IRDA new norms to create commotion in the Insurance sector

Early insurance exit still costly, pension plans take after NPS

MUMBAI, November 7, 2019:- The President of Association of Investigators and Detectives, Surendra Jagga 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, Surendra Jagga 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 when the insurance claims for vehicle insurances is only up to Rs. 50,000.

The Director of Association of Investigators and Detectives 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.

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 Desai.

Statistics of the claims shows that @ 85 % of claims in motor falls under Rs. 75000/- will lead to…..

  • Fraud perception as no inspection of loss is required, thus increase the losses of Insurers.
  • 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.
  • Genuine policy holder may be deprived of his legitimate rights due to     increasing fraud perceptions and prejudice/biased loss assessment.
  • With increase in losses of Insurers, the Insurers will be constrained to increase the policy premium thus increase in the burden of policy Holders.
  • 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”)

  1. 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.
  2. 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 Parkash Tayal that “Obviously, the IRDA has turned a blind eye to the functioning of the insurance companies
  3. 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.
  4. 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

  1. 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” .