Insurance Article, The Insurance Times 2021, The Insurance Times April 2021

The trauma called property insurance claim

Taking and talking about property insurance is illusive concept and getting a claim is a traumatic experience in India. There are definitely exceptions but any opinion survey with the Home Insurance policy holders and Shop Insurance policy holders would reveal the above.

In the era of fully nationalized General Insurance sector, the villain was mostly the Insurance company. Now, it is the property surveyor who gets undue importance in the whole eco-system of survey of loss, assessment, document verification and subsequent disposal of the claim.

Here we are talking about simple fire, flood or say inundation losses to the insured residential/small shop property where the quantum of loss could range between say Rs. 40,000/-  and Rs. 10,00,000/- or may be more but within say Rs. 20,00,000/-.

The surveyor complicates the claim from all possible angles resulting into trouble, annoyance, frustration and eventual jeopardization or even rejection of the claim. He does it by dumping the policy holder with a requirement of what is known as documents or more formally LOR (Letter of Request) for documents.

We would argue that for small property losses, the surveyor’s insistence on “so –called” document requirement is mostly baseless and can be done away with. The surveyor’s job is an independent assessment of the loss for which his expectation of being served with the host of documents on a platter is totally unjustified.

In effect, the Indian surveyors are doing 90% document survey job and 10% real assessment job. Unfortunately,  it should be 90% real assessment job based on minute physical inspection, measurement, examining the degree of damages, condition of the property, technical analysis, market study of the prices of damaged items, possibility of re-use of materials, best possible sale of salvage etc.

Chapter IV of the IRDAI (Insurance Surveyors and Loss Assessors Regulation), 2015 clearly stipulates these jobs as stated above as part of duties and responsibilities of a surveyor and loss assessors.

The Regulations categorically impose the responsibility of maintaining confidentiality and neutrality without jeopardising the liability of the insurer and claim of the insured.

The Chapter VI (1) titled Code of Conduct of the same Regulation stipulates ethical behaviour with integrity on the part of the surveyor. Integrity hereby implies not merely honesty but fair dealings and truthfulness. Unfortunately, in most of the cases, these are not practised.

This piece will show the hollowness of such demand for documents from the surveyor document by document. The list (not exhaustive) is as under:

  1. Estimate of loss:

The very first favourite document of a surveyor for any property loss is the document called the “estimate of loss”. This actually is a preliminary figure which is supposed to be submitted by the insured and backed by one or multiple documents from the third party vendors involved in repair and reinstatement of the loss. Such documents are supposed to capture the material cost, labour cost, supervision cost, debris removal cost, architect’s fees etc.

 

Now, for a small fire loss in a residential building, the challenges faced by the home owner to provide such a document are as under.

  • In small townships, the small contractors are neither equipped nor accustomed to provide itemized repair invoices, that too with GST details.
  • The large contractors are generally not interested in undertaking small construction/repair jobs.
  • The cost of a large contractor is far too high even if he is made agreeable to undertake the repair job. In such a case, the surveyor insists for a smaller contractor and the home/shop owner is pushed back to the first challenge as stated above.

The sheer bad practice here is that the surveyor should know the approximate amount of loss by a minute physical inspection of the damaged property. He should enquire/know that prevailing local prices of the items of similar quality damage. By all means, he is duty bound to do the above job by physical inspection, measurements and local price enquiry.

 

  1. Sanctioned plan of the house for the area and age of the building:

This document is useful if the same is readily available. However, for reasonably old residential property it may be the case that the old widow is not aware where the sanction plan was kept by her late husband. It is absolutely surprising that the surveyor would go on insisting for the same document over and over again much to the annoyance of the insured.

We are of the firm belief that it is the duty of the surveyor to take the measurement of the whole property including the affected portions. It is his duty to convince himself about the year of construction and the plan, (if at all important) by visiting the municipal authorities.

 

  1. Fire Brigade report:

This is an important document for processing a fire claim. The details stated in this report enable the claims department officials of the insurer to cross check the date and time of the fire. The time taken by the fire fighters to extinguish the fire gives a corroborative evidence about the intensity of the fire and the possible extent of damage.

The cause of fire stated therein allows the claims handler to cross check the same with the proximate cause stated in the claim form as well as what has been identified as the cause by the surveyor.

For fires in large industrial complexes, large building complexes, markets with several types of shops selling and storing several types of merchandizes, such report gives a good insight into the cause of fire, breaches of safety norms (if any), storage of declared or undeclared hazardous items, inadequacy of the fire-fighting system etc.

However, for a simple residential fire, insisting for a fire brigade report is generally devoid of much justification. The cause of fire can be very well be established by mere visual inspection of the place of loss by the surveyor. Most importantly, getting the fire brigade report is not easy and is time consuming.

Therefore, except in some rare case where the moral hazard of the insured is doubtful, fire brigade report must not be insisted upon by the surveyor as is being routinely asked.

 

  1. Final repair bill with proof of payment:

Unless a fire policy is issused on reinstatement value basis, the surveyor has no right to ask for final repair/reinstatement bill for the property with proof of payment. A reinstatement value fire policy is the one where the sum-insured has been fixed based on the present day replacement value of the property irrespective of when the building was erected or the furniture, fixture, fittings and the machineries were purchased.

In such a case, the fire claim is payable only after the reinstatement of the property without any improvement however. If the fire policy is without the reinstatement value clause (say the sum-insured has been fixed on depreciated value basis) the insured has a right not to even reinstate the property.

In many cases, deliberately or due to sheer ignorance, the surveyor routinely insists for the repair bill and proof of payment even when the fire policy is not on reinstatement value policy. This not only is improper but also causes harassment to the Insured not to speak of the delay in issuance of the survey report and eventual settlement of the claim.

 

  1. Original purchase invoices of furniture, fixture, fittings and contents:

This is another favourite demand of the surveyors even for small to medium home fire loss. Hardly ever it is realised by the surveyor that in a residential property getting the invoices of the furniture, fixture, fittings and contents is almost impossible since the homeowner hardly keeps them.

In many cases, the furniture is made within the house itself by the known carpenter of the homeowner who seldom issues any invoice. The role of the surveyor should be simply to check the damages and find out the present day value of the items so damaged to check the underinsurance factor (if any).

The role of physical inspection and knowledge of market price and/or deprecated value is paramount here. One can legitimately expect such skills from a licensed surveyor rather than serving him everything on a platter.

 

  1. Salvage value of the affected item/s:

While submitting the list of requirements, the surveyor routinely asks for the salvage value of the affected items ignoring his role and responsibility in finding out the same himself in order to finalize a logical and reasonable assessment.

It is not fair to expect a homeowner to explore the market and to find a salvage buyer. This by no means can be taken as a claimant’s job unless the insured wishes to offer a price for the salvage. There are occasions where even for a non-industrial/commercial risks, the surveyor has been found to insist for 3 quotations for salvage from the homeowner which is simply ridiculous.

The surveyor should be skilled enough to ascertain a price and make local enquiries about the potential salvage buyers. For a non-industrial risks, this is not at all a difficult job.

 

  1. First Information Report (FIR):

The surveyors routinely ask for the FIR as a part of claim documentation. It is strongly felt that unless there is an element of malicious damage, the requirement of FIR should be dispensed with in case of a simple fire loss in a shop or dwelling. The surveyor has a right to conduct a local enquiry in case he has reason to believe that some irregular eventuality has taken place.

 

  1. Newspaper cutting:

Though not insisted for in case of home losses, even for commercial losses arising out of natural calamity, such document must be taken as an additional corroborative document and not as a strictly necessary document. In a small locality, there may not be any local newspaper reporting a flood loss or a malicious damage loss to a commercial property.

A medium or even a large sized loss for a small or medium sized factory in a small locality may not feature in a leading newspaper. Therefore, in effect except for very large catastrophe newspaper cutting may not be readily available though it remains a comforting document both for the surveyor and the claims handler in the Insurance company.

 

  1. Claim form:

This is a vital and required document for any fire or for that matter any Insurance claim for small home or shop losses. However, it is felt that the surveyor has a role to guide the claimant to properly fill up such form since the claimant may not be well conversant with such form or may be modestly educated.

The spirit and intention at all points should be to assist a distressed Insured rather than pressurizing him with voluminous requirement of documents.

 

  1. Claim bill:

This is a required document and the claimant must be guided to make a proper itemized claim bill. Legally, this is the evidence of the claimant’s demand of a particular quantum to compensate his loss.

 

  1. Meteorological report: This is another favourite document sought by the surveyor for weather losses. For a normal homeowner, such document must not be insisted upon. The reasons are many. Such document may not be readily available. There could be a possibility that no meteorological office exists in the location. Finally, even in absence of the meteorological report, common knowledge and physical inspection would very well establish the genuineness of the loss and quantum thereof.

Conclusion:

The fact that an insurance contract would require an independent assessor to assess a loss beyond a certain amount is never disputed. There would be requirement of supporting documents as well to authenticate both the genuineness and the quantum of loss.

The policy document as furnished by the Insurer to the surveyor would establish the validity of the coverages and perils covered with the boundaries of payment defined through various conditions, losses, warranties, deductibles etc.

The bottom line however remains the fact that the ultimate goal is to reasonably dispose of the claim (it could be payment or a rejection even). Be that as it may, the role of the surveyor is to quantify the loss through physical examination of the damages and not to rely solely on the supporting documents.

In that event, logically the surveyor has no role and all the cases can be converted as self-surveys or mere document based assessment. No stakeholder would want such a situation.

The insurer also has a very important role to play and must guide the surveyor on how to complete an assessment smoothly without pressing for irrelevant or unnecessary documents which defies the very basic principal of customer service and claims settlement.

The regulator also has a role here by way of issuing standardized guidelines on simple property loss assessment so that the surveyors cannot take resort to unnecessary requirement of documents to delay or jeopardize an assessment

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