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EXECUTIVE SUMMARY
This project is thesis on the topic of claims in General Insurance. The study deals
with the various aspects of claims of fire and marine insurance.
The prompt settlement of a valid claim is an important function of an insurance
organization. In fact the efficiency of the organization is tested whenever a claim
arises, by the time that is taken by the insurers to finalize it.
The speed, courtesy and fairness with which an insurer administers claims
reflect the level of services the company provides to its customers and significantly
affects customer satisfaction. The goodwill of the organization depends primarily
on the claim satisfaction level among its customers.
In an every insurance company effective claim administration is of paramount
importance since it results in cash outflows. Though, the insurers are legally and
morally liable to service the contracted claims, yet it becomes extremely important
to correctly assume the claims filled in order to decline (a) claims with fraudulent
intentions claims me due to incorrect interpretations of clauses contained in the
policy document.
In India, motor insurance claims have become a major threat to the survival
insurance companies because of high fraudulent claim proportion most of the
insurance companies have a well defined claims department which undertakes the
various activities of claim administration. Experienced professionals are generally
employed by the insurance companies known as claims analysts. They evaluate,
assess and maintain the records of various claims made in the claim department.
The hierarchical structure of the department may vary with the levels of authority
for passing of claims usually specified in terms of monetary limits. The claims
department executives are in constant touch with the other departments of the
insurance company, especially the underwriters so as to facilitate process of buying
risk and balancing adverse exposures. The companies also provide the guidelines
to facilitate the decision making process of the claims analysts and carrying on the
claim administration.
INTRODUCTION TO CLAIMS MANAGEMENT
CLAIMS MANAGEMENT
INTRODUCTION TO CLAIMS MANAGEMENT
The p
CLAIMS SETTELEMENT IN GENERAL INSURANCE All insurance contracts are based on the information provided by the insured
in the proposal form. The correctness of the information furnished in the proposal
forms is verified at the tie of claim, when physical inspection of the property is
done. In case of any misrepresentation, it would be the prerogative of the insurance
company to avoid a claim, or avoid the policy itself, or pay a claim for a reduced
amount. It should therefore be understood that the completed proposal form plays
an important role as it affects the claim under the policy.
Following are the some important points that are of relevance in a claim
settlement procedure:
1. The loss or damages should be reported to the insurer immediately. On
receipt of claim intimation the insurer will forward a claim form.
2. The completed claim form along with an estimate of the loss has to be
submitted to the insurer. It is preferable to submit an itemized estimate with
separate values. The insurer will arrange for inspection to the damaged items
to assess the loss
3. In case of major losses, a specialist-licensed surveyor is deputed.
4. The insured has to provide the required documents to substantiate the extent
of loss.
5. In case the cause of loss is not established, it is for the insured to prove that
the loss or damaged has occurred due to an insured peril.
6. On arrangement of claim amount between the insured and the insurer, the
claim is settled.
Broad Pattern of Claim Settlement:
Preliminary: Insurers insist on an early notification of loss and the policy
provides for the time limit within which notice of loss shall be given by the
insured. On receiving of notice of loss, the relevant-policy particulars are checked
to see if the insurer is in force. The claim form is thereafter issued to the insured.
The claim is allotted a number and necessary entries are made in the claim register.
Preliminary intimation of loss is sent to the co-insurers and facultative reinsures, if
applicable.
Survey : As per the section 64 UM of insurance Act, all losses more than Rs.20,
000 must be surveyed by independent licensed surveyors and assessors who are
appointed by the insurance companies. A typical loss survey report deals with,
among other things cause and extent of loss as also the observance of warranties
and other terms and conditions.
Settlement: The claim is processed on the basis of the survey report, the claim
form and other supporting documents. Settlements are made by the cross cheque
and payment details are entered in claim register as also in the relevant policy
records.
General Guidelines for Settlement of Claims
Introduction: The guidelines described are more of a general nature, and it is
many times there that some of the guidelines laid down cannot in practice be
complied with due to particular circumstance of the case. Such non-compliance
need not, therefore, render the claim is invalid. The Claim Settling Authority uses
discretion by recording the reasons.
Appointment of Surveyor: The Insurance Act stipulates that all claims of Rs.
20,000 and above are to be surveyed by surveyor. Therefore for the claim less than
Rs.20, 000-survey by licensed surveyor is not mandatory. Such losses may not
surveyed by the Company officials (in house survey) if survey is required.
Ministry of finance vides Gazette notification no. Part 2 Section 3 (2) dated
30/5/70 have exempted certain clauses of claims from the operation of section 64
UM subsection (10) irrespective of the claim amount and hence such claim can be
processed without insisting on a report from a licensed surveyor.
The following must be kept in view before a surveyor is appointed for any claim:
(a) The surveyor should be holding a valid license.
(b) The surveyor should be selecting depending upon the type of loss and the
nature of the subject matter involved.
(c) For assessment of some losses specific technical expertise may required and
consultants having such technical expertise may be required and consultants
having such technical expertise may be associated with the surveyors. The
Consultant’s remuneration should be negotiated in advance bearing the
expertise in mind. This will be in addition to the survey fee payable.
(d) Wherever business interruptions losses are involved, the surveyors for the
material damage and the business interruption losses, if several, should be
competent to complement one another. One surveyor can be utilized for both
the losses if the company is satisfied about the surveyor’s competence for both
the jobs.
(e) Appointment of the joint surveyors may be done on the merit of the case.
Guidelines for the authority for appointment of surveyor will be as per
circulars issued from time to time.
Where a servicing DO is approached for appointment of surveyors even
though they are not the policy issuing office, surveyors must be appointed by the
servicing DO immediately, with the intimation to the policy issuing office.
Appointment of Investigator
Depending upon the circumstance it may be necessary to appoint an
investigator to verify the claim version of loss. A separate surveyor appointment
may be considered if any actual physical survey/assessment is possible and called
for.
The letter appointing the investigator should mention the terms of reference
and make it clear that the report should contain no inference or doubts unless these
are well documented and substantiated and can stand the scrutiny of a court if so
required. In the absence of laid down schedule of fees for investigators, it is
advisable to 1 negotiate and decide the fees to be paid in addition to expense
actually appointing the investigator and the determined/decided fee recorded in the
letter appointment.
Processing of claims
Documents generally required for processing of claims are specified on the
respective sections and as far as possible all documents must be called for from
the insured in one go and not in the piecemeal.
“ON ACCOUNT” Payment:
Pending final assessment of the claim an “on account” payment may be
considered subject to confirmation of the following:
Loss due to occurrence of a peril covered by the policy.
Establishment of the policy.
The minimum liability that might arise under the policy.
After approval of the claim by the competent authority, the
insured/claimant should be advised of the final amount of claim approved,
with details thereof. Remaining formalities of obtaining full and final
discharge and bank/financial institution discharge (where required) should
be completed before release of the amount of claim.
If the loss or any party thereof is recoverable from a Third party, a letter of
subrogation and/or assignment and special power of Attorney, to suit
special cases is to be sent to the insured for completion on requisite stamp
paper and return before settlement.
Co-insurance:
The leader will process the claim on the behalf of all Co-insurers. A decision by
the leader regarding claim settlement, taken at the appropriate level according to
the existing tenets of delegation of financial authority, shall be final and binding on
the co-insurers. Claims decided at the appropriate level by the leader will not
processed again by the co-insurers, regardless of amount. The leader will intimate
to the co-insurers details of a claim settled by him with copies of all relevant
reports and documents. The co-insurer will settle his share of claim within 15 days
from the receipt of such intimation from the leader without any delay.
In case of claim requiring board division, the decision taken by the Board
of the leader shall be binding on the other co-insurers. There shall be no separate
need for the co-insurers to approach their respective Boards for for decision in
respect of such claims.
A Suitable note may, however be placed by the co-insurers before their respective
boards for information in such cases.
Close proximity cases: Detailed investigation should be immediately instituted.
When a loss occurs in a close proximity .i.e. within 5 days for all classes of
insurance (except marine voyage policies), of the date of inception of risk. The
close proximity mentioned here is in reference to new insurance or where there has
been a break in insurance. Close proximity investigation should also be carried out
in cases where it is found that insurance has been taken out significantly later than
it ought to have been taken i.e., the risk has remained uninsured or inadequately
insured prior to the insurance cover under reference.
Rectification of policy after a loss:
Rectification of a policy after a loss is reported for reasons other than the breach of
condition/warranty should be carried out as under:
a) Where rectification involves collection of additional premium, the additional
premium may be charged only on the affected policy in which the claim has
arisen.
b) Rectification can be done by the Authority Competent for settlement of the
claim.
Repudiation of Claims:
If a claim warrants repudiation, the competent authority would be the
authority competent to settle the claim. Letter of repudiation may state the reasons
and/or the policy condition under which it is repudiated.
Re-opening of Claim Files:
Re-opening of claim files can be done by the authority one step higher than the
appropriate claim settlement authority.
INSURANCE REGULATORY &
DEVELOPMENT AUTHORITY
INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY ACT 1999
This Act, passed in December 1999, provided for the establishment of the IRDA to
the interests of holders of insurance policies to regulate, promote and insure
orderly growth of insurance industry and for matters connected therewith or
incidental thereto. It also sought to amend The Insurance Act 1938, the the life
Insurance corporation Act, 1956 and the General Insurance Business
(Nationalization) Act, 1972.
The IRDA is corporate body. It is advised by an Insurance Advisory Committee
Consisting of not more than 25 members to represent the interest of commerce,
industry, transport, agriculture, Consumer forums, surveyors , agents,
intermediaries, organizations engaged in safety and loss prevention, research
bodies and employee associations in the insurance sector. It replace the ‘Controller
of Insurance’ to administer the provisions of the Insurance Act. That includes
registration, licensing, and laying down regulations for the proper conduct of the
business and the protection of the interest of policyholders.
Powers and Function of the Authority
To regulate, promote and ensure orderly growth of the insurance and
reinsurance business.
IRDA Regulation 2002:
Claim procedure in respect of a general insurance policy is prescribed by
regulation 9 as follows:
An insured or the claimant shall give notice to the insurer of any loss arising
under contract of the insurance at the earliest or within such extended times
as may be allowed by the insurer.
On receipt of such a communication, a general insurer shall respond
immediately and give clear indication to the insured on the procedures that
he should follow. In case where a surveyor has to be appointed for assessing
a loss/claim, it shall be so done within 72 hours of the receipt of intimation
from the insured.
When insured is unable to furnish all the particulars required by the surveyor
or where the surveyor does not receive the full co-operation of the insured,
the insurer or the surveyor as the case may be, shall inform in writing the
insured about the delay that any result in the assessment of the claim.
INSURANCE LEGISLATION
The transaction of general insurance business in India is governed by, and is
subject to two status, viz, the Insurance Act-1938 (as amended) and the Insurance
Regulatory Development act, 1999
The practice of general insurance is directly or indirectly affected by other statues
also, e.g. Marine Insurance Act, Motor Vehicle Act, Workmen’s Compensation
act, public Liability Insurance Act.
THE INSURANCE ACT, 1938
This act was passed in 1938 and was brought into force from 1st July, 1939. The
Act has been amended a number of times, the most important amendments being
made in 1950, 1968 and especially by IRDA Act, 1999.
The act applies to all insurers transacting insurance business subject to exceptions,
restrictions and limitations as specified by the Central Government.
The important provision of the Act relates, among other things, to;
a) Registration
b) Accounts and returns
c) Investment
d) Limitation in expenses of management
e) Solvency margin
f) Prohibition of rebates
g) Power of investigation
h) Licensing of agents/ corporate agents
i) Licensing of brokers/ reinsurance brokers
j) Licensing of surveyors/ loss assessors
k) Advance payment of premium
l) Tariff advisory committee
EXPLAINATION
1. Registration: Every insurer is required to obtain a certificate of
registration from the IRDA. Application form for registration and
payment of fees etc. are prescribed in the Act. This registration is
required to renew annually.
2. Accounts and returns: an insurer is required to keep a separate account
of all receipts and payments in respect of each class of insurance viz. fire,
marine and miscellaneous insurance. Also separate schedule have to be
maintained for special classes of insurance i.e. Motor, workmen’s
compensation/ employer’s liability, public, products liability, engineering
aviation, personal accident, health insurance. As regards marine, separate
accounts for cargo and marine hull have to be maintained. Every insurer
is required to prepare, at the expiration of each financial year, in the
prescribed form.
A Balance Sheet
A Profit and loss account
A revenue account for each class of insurance business.
These accounts have to be audited annually by an auditor and printed
and four copies have to be furnished as returns to the authority within
six months from the close of the financial year.
Every insurer is required to furnish to the authority a certified copy of
the minutes of the proceeding of every general meeting, within 30
days from the holding of the meeting.
3. Investments: Every insurance is required to invest his assets only in
those investments approved under the provision of the Acts (from time to
time guidelines are issued by the central government prescribed the
approved investment). Returns in the prescribed form are to be submitted
showing position as at 31st march of the preceding year, for the
investments made out of assets.
4. Limitation on expenses of management: The Act prescribes maximum
limits of expenses of management including commission that may be
incurred by an insurer. The percentages are prescribed in relation to the
gross direct business written by the insurer in India.
5. Prohibition of Rebates: No person shall allow or offer to allow as an
inducement to any person to take out insurance, any rebate of the whole
or part of commission payable or any rebate of the prmium shown in the
policy. Any person making a default inn the complying with these
provisions shall punishable with fine which may extend to five hundred
rupees.
6. Powers of Investigation: The Central Government may at any time, by
order in writing direct authority to investigate the affairs of any insurer
and insurer and report to the Central Government.
7. Other Provisions: The other important provision of the act relate to
licensing of agents, licensing of surveyors, advance payment of premium
and TAC.
GENERAL INSURANCE BUSINESS (NATIONALISATION) ACT, 1972
This Act came into forces on 1st January, 1973
Object of the Act
To provide for the acquisition and transfer of shares of Indian insurance
companies and undertaking of other existing insurers.
To serve better the needs of the economy by securing the development of
general insurance business in the best interest of the community.
To ensure that the operation of the economic system does not result in the
concentration of the wealth, to the common detriment.
For the regulation and control of such business and for matters connected
therewith or incidental thereto.
CLAIMS IN FIRE INSURANCE
The Insurer should inform about loss as soon as the loss occurs. On receiving
the notice, the insurer appoints an assessor to examine the facts of the case and
to determine the amount of liability. The assessor is an expert person having the
ability and experience in handling the claims.
The assessor is empowered to act and make necessary arrangement on behalf of
the insurer. He goes to the site of the personally, examines the damaged
property and the collects the all available information.
The assessor gets the idea of the nature and extent pf the damage, the origin and
the cause of the fire. Usually, the assessor asks the insured and insurer. The
insured suggested to separate the salvage or undamaged part of the from the
damaged part to reduce the possibilities of further damage and to evaluate the
amount of the loss correctly.
Steps are taken to check that-
The policy is in force on the date of the occurrences of the loss or
damage.
The loss or damage is by peril insured by the policy.
The property affected by the loss is the same as insured under the policy
The notice of loss is received without undue delay
After the initial check up, a number is allotted to the claim and entered in
claim register. A separate docket is opened for filling the claim paper and
the copy of the policy. The face of the docket provides for printed
columns for incorporating claim number, policy number, date of loss,
estimated amount of the loss, date of survey, name of surveyors, etc.
A claim form is issued to the policyholder. The claim form requires the
following information:
Full description of circumstance of the loss such as date loss of time,
the place of fire
Cause of fire
Particulars of the property affected by the loss such as description,
value at the time of fire, value of salvage and the claim amount.
Statements of other insurance on the property, name of the insurer,
the policy number and the sum insured.
Sound value of all the property.
The claim is recorded in the docket of the claim, where facultative
insurance is involved, an advice of the loss is sent to the insurers.
The survey report of the assessor contains the following information:
Cause of loss: It is necessary to know whether the fire was caused by
an expected peril or was caused by the negligence of a third party or
there was any evidence of fraud. So, the cause of fire is clearly
obtained. Often the exact cause and origin of fire cannot be accurately
established.
In such case the available evidence will have to be carefully examined
to support a plausible cause:
The amount recommended for payment which is determined, on the
basis of current market value and under-insurance
Detail and value of salvage. The method to dispose it of
Details of expenses involved in extinguishing fire and salvage crop
charges.
The position in respect of compliance with the warranties.
Apportionment of the loss and expenses among the insurer where
there are more than one insurer.
The exact amount of loss payable by the insurer. The presences of the
average clause in he policy will determine the amount of loss is
payable.
On receipt of the claim form full completed and the and the survey report , the
claim is processed and, if it is in order, a discharge voucher is to be signed by the
insured. The amount of loss is payable by the insurer is usually settled by the
agreement between the insurer and the insured otherwise the matter has to be
referred to arbitration. Market value of the damaged property is usually taken into
account while calculating the amount of loss. Sometimes the cost of replacement is
considered for the purpose. But, it is prevalent only in advanced countries because
the insurers have we equipped staff of replacement.
Before the cheque in settlement of the claim is released, the payment is recorded
in the claims register and the claim docket. It is essential that the salvage
recoveries should be correctly recorded in the claims register. The payment is
recorded in the relative policy file and the sum insured is reduced by the amount of
the claim. The sum assured can be reinstated on payment of proportionate premium
from the date of reinstatement of the sum insured to the date of expiry of the
policy.
When amount of loss is estimated to be small and the cost of investigation is
proportionately high, the survey is dispensed wit and the claim is processed and
settled on the basis of the complete claim form. When the insurance is on co-
insurance basis, the surveyor is appointed by the leading office.
Each co-insurance is sent a preliminary advice of the claim followed by a copy of
the final survey report which indicates the apportionment of the loss among the co-
insurers. Generally the leading office settles the entire loss and recovers the
proportionate shares of the loss and expenses from the co-insurers.
Salvage corps
Fire salvage Association was incorporated in 1925 as a company registered by
the guarantee and the insurance companies are members of the association. The
main objects of the association are to provide a fully trained corps to salvage
materials from the building on fire, to protect them from water damage, to restore
them to serviceable conditions after fire fighting operations are completed. The
corps also renders following services to fire M-committee, Bombay, of the Tariff
Advisory Committee.
Checking the fire hydrants in the cotton green storage area.
Inspection of sprinklers in the godowns in the cotton green area.
Training of the fire fighting squads in the textiles mills.
Provision of facilities to the fire Sub-committee to test sprinkler heads and
other fire extinguishing appliances.
Reporting on unusual features observed on the time of fire extinguishment.
Application of Average Clause in Payment of Claim
When insurance is subject to the ordinary, or pro-rata conditioning of
average, i.e., under- insurance, the liability of the insurers is restricted to that
proportion of the loss that the sum insured bears to the value of the property at
the time of the destruction or damage. The insurer’s liability in the event of a
claim under a policy subject to average, the loss is assessed in the ordinary
manner, but the amount payable is determined after a comparison of the sum
insured and the value of the property. Where under-insurance exists, the
liability of the insurers is limited.
The Pro-Rata Conditions of Average
“Whenever a sum insured is declared to be subject to average, if the property
covered thereby shall at the breaking out of any fire or at the commencement
of any destruction of or damage to such property by any other peril hereby
insured against the collectively of greater value than such sum insured, then the
insured shall be considered as being his own insurer for the difference and shall
bear a ratable share of the loss accordingly.”
The insurers cannot be called upon to pay the full sum insured. If the property
is totally destroyed, there will be a total loss under the policy.
Special Conditions of Average
“Whenever a sum insured is declared to be subject to special conditions
average, then, if such sum shall at the bring out of any fire or at the
commencement of any destruction or of damage to the property by any other
peril hereby insured against, be less than three – fourths of the value of the
property insured in that amount the insured shall be considered as being his own
insurer for the difference between the sum insured and the value of the property
insured at the time of such fire or at “commencement of such destruction or
damage and shall beat ratable share of the loss accordingly.”
This condition shall operate only if the sum assured is less than the three-
fourths of the value of the property. If the sum assured exceeds this proportion
of the value at risk, the insured recovers the full amount of his loss up to the
sum insured.
The assessor in the fire insurance deals with some typical task which is
described in the following paragraphs. The assessor also called ‘Adjuster’.
Task of Adjuster
The adjuster has to examine and collect the following information:
I. What policies and agreement covered the property at the time of loss?
II. Determine the extent of the application of the insurance the contributions
to be made by the insurer to the loss.
III. If there are two or more policies covering the property, portion the loss
among these policies.
IV. See that the requirements in case of loss that are necessary produce
informative essentials to establish the status of liabilities under the
policy or the value or loss of the property are complied
V. Consider the interest of any mortgagee named as payee in policy and the
action that should be taken by the insurers.
VI. Investigate any disputed cancellation of the policy.
VII. Exercise the option to take all or any part of the property at the agreed or
appraised value.
VIII. Preserve any right of recovery from third, parties to the loss.
PAYMENT AND- DISCAHRGE BY ADJUSTER
The adjuster should:
I. Meet the insured or the person who will act for him in adjustment, discuss
the loss with him and make any necessary, examination of records.
II. Examine his policy if it cannot easily be produced, the records of insurer’s
agents or broker’s record should be searched.
III. Inspect the scheme of the loss and examine any of the property still in
evidence.
IV. Examine available records or reports covering the occurrence of the loss,
those of fire department, peril or salvage corps, ice, etc.
V. Examine records or documents deeds or mortgage contract of sale, leases,
etc.
VI. Consider whether any insurance held by others should bear the loss or any
part of it.
VII. Withdraw if the insurance is not liable for the loss contract with the insured
and report to the insurer or have a waiver agreement.
VIII. Estimates the situation and the probable results to adjustments.
IX. Choose the method of adjustment used.
X. Make any necessary preparation for conducting the adjustment according to
the method chosen.
XI. Check any claim for possible errors and omissions also for the improper
conclusion of property.
XII. Apply contract conditions and determine the sum for which any policy or
any contract is liable.
XIII. Forward to insurer with final report and supporting papers.
XIV. Account the salvage and its proceeds with the final report.
XV.
WAIVER AND ESTOPPEL
Waiver
Waiver is defined as the voluntary requirements of a known right. The waiver may
be
o Expressed
o Implied.
An insurer is informed that a policy under which claim is made is void because the
person insured had no insurance interest in the property but still the insurer is
going to pay it is a Wavier.
Estoppel
Estoppel is the legal bar raised by a person’s own action against asserting a right
that he once possessed or making a choice that once was open to him.
An., insurer may be estopped from exercising its option to take all or any part of
the property at the agreed or appraised value if it delays its practice to the insured
that it intends to do so.
CLAIMS IN MARINE
INSURANCE (HULL)
MARINE INSURANCE CLAIMS MARINE (HULL)
(1) Introduction
A. For the sake of convenience and also in view of the different nature of
deployment, operations and hazards encountered, for the purpose of these
guidelines Marine Hulls are divided into three group’s viz:
Ocean going vessels and other vessels rated exclusively by the
Tariff Advisory Committee.
Vessels insured under Builder’s Risk Policies, Ship Repairer’s
Liability Policies, Ship Breaking Policies and the Charterer’s
Liabilities policies.
All the vessels and/or operations of which rates have been
provided in Marine Hull Manual under specific Tariffs or
otherwise and all other vessels/operations not covered by (A) and
(B) above.
B The types of claims which occur in connection with Hull Insurance are:
Total Loss/Constructive Total Loss;
Particulars Average / Particulars charge i.e., Partial losses /
Expenses;
General Average;
Collision liability;
Liability and Non-liability Claims (such as wreck removal)
Falling under the P & I section for the policy where such
cover is granted;
Sue & Labour Charges;
Personal Accident Claims for crew covered under Sailing/Fishing
vessels Tariffs.
C Notwithstanding the expertise available in the company, the
followings claim should generally be considered for reference to Professional
Average Adjusters:
All claims falling under Category 1.1 “A” unless the claim
Involved is straight forward and also for a nominal amount.
GA or GA/PA claims on vessels under Category 1.1 “C” Collision
Liability claims requiring cross Liability adjustments in respect of
risk falling under Category 1.1 “B” and “C”
Though selection of Average Adjuster is prerogative of the Hull Owners the
should be advised to engage adjuster who have established offices in India as far as
possible.
2. Procedures
(A) Oceangoing Vessels
In View of:
Nature and quantum of claims likely to arise under this category;
Likelihood of occurrence of loss in distant foreign waters;
Involvement of laws and practices of foreign jurisdictions, and
Involvement of foreign professional and/or firms like surveyors, repair
yards, adjusters, solicitors, arbitrator, courts,etc.
The current system of processing these claim in accordance with the international
practices and traditions will continue except in so far as the provisions of the
Indian Statutes are concerned.
(B) Sundry Hulls
While a Licensed Surveyor should be appointed in all cases of Partial
Losses! Expenses, such licensed Surveyor is to be appointed in case of
TUCTL only where the vessels or its wreck, of reasonable value is
available for inspection or making reasonable attempt to salvage.
On receipt of loss intimation a letter may be written “on without prejudice
basis” to the insured advising about the appointment of surveyor and/or
investigator requesting the insured to render full co-operation to the
Surveyor/ investigator appointed and also to return the claim form duly
completed and signed.
Notice Abandonment of the vessel/ wreck in writing is a prerequisite for a
constructive Total Loss Chain. As a matter of practice, insurers must
decline prima facie acceptance of the Notice of Abandonment. However,
insurer’s refusal to accept abandonment does not legally prejudice the
insured’s claim for a CTL once the Notice of Abandonment has been
issued by him and received by the insurer. Notwithstanding this the insurer
must still refuse acceptance of abandonment of the wreck till the.
Probable liabilities attaching to the wreck (port and other dues, statutory
requirement of wreck removal In case of vessel sunk in navigate channel;
etc. Are reasonably estimated as considered.
Total loss claim can be settled on the basis of the statements and
documents, as also the investigators Surveyor’s report as the case may be if
the circumstances are found to be reasonably acceptable. As per the Marine
Insurance Act, following acceptance of the claim for the total loss of a
vessel, the insurers becomes entitled to the wreck or the proceeds thereof, if
any. However before enforcing such entitlement, it is a advisable to
ascertain whether or not any liability, statutory or otherwise, is reasonably
likely to, attach to such wreck or proceeds thereof.
Since Marine Hull Policy is issued for a composite sum insured,
representing the aggregates values of Hull or Machinery values separately
in the policy being prohibited, no claim for total or Constructive Total Loss
can be considered for settlement on the basis of and on account of either
Hull or Machinery value alone.
In case of partial loss, as far as possible, efforts should be made by the
Surveyors to achieve assessment net of salvage, if any because it is difficult
and very often not economical for the underwriters to get involved in
salvage, if any because it is difficult and very often not economical for the
underwriters to get involved in salvage take-over and disposal. However,
where this is not possible arrangements should be made to take over the
salvage from the insured before the settlement of the claim and it should be
disposed of as early as possible as per the guidelines for the disposal of
salvage.
Claims occurring in foreign waters should be dealt with in the same manner
as in the case of Ocean-going vessels.
Processing Of Claims and Documentation
The documents required for the settlement of Sundry Hull Claims are:
A Final Survey Report inter-alia incorporating the following:
Name of the Registered Owner of the vessel.
Identity of the vessel including registration details.
License particulars including validity thereof wherever applicable.
The details of the loss suffered.
The Surveyor’s observation on the alleged circumstance of the loss.
The reasonable probability of the alleged circumstance giving the
rise to the losses noticed and/or claimed. (Qualification of repairs/
replacement cost, salvage, sue and labour etc. where applicable)
Cause of the loss as per the Perils Clause of the policy and the
deposit to be collected by the steamer. Company would be credited
into a properly constituted Trust Account jointly with the average of
adjusters.
In lieu of cash deposit, steamer companies often accept unlimited
guarantee of the insurance Company covering the goods. As far as
possible the dealing office should arrange for the General Average
Guarantee to be given as per prevailing financial order.
As soon as any intimation is received regarding GA and any
request from the insured for issuance of GA Guarantee is received. H.O.
Marine Dept. should be intimated with the full details.
Documents for General Average Claims
Original policy or certificate of insurance duly endorsed
Bill of Lading (Signed Copy)
Invoice (Original or Signed Copy)
A copy of Notice declaring General Average By the Ship
owner /Agent.
General Average Deposit Receipt (GADR) on the original
Lloyds from the duly endorsed.
(GADR indicates the name of the steamer, details of the casualty, the Bill
of Lading No. the provisional net arrived value of the goods, description of
the goods, the name of the GA Adjusters, the amount of deposit by the
consignees etc
4. General Average Guarantee and Counter Guarantee:
As an alternative to cash deposit ship owners are willing to accept a
Guarantee from a bank or if the goods are insured from the insurers. Insurers grant
this guarantee on behalf of the insured in terms of which they agree to pay the
General Average Contribution. In such cases, a Counter Guarantee is obtained
from the insured. The Counter Guarantee is required because the General Average
adjustment may be based on a contributory value of the cargo which may be higher
than its insured value.
Letter of Transfer
This letter is signed by the consignees whereby they
Surrender their rights in respect of the deposit paid to ship owners
by the insurers;
Agree to transfer the deposit amount to the credit of the insurers;
Authorize the insurer to receive from the ship owners the
difference between the amount of general average as adjusted and
the amount of deposit;
Undertake to refund to the insurers any sum deducted by the ship
owners from the deposit which may not be recoverable under the
insurance policy; and
Undertake to repay to the insurers, if any contributory
Value exceeds the insured value the proportion of general average
applying to such value.
If it is reported that the General Average Act has included sacrifice of
cargo, then the consignee should clear the damaged cargo only after the General
Average Survey is conducted by the ship’s Surveyors.
CLAIMS IN MARINE
INSURANCE (CARGO)
MARINE CARGO
Documentation to Support Claims
Ex: Ship, Air Port, Multi-modal Transport
Documents generally required for Settlement of Various Types of Claim are as
under:
General
a) Original Insurance Policy/ declaration under then open policy duly endorsed
by the insured. A letter of indemnity may be furnished if the original is lost.
b) Original or a signed copy of sale invoice along with packing list wherever is
available.
c) Signed copy of Bill of Lading (in case of sea voyage)/ Air Consignment
Note (for multi-modal transport)/ postal receipt for sending by post.
d) Triplicate or exchange control copy of Bill of entry ( to facilitate verification
of the date of filling to ascertain whether there has been any delay and also
to check duty payment details).
e) In case of General Average. G.A. Guarantee and Counter Guarantee of
original
Cash Deposit Receipt with the Letter of Transfer as the case may be. CD Letter
of Subrogation duly stamped and executed (only where recovery from carriers/
other third parties is possible).
(f) Special Power of Attorney (wherever recovery from Railway/ other carriers is
involved. In other cases as required)
In case of short landing/ non- delivery of complete consignment
Full set of original Bill of Lading/Air Consignment Note/Postal Receipt, etc.
As applicable endorsed in favour of insurers. The original contract of
affreightment should be endorsed by the carrier confirming short landing/ non-
delivery of the entire consignment by them or with a separate short landing/non-
delivery certificate. An undertaking to be obtained from the claimant that he
would take delivery of the cargo, it traced, under an insurance survey.
In case of partial Non-Delivery/ Short Landing
Non-delivery and/or landed but missing certificate from the
sea-air/CTO/carrier/postal authority/Post Trust, as applicable.
In case of Partial Loss or Damage:
Assessment report by sea/air/CTO/carrier/Postal Authority.
Survey Report of independent Surveyor(if survey has not been
waived)
Claim form/Claim bill.
In case of consignee’s claim to be settled in India for export shipment, Banker’s
certificate confirming non- receipt of export proceeds in India in an appointed
manner.
Non- Delivery (short landing or landed but missing)
Specific Documentation: The claimant should be requested to apply for either
short landing certificate or landed but missing certificate from the port
authorities or steamer companies within the period allowed under statute/port
rules. When the, landing or landed but missing certificate is obtained, the
claimant should be asked to send notice to the carrier or the Port Authorities, as
the same may be for the value of lost cargo (CIF value and /or duty and /or
profit) and obtain their acknowledgment claim on the carrier or the port
authorities should be accompanied by:
I. Original of short landing or landed but missing certificate.
II. Copy of Bill of Lading
III. Copy of Invoice.
Individuals or agencies specialized in the work of tracing missing cargo should be
engaged to trace the missing cargo of high values. Where such certificates are not
forthcoming in time, notice to carriers and port authorities etc., must be served by
claimant within the statutory time limits for the value of cargo not received.
Total and/or Constructive Total Loss
Where total and/or constructive total loss of the cargo has been caused whilst in
the custody of the Steamer Company or port Authorities;
Copy of value claim on the carrier/port authorities (as the case may
be) and
Acknowledgement thereof.
Notice of abandonment in case of C.T.L. to customs authorities.
Open assessment/delivery certificate/ship survey report.
Particular Average- Partial Loss i.e., Theft Pilferage, Shortage and Other
Damages (in case where loss or damage is reported before clearance from
the dock):
Steamer/port survey report.
Customs Examination Certificate before clearance of consignment from
docks.
Independent survey report.
As regards claim for the shortage from extremely should cases, it is essential to ask
claimant to refer the matter to their supplier about the policy short packaging at
their end. Only on receipt of confirmation from the supplier about correct packing
as per invoice further processing of claims on merits should be done. Surveyor
should be asked to examine whether there was sufficient empty space in the case to
hold the missing items or whether the missing items were replaced by some foreign
materials by comparing the materials by comparing the weight of consignment
stated in the invoice/packing nest with the package received at the destination in
order to determine skilful pilferage in transit. It may also be checked as to whether
the missing items had been extracted by Customs for examination or other
purposes:
Claim under Duty and Increased Value Insurance Policy:
In the case of certified short landing no duty is payable. Claims other than short
landing have to be scrutinized with due regard to the basis of duty insurance and
may be authorized for payment for the actual value of the loss including the actual
customs duty paid but to exceeding the proportionate insured valued on duty.
As regards Increased Value Insurance, the claim would be payable for
proportionate increased valued insured under the policy as per the Increased Value
Insurance Clause.
As provided in the duty insurance clause a claim under “duty increased value”
policy is admissible only if the loss is admissible in terms of the cover granted
under the same policy covering the same consignment. This provision however
need not apply to cases where the CIF is insured overseas, due to contractual
obligation. Further, if a marine claim is within the ambit of the policy conditions
but declined by the insurers for other reasons like non-compliance of Section 64
VB of the Insurance Act this will not affect the admissibility of the duty claim.
Therefore the claimant is required to furnish to the company proof of the liability
for the loss under the Marine policy as per terms and conditions of the policy.
The other documents required are:
Original duty Insurance policy duly endorsed
Copy of Bill Of Lading
Bill of Entry
Survey report
Copies of correspondence exchanged with customs/carriers relating to the
claim lodged with them,.
General Average
In the event of the Steamer Company declaring General Average, the
Steamer Agents to make cash will call upon the consignees Deposit before
delivery of the consignment of destination. The consignees should be asked
not to comply with this, without the prior written concurrence of the dealing
office. The concurrence can be given after ensuring that Lloyd’s form of
bond or similarly worded form is used.
I. Copy of Certificate of Registration and License, if any, issued by the
concerned authorities.
II. Original of the Certificate/ Letter of the Cancellation of registration
of vessel in respect to total loss claims.
III. Weather report for the relevant place, date and time from the
competent authority in case adverse Weather warranty is involved:
IV. Affidavits and /or statements by the owner, Trindal and all the
members of the crew separately of the insured vessels and/or
rescuing vessel, if any made to any authority such as police,
magistrate, Notary public, port office, Indian Consultants etc.
V. Marine Casualty Form issued by Mercantile Marine Department
where applicable. N.B.: Marine Causalty form is available only if
any member of the crew including Trindal has survived the casualty.
If all the crew members including the Trindal employed in the
particular adventure die due to the casualty or are missing beyond
trace, the Marine Casualty form is not issued by the casualty can be
recorded by the Department. However, in such cases, the Mercantile
Marine department issues a certificate confirming that the casualty
has been reported to them.
VI. Policy Report for claims within the territorial waters and for SRCC
claims.
VII. The loss should be reported to the Port Authorities if occurring
within the Port area.
VIII. In view of the localized and small scale operation, ‘Salvage charges
covered under the Fishing Vessels Policy is to be seen differently
from that under Ocean-going vessels policy inasmuch as neither the
Lloyd’s open Form for salvage agreement nor any international
professional salver is ever likely to be involved in salving such
vessels. Therefore, in most of the case the salvage services rendered
to fishing vessels will be contracted salvage and for the purpose of
eliminating unnecessary complementation, it is advisable to treat
such salvage charges as sue and labour costs for all practical
purpose. It is however, to be ascertained that the amounts claimed
for such costs are both actually incurred judiciously And reasonably
incurred as also incurred to avoid or minimize a loss that would
otherwise be admissible under the policy.
IX. In the event of a Total and/or constructive Total loss claim being
considered for admission, the original insurance policy duly
discharged by the insured to be collected. However, where the
original policy is reported to be lost an appropriate Letter of
Indemnity in lieu thereof should be obtained from the insured.
X. In the event of claim for partial Loss/Expenses, salvage, Salvage
Charges or sue Labour Charges, original repair bills, cash memos
and similar documents duly verified and certified by the surveyor as
also Salver’s/divers Report where applicable, are to be furnished.
Claims for sue and Labour charges may have to be considered for
settlement over and above the TUCTL claim settlement. For these
also original bills/cash memos in support of expenses incurred are
required.
XI. For the claims other than TUCTL, the applicable deductible should
be first deducted from the total claim amount as provided for in the
clauses attached to and forming part of the policy.
In addition to the above, the following documents have to be collected
for sailing
Vessel Claims.
Certificate of Inspection
Free Board Certificate before commencement of the
voyager,
Cargo manifest
Load Line Certificate
Port Clearance Certificate.
In case of Fishing Vessels, wherever the provisions of the Merchant Shipping
(Amendment) Act1983 part XV A, Section 435A to X are applicable, the
surveyors should be directed to report on the compliance thereof.
Fixed Jetties and Pontoons
Since these are fixed structure and are included in the Hull Department more as
an extension of the principle of Hull Insurance than for any other reason, in the
event of losses it is advisable to process such claims as Engineering Claims and
proceeds accordingly.
However, since some losses may be found to be appropriate to be dealt with in
accordance with the practice of Hull department like in the event of fixed pontoon
getting standard/grounded, such claims should be processes in line with practices
of the Hull Department.
Situations which are not explicitly provided for here should be handled in
consultation with the competent authority/ Head Office.
Engineering Insurance Claims
1. The documents generally required for processing engineering claims are as
under:
a) Copy of the policy complete with terms, conditions and warranties.
b) Claim form duly completed by the insured.
c) Survey Report should include
Clear indication of the cause of loss
Extent of damage and loss
Establishment of liability
Assessment of loss occurrence of riot is in the public
Knowledge, production
Confirmation of compliance of policy terms, conditions and
warranties.
Admissibility of the claim
Photographs (if necessary)
Police report, and ( if necessary)
Fire Brigade report ( if necessary)
Note: Items (e) and (f) may be waived if the survey report is clear and does not
cause any doubt on the occurrence as well as the extent of loss. Where occurrence
of riot is in the public knowledge, production of final Police Investigation report
and Fire Brigade Report may be waived.
In case of the theft losses it is necessary to collect a copy of the first
information report or proof of complaint lodged by the insured with the police,
such as registered AID letter. Final Investigation Report may be waived depending
upon the merits of the case
The steps involved in the loss adjustment should be as under. Gross loss assessed
Less: Depreciation, if any,
Less: Salvage
Less: Under Insurance
Less: Excess
Net, Claim Payable
Policy type wise additional requirements are as follows:
2. MCE Policies
(Marine Practice to be followed for settlement of marine claims under MCE
Policies.)
In case of mega projects, the services of an on-site representative/outside
project monitoring agency could be retained to:
Monitor and progress of the project activity.
Receive report, on general condition prevailing at site, from loss
minimization
Point of view
Co-ordinate with different authorities at site;
Collect required documents for claims already lodged to expedite
disposal;
Conduct survey of losses falling within the self-survey limit;
Preliminary survey of losses.
Incident expenses like supervision charges, storage charges may be considered to
the extent they are included in the sum insured and actually incurred. When the
replacement value is not ascertainable the assessment can be based on the original
invoice value plus escalation if provided in the policy. However, it may be left to
the supervisor to arrive at the value.
The loss under various extensions like additional custom duty, air-freight,
express freight, overtime wages, etc. are to be assessed separately. The expense
under these extensions will be available only when incurred by the insured. The
liability under these extensions will be over and above ones allowed under the
standard policy provided the limit is not exhausted by earlier settled claims and
loss claims reported but pending settlement.
If the claims is assessed both under the main policy and extension like
additional custom duty, express freight, over-time wages etc. the specified excess
will be applied for each of these sections separately.
3. Contractors’ All Risk Insurance
The Surveyor shall confirm that the damage is not due to faulty design as
the policy excludes loss due to faulty design unlike the erection policy where
only a particular portion is excluded and resultant damage is paid.
4. Contractor’s Plant and Machinery Insurance
Being an annual policy, the validity of the policy at the time of occurrence
should be verified.
Identification of the damaged equipment/item should be asked for a
confirm Coverage under the policy. This is necessary since selection of
equipment for insurance is allowed. The surveyor should confirm the accidental
damage to the equipment. For items fabricated by the contractors and
replacement value not available, the surveyor should assess the loss on the basis
actual costs incurred by the insured.
5. Machinery Insurance
Test reports of the damaged parts if deemed necessary by the
surveyor and/or:
Suggested by the insurers is to be submitted to the
insurers/surveyor
The surveyor should confirm repairs/replacement
The claim payable may include costs of dismantling transportation to the
repairer’s shop, repairs and re-transportation and re-erection and other incidental
expenses. If the damaged equipment being sent out is covered under a Marine
Transit Policy, the costs of such insurance may also be reimbursed.
If repeated losses are reported on the same equipment, the underwriting office
can take the help of an outside expert to ascertain the precise cause of repeated
losses and suggest measures for avoidance/minimization of re-occurrence of
breakdown/loss.
The exclusion of damage to Bells, Ropes, Chains, Rubber Tyres, Dyes, Moulds,
etc. is to be considered. As to the oil and other operation media in the transformer
and equipment, these may be reimbursed when specifically covered under the
policy.
The losses under the other extension like additional custom duty, air freight,
express freight, etc. are to be assessed separately and the underwriting office
should confirm the availability of additional sum inured specifically for such items
of expenditure while recommending the claims for settlement. If the assessment
involves additional expenses for repair/ replacement, the surveyor should confirm
that the expenses are reasonable.
7. Boiler Explosion Insurance
A loss of profit claim is admissible only if loss or damage to machinery or
boiler covered under corresponding policy is admissible.
As selection of equipment under the MLOP is allowed, the underwritings
office should re-council’s the coverage of the equipment involved. (Attention is
drawn to the applicable time excess and surveyor is to be appointed in
consultation with the Regional Office Head Office only in those cases
interruption period is likely to exceed the time excess) As the selection of the
indemnity period is made depending upon the type of machinery, the
underwriting office should make a policy copy available to the LOP surveyor
and drawn his attention to the indemnity period against the affected item.
The material damage surveyor and the loss of profit surveyor should report of
the step initiated by them in helping the insured to reduce the period of
indemnity by expediting repair/ replacements or adapting temporary measures.
As a principle, the company engineer should be associated as far as possible
along with the surveyor to minimize the loss under the Machinery Loss of Profit
Policy.
8. Electronic Insurance policy
Since the selection of equipment is allowed, the underwriting office should
confirm the experience of cover for the damaged item.
Various Exclusive Under The Basis Policy
It should be ensured that the claim does not fall under any of the exclusion.9.
Deterioration of Stocks
The surveyor should ensure that the insured takes following loss
minimization
Measures:
No fresh stock should be loaded In the cold storage chambers.
Cold storage doors should be sealed to maintain temperature and
avoid
Temperature rise.
If possible, the insured should be requested of shift stocks to some
other running
Cold storage premises preferably in cool evening/ night period or by
refrigerated ans.
The insured should be requested to carry out repairs to the
refrigerators plant.
Most expeditiously.
If there is no possibility of completing the repairs immediately, the
insured should be advised to unload stocks from cold chamber for
disposal in the local market as quickly as possible, and at the best
available price in association with the surveyor/local authorities.
9. ALOP
Following action is to taken
For a material damage ‘reported under a Marine cargo policy or a
Project Policy, the HO should immediately take steps to monitor the
facts of delay in repairs replacement that may trigger a claim under
the ALOP/Marine ALOP Section.
Deputation of Surveyors for ALOP claim should be only with the
authorization of the HO 9Tech.).
10.CECR
All the general reputation as mentioned in the manual should be followed
and surveyors with good knowledge of Civil Engineering should be utilized.
I would like to extent my sincere gratitude to all those
people who have helped me in the successful completion of my
project entitled “CLAIMS MANAGEMENT IN GENERAL
INSURANCE.”
I have received help and encouragement from various
sources in the completion of this work. While it is not possible
to state all of them here,
I consider it my most pleasant duty to acknowledge my
deep sense of gratitude to my teacher and Project Guide for
the Great interest and pain that he all along took in the
completion of this work. Without his advise, constant
encouragement and guidance, it would have been difficult to
complete this work in its present form. I am also grateful to our
coordinator for her constant guide and support.
My thanks are also due to our Computer Centre Staff and
Library Staff that has always help me whenever I required their
help.
Finally, my special thanks to my parents, family and friends
and for their constant Support assistance, to make this project
worth presenting before you.
TABLE OF CONTENTS
Sr. No Index Page No. Page No.
1. DESIGN OF STUDY Acknowledgement Objective Scope Limitation
2.Executive Summary
3. Introduction To Claims Management Claims management in general
insurance Broad patterns of claims settlements General guidelines for settlement of
claims
4. Insurance regulatory and development authority
Irda Act 1999 Powers and functions Irda regulations 2002 Instantsurance
5. Insurance legislation Insurance act 1938 General insurance business
(nationalization) act, 1972
6. Claims in fire insurance Salvage Crops Application of average clause in
payment of claims The pro-rata conditions of average Special condition of average Task of adjuster Payment and discharge by adjuster Waiver and estoppel
7. Claims in marine insurance (hull)
Introduction Procedure Processing of claim and
documentation
Documents of general average claims
8. Claims in marine insurance (cargo)
Marine insurance Engineering insurance claims Mce policies Contractors all risk insurance Machinery insurance Boiler explosion insurance Loss of profit insurance Electronic equipment insurance Alop Cecr
9. Conclusion and findings
10. bibliography
OBJECTIVES
To study and analyses the concept and philosophy of claim
management in general insurance
To understand the process of settling claims in general
insurance
To understand the practical aspect involved in settling the
claims in general insurance
To find out how efficiently and easily claims are settled in
India
To understand the importance of general insurance
contributing to Indian economy
To know about the views of the experts in insurance industry
about claims in general insurance.
SCOPE
The scope of the study is been restricted to claims in general insurance in
India
Also in general insurance where there are various kinds of insurances, the
study is restricted up to fire and marine insurance
Number of pages is another limiting factor to the project. Due to this it was
not possible to cover all the important aspects related to claims
management.
LIMITATION
There are many technical aspects in claims management which company
official hesitates to provide
The claim management procedure is limited to Indian prospective only.
As the subject of study is vast, it was not possible to cover each and every
aspects of claim management
Statistical data is confined only to limited number of companies.
Company Policies Issued Claims Settled
New India Assurance 600 8
Oriental Insurance Co. 550 6
Allianz Bajaj 200 4
ICICI Lombard 300 4
Royal Sundaram 350 3
Out of the total Companies selected for the primary research of the project, The
New India Assurance Co. settle settles the most of the claims. Whereas, other
private general insurance companies are far behind in settling claims
FINDINGS
1. The Indian market is not aware of benefits of taking policies for these
businesses, policies related to Fire Insurance and Marine Insurance.
2. Potential customer prefers public limited companies just because they have
more faith in government than, private companies.
3. The genuine claims have to be settled as early as possible by the company so
the customers have more confidence in them.
CLAIMS IN FIRE INSURANCE