In my last article, *Insurance Phobia* published in the *Insurance Times*, I enumerated various aspects of why people are afraid of insuring as they feel that insurance is not a transaction worth spending money on for reimbursement of unfortunate loss. They say that they go on insuring but no claims are made. Some say that the loss suffered by them is not reimbursed to their satisfaction. But there is no limit to satisfaction.
Truly enough, the insurance people are at fault for failing to educate people, which leads them to say, “Insurance is to help make profits.” But the aspiring agent for commission says that “All losses will be paid.” This creates confusion if the party is told from the beginning that insurance is not for making profits but for the reimbursement of loss as per the terms and conditions of the policy. The insurer must be told to go through the policy in the beginning itself, so the insurance always mentions on the docket of the policy to advise to go through the policy in the beginning itself. So the insurance always mentions on the docket of the policy to advise going through the policy at the beginning. The proposal form, which is supposed to be filled in and signed by the insured, contains various questions that form the basis of the contract on which rating is done. But, unfortunately, this is often taken lightly by the signatory, and the agent himself fills up the proposal and signs as simply as a love letter. This creates a problem. For instance, a health insurance claim was rejected as the insured was suffering from hypertension in the past, and this fact was revealed by his old mother to the doctor. The doctor recorded it in his report, and the insurer rejected the claim as a lack of good faith.
Such things could be avoided in the initial stages of insurance when the agent is cautious and books the business with open eyes. Every agent or underwriter should go to the insured with open eyes while talking to the insured. In a big rayon factory, when I went to underwrite a workman’s compensation insurance proposal, the general manager took me around the factory. I noticed the operation of the woodcutter, crushing the wooden logs into chips, where a man stood at a height of about 30 feet, pushing the wooden logs into the crusher with his legs while holding an iron pole with one hand. If he slipped, he would also fall into the logs and be crushed into pieces. When I told the GM, he said, “Yes, it is a risky job, and two people have died earlier in such operations.” I suggested to the GM, “If you tie this man with a chain and a belt to an iron pole, such a man will never slip and fall inside.” The GM became very happy and immediately gave instructions. Thus, several claims were averted. I always used to inspect large losses at a casual visit and advise the insurers on safety measures.
POLICY CONDITION
Many of the insurers have suggested that if the insurance company inspects the property to be insured and suggests precautionary measures, many of the losses can be avoided. I told them that no doubt the idea is good, but the premium rate would be considerably increased because the insurer has to send a surveyor to every place where the insurance is being done. To evaluate the property, to avoid under-insurance, to check the ownership of the property, to check up insurable interest, etc. To avoid subsequent complications, the surveyor has to be paid the fees, and this will be charged to the person insuring. Just imagine if the insurer in one place has to send the surveyor to the property located at a distant place; it will become a great economic loss and a loss of time. It is, therefore, assumed that whatever is declared in the proposal form is correct; the insurer accepts it as true and, at the time of a claim arising, checks up on the truth of these. If these are true, the claim will be passed. This is known as utmost good faith. If this fact is made aware of, he will not only appreciate this aspect but also follow it strictly.
SUBROGATION
In property claims, when the claim reaches the final stage of settlement, the insurer does not remain silent. If the insured has filed a claim against another party who has caused the damage, the insurer’s main aim is to recover the amount paid to the insured. This is possible only when the insurer is substituted in place of the insured and becomes entitled to all the rights and remedies available to the insured against the other party. In a case where a ship caught fire, the insurance company, which was fully liable, was satisfied that the ship was properly safeguarded. However, during the investigation, it was found that the ship had sustained further damage during repair. The insured and the repairer were asked to lodge a complaint against the repairer, which was accepted. When the insurer had paid the claim, they subrogated and immediately demanded recovery from the repairer.
SALVAGE
Even when the damage to a car is repaired and the final amount of the claim is decided, before the settlement of the claim, the insurer demands that the damaged parts of the car be returned because this helps to mitigate the loss. Some insurers also inspect the salvaged parts to ensure they are not re-used in other claims. This is the kind of practice the insurers adopt when settling claims. On one occasion, the owner of a petrochemical factory telephoned me and informed me about a claim of a damaged container, which was reported to us as a total loss. The insured said that this container, which was originally valued at Rs. 10,00,000, was being handed over to the insurance company. The damage to the container was genuine, but the insured was trying to inflate the loss to get a bigger claim. I visited the spot and found that the container was filled with water. I requested the owner to wait for a week and I would come to inspect it again after a week. Slowly, the container was drained and it came back to 90% of its normal size. When I inspected it, the owner was surprised and asked me, “What about the check for Rs. 10,00,000?” I told him that insurance is for losses, not for profits.
MAXIMIZATION OF LOSS
Many of the insured people have the tendency to exaggerate the loss to get a bigger claim. When I tried to explain that insurance is not for profit but for actual losses, some of the people were reluctant to believe it. One such person was the owner of a damaged chemical container. He told me that the container was beyond repair, but when I visited the spot, I found that the container was still salvageable. The owner was not pleased with the engineer’s survey, so I visited again with the engineer and after a thorough inspection, the owner was satisfied with the check I issued for the actual loss. The owner said, “Insurance people are intelligent,” but I told him that “insurance people collect a little premium from the many and pay the losses to the few. If the losses are more, the insurance company will collapse.”
THE CONCLUSION
The insured will entrust the entire responsibility to the agent and blame the agent for scissoring the claim. In this effort, public sector insurance companies try to create awareness among the public about various aspects of insurance and encourage them with the concept that “CUSTOMER IS THE KING,” but this king never felt happy with any amount of loss after the settlement of the claim, as the famous childhood story goes. That a king was never happy as he always complained of sickness and uneasiness. The doctors of the time came and cured him, but to no satisfaction, and the king remained uneasy. But an old man came forward as an experienced doctor and challenged the cure for the disease of the king. In that, he suggested that the king should sleep in the shirt of a happy man for one night, and he would certainly be cured. The king ordered his men to go all over the country and bring the shirt of a “happy man.” In that process, they contacted the richest man and failed. Finally, they went to a jolly Miller who was playing his flute while dancing. Thinking he must be a happy man, they asked for his shirt, which was torn and dirty, but he ran away along the shore, saying that if he gave this shirt, he would have no other shirt. Feeling dismayed, the chieftain returned to the king and said that nobody is happy in the empire. At this stage, the king realized that nobody is happy in the world, having one problem or the other, or having complacency in the present situation.
Thus, the party taking insurance should also feel satisfied with whatever claim amount they receive in return for the paltry amount of premium they pay.
