, Kolkata -7 for Rs.150/- each.
— Editor
By : Vazir Ahmed Khan, Published in “The Insurance Times” January, 2013
