IRDA new
norms to create commotion in the Insurance sector
Insurance
company’s salaried employees to scrutinise claims
Possibility
of bogus and inflated claim settlements to increase
Increased
premium to burden general policy holders
MUMBAI, November 7, 2019:- The President of Association of Investigators and
Detectives, Mr. SurendraJagga has emphasised that if the ‘PROPOSED REGULATION
2019’ is implemented through the Insurance Regulatory and Development Authority
(IRDA), it will create a turmoil in the insurance sector and give rise to many
wrong practises, which will ultimately burden the general policy holders.
He was speaking at the press
conference in Mumbai, called on behalf of the Association of Investigators and
Detectives to talk about the effects and consequences which will follow due to
the implementation of the new proposed norms of IRDA on the common man and the
insurance policy holders, given the scenario that the slump in the automobile
sector and the Indian economy.
Association of Investigators
and Detectives, Mr. SurendraJagga said be it any insurance, the claim related
to it is always scrutinised through an independent damage assessment agency’s
report. After the inception of Insurance companies or business in 1938 in India, many legal provisions were amended,
but never was a question raised on the validity of an independent damage
assessment agency. However, in 2015, the
IRDA brought in new rules in the damage assessment processes. Under this, the
stringent scrutiny process for the insurance claims for vehicle insurance up to
Rs. 50,000 and other insurance up to Rs. 1 lakh were removed, which diminished
the roles of Insurance Surveyors in this process. This especially
whenthe insurance claims for vehicle insurances is only up to Rs. 50,000.
The Director of Association
of Investigators and DetectivesMr. Ashish Desai said, “According to the
proposed norms, the insurance claims up to Rs. 75,000 have been removed from
the process of independent damage assessment agency’s purview. Which means,
henceforth, in order to settle the claims up to Rs. 75,000, there would be no
need for any surveyor or investigator’s report. Though, the aim behind this
could be that these claims be settled faster and quicker, in reality this is
likely to increase the premium on these policies and thus ultimately burden the
general policy holders”.
In case the claims are not
scrutinised by an independent assessment agency and instead the salaried
employees of the company are made to scrutinise the claims by doing the roles
of surveyors and investigators, there is a possibility that the vehicle repair
bills and medical bills will be presented with an inflated amount.
Mr. Desai went on to say
that if such claim settlements are made without any authorised scrutinization
process, this could lead to malpractices and frauds of the highest order. As it
is, according to the present data, 15 per cent of the cases in vehicle
insurance claims are bogus and this might rise up to 25 per cent if these rules
are implemented.
“The number of claims coming
for settlement might increase and in that case the insurance companies will
have to increase the premium on the policies. This will naturally affect the
general policy holders. Several bogus and inflated insurance claims will be
passed and settled with proper scrutiny and examination and this will also
burden the honest policy holders”, added Mr. Desai.
Statistics of the
claims shows that @ 85 % of claims in motor falls under Rs. 75000/- will lead
to…..
1.1.
Fraud perception as no inspection of loss is
required, thus increase the losses of Insurers.
2.2
The
Private Insurers will start utilizing employed In-house claim inspectors who will try all means to curtail
the claim amount as dictated or directed by their bosses thus taking away the
fair practice in loss assessment and settlement.
2.3
Genuine policy holder may be deprived of
his legitimate rights due to
increasing fraud perceptions and prejudice/biased loss assessment.
2.4.
With increase in losses of Insurers, the
Insurers will be constrained to increase the policy premium thus increase in
the burden of policy Holders.
2.5.
The genuine policy holder will lose faith in
Insurers; the basic principle of Insurance i.e. “Utmost Good Faith” will be
suffered.
Thus the Insurance Industry will be pushed to Pre-Nationalization
situation (Nationalization was done to “prevent concentration of wealth and to regulate
and control the industry”)
3.
IRDA is advocating for memberships of Indian Institute
of Insurance Surveyors & Loss Assessor, IIISLA to Insurance employees
in the proposed Regulations, 2019, thus violating the IRDA Act. 1999 where
Surveyors and Loss Assessors are defined as “Intermediaries” working
without prejudice. Appointing employed surveyors for loss assessment will give
rise to conflict of Interest.
4.
The IRDAI is also taking blind eyes
towards unethical practices and violation of IRDA Act 1999 and Insurance Act (as
amended from time to time) by insurance employees and corporate employees
pretending as Surveyors and Loss Assessors. Number of complaints made to IRDAI
from all over India had never been attended. Even the Honorable High Court of
Delhi observed in M/s United India Insurance Vs. Jai ParkashTayal that
“Obviously, the IRDA has turned a blind eye to the functioning of the insurance
companies
5.
IRDA is making the existence of Institute
of Insurance Surveyors & Loss Assessor, IIISLA insignificant which is
promoted by the Authority themselves in 2006, under IRDA act 1999 by proposing
the removal for “Compulsion of Membership” for licensing of Surveyor & Loss
Assessor. It is necessary to point out
here that IIISLA is watchdog for the “Code of Conduct” and “Code of
Ethics” by Surveyors & Loss Assessors.
6.
In 2015 IRDA Introduced the clause of
appointment of Surveyor by Insured vide Regulation 2015(12)(2) but failed to
make the general policy holder aware about their rights to appoint Surveyor as
still general policy holder is not aware about this.
Recommendation: All policies Issued should be clearly
mentioning that …..”INSURED CAN APPOINT SURVEYOR”
7.
IRDA is violating section UM64(2) of Insurance Act 1938 by allowing the settlement of claim without
survey for proposed amount up to Rs. 75000/-.
Section 64UM(2) read as…
“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 8[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 license issued under this section
to act as a surveyor or loss assessor (hereafter referred to as “approved surveyor
or loss assessor”): 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” .
By proposing
the Regulation 2019, the Insurance Regulatory and Development Authority is
attempting to remove the Independent, Impartial, Fair Loss Assessment System
thus jeopardizing the Interest of the policy holders in the country defeating
its purpose of regulating the insurance business in the country with fair
business practices.
We have recent
example of PMC bank, where the regulator lost grip on the functioning of the
bank and 51000 customers had to pay for it.
We are of the
opinion that the proposed regulation will not only give rise to fraudulent
practices in the claim settlement process but also exponentially increase the
losses of Insurers and take away the trust of policy holders from the Insurance
business which is struggling for increasing the penetration in Indian Markets
hence such suicidal act of IRDA be stopped and proposed Regulation 2019 be
rolled back in toto.
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