Don't survey, just settle

CAVEAT EMPTOR

It'S A game all insurance companies play. They are quick about selling policies and collecting cash from customers. But when it comes to making a pay out they employ every delaying tactic in the book.

The consumer courts have frequently rapped insurance companies on the knuckles for such delaying tactics. Back in 1993, the Haryana State Commission went to the extent of fixing a maximum period of three months for settlement of insurance claims either way.

In Surinder Kaur vs The Oriental Insurance Co. Ltd the commission categorically held that "a delay beyond three months to either settle or repudiate the claim would in essence be a deficiency in insurance service."

This line has since been followed by all the state commissions and even by the National Commission.

A glance through the law reports shows that a majority of consumer complaints relate to non-settlement of insurance claims.

The common factor in many of these cases is the time taken by the surveyors to submit their reports. Under Section 64 U M of the Insurance Act, 1938 a surveyor has to be appointed if the amount claimed by the insured is Rs 20,000 or more. Surveyors are enjoined to follow the code of conduct in relation to their duties.

In practice, however, they often use one pretext or another to sit on the claims for inordinately long periods. The insurance companies, instead of reprimanding such surveyors, plead their inability to settle claims in the absence of survey reports.

Another stalling tactic used by the insurance companies is to appoint one surveyor after another till they get a report in their favour.

This practice too has been criticised by the courts in several cases. A case in point was Ashwani Textiles vs Oriental Insurance Company Ltd. (2002), where four surveyors were appointed one after the other to settle an insurance claim relatable to a fire in a textile factory on April 20, 1997.

The claim was not settled till as late as July 23, 2002 when the National Consumer Disputes Redressal Commission criticised the company and cancelled the appointment of so many surveyors.

The court observed that there was no reason for the appointment of the fourth surveyor after the earlier surveyor's comprehensive report. It directed the insurance company to pay the insured Rs 2,287,654 as compensation as per the surveyors' report already with the insurance company.

The National Commission has, in recent decisions, categorically held that insurance companies have no power to appoint more than one surveyor to assess the loss.

In National Insurance Co. Ltd vs New Patiala Trading Co 2002 the commission authoritatively observed that "the scheme of Section 64-U M of the Insurance Act, particularly of sub sections (3) and (4) would show that insurance companies cannot appoint a second surveyor as a matter of course. If the report of the surveyor or loss assessor is not acceptable to the insurer, it must specify reasons but it is not free to appoint a second surveyor."

But the insurance companies are still using delaying tactics. In a recent decision, the Bihar State Consumer Disputes Commission has deprecated the practice very strongly.

In Raju Kumar Gupta vs United Insurance Co. Ltd, Bhurani Jewellers took shopkeeper' insurance policy from United Indian Insurance Company for Rs 16 lakh.

On April 28, 1999 jewellery worth Rs 1,736,929 was stolen from the shop. After the claim was lodged with the insurance company, it went on appointing surveyor after surveyor, who each gave different valuations of the loss suffered by the insured.

However, when the last one gave the opinion that the entire claim was false, the insurance company repudiated the claim, leading to the filing of a complaint before the Bihar State Commission. The commission directed the insurance company to pay the sum of Rs 383,508, which was the amount assessed by the first surveyor.

It observed that "it is settled law that an insurance company under Section 64-U M cannot appoint another surveyor without assigning valid reasons for not accepting the report of the first surveyor".

It is high time insurance companies gave up the practice of appointing one surveyor after another. Law does not permit this practice and if it is still resorted to, courts will not take it lightly.

While on the subject, it may be noted that the threshold amount of loss of Rs 20,000 necessitating the mandatory appointment of a surveyor needs upgradation, having been fixed long ago. This is yet another cause of delay in the settlement of insurance claims.