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 Consultants 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 surveyors 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, Workmens 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, workmens compensation/ employers 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 The amount recommended for payment which is determined, on Detail and value of salvage. The method to dispose it of Details of expenses involved in extinguishing fire and salvage The position in respect of compliance with the warranties. examined to support a plausible cause: the basis of current market value and under-insurance

crop charges.

Apportionment of the loss and expenses among the insurer where The exact amount of loss payable by the insurer. The presences of

there are more than one insurer. 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 coinsurance 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 insurers 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 threefourths 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 insurers agents or brokers 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 persons 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 groups viz: Ocean going vessels and other vessels rated exclusively by the Tariff Advisory Committee.

Vessels insured under Builders Risk Policies, Ship Repairers Liability Policies, Ship Breaking Policies and the Charterers 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, insurers refusal to accept abandonment does not legally prejudice the

insureds 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 Surveyors 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 Surveyors 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 General Average Deposit Receipt (GADR) on the owner /Agent. 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 ships 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/ nondelivery of the entire consignment by them or with a separate short landing/nondelivery 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 seaair/CTO/carrier/postal authority/Post Trust, as applicable. In case of Partial Loss or Damage:

Assessment report by sea/air/CTO/carrier/Postal Authority. waived)

Survey Report of independent Surveyor(if survey has not been Claim form/Claim bill. In case of consignees claim to be settled in India for export shipment, Bankers 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 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 Lloyds form of bond or similarly worded form is used.
I. Copy of Certificate of Registration and License, if any, issued by the

relating to the claim lodged with them,.

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 Lloyds 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 Salvers/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 Cargo manifest Load Line Certificate Port Clearance Certificate. commencement of the voyager,

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. Claim form duly completed by the insured. Survey Report should include

b) c)

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 Admissibility of the claim Photographs (if necessary) Police report, and ( if necessary) Fire Brigade report ( if necessary) warranties.

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. Contractors 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 repairers 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-councils 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 Temperature rise. If possible, the insured should be requested of shift stocks to Cold storage premises preferably in cool evening/ night period or The insured should be requested to carry out repairs to the Most expeditiously. If there is no possibility of completing the repairs immediately,

avoid

some other running by refrigerated ans. refrigerators plant.

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 1. 10.

Index DESIGN OF STUDY bibliography Acknowledgement Objective Scope Limitation

Page No.

Page No.

2. Executive Summary 3. Introduction To Claims Management Claims management in general insurance Broad patterns of claims settlements General guidelines for settlement of claims Insurance regulatory and development authority Irda Act 1999 Powers and functions Irda regulations 2002 Instantsurance Insurance legislation Insurance act 1938 General insurance business (nationalization) act, 1972

4.

5.

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 Claims in marine insurance (hull) Introduction Procedure Processing of claim and documentation Documents of general average claims

7.

8.

Claims in marine insurance (cargo) Marine insurance Engineering insurance claims Mce policies

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.

600 500 400 300 200 100 0 New India Assurance Oriented Ins. Co Allianz Bajaj ICICI Lombard Royal Sundaram Policies Issued Claims Settled

Company New India Assurance Oriental Insurance Co. Allianz Bajaj ICICI Lombard Royal Sundaram

Policies Issued 600 550 200 300 350

Claims Settled 8 6 4 4 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