The Hindu Business Line : Insurance: Recovering from tsunami's wrath

What should assume priority now is to bring back to normal the survivors and those who have suffered economic loss. State governments have initiated measures to provide relief to the victims in the affected areas. Being a national calamity, efforts by the government alone would not be adequate. Affluent sections, besides financial institutions, banks and insurance companies, have a social and moral role to play, apart from contractual obligations. The task for all would be to mitigate the sufferings of victims and focus on efforts aimed at recovery, rehabilitation and restoration of normal life.

In this effort, it is necessary to guide the victims to recover their economic losses from life and general insurance companies. In the case of life insurance, the sum assured is payable on death, while for general insurance such as marine insurance of hull and cargo, the actual loss is payable on the occurrence of a marine peril; in fire insurance of properties on the occurrence of fire, earthquake, and flood. In accident insurance, the loss is payable when the accident occurs.

A policy of insurance is not encashable like a cheque or a demand draft but the owner of the insured property is entitled to recover the amount of loss once it is ascertained. There are two important requirements for entitlement of an insurance claim — the cause of loss and proof of loss.

It is important for the claimants — survivors of the victims of tsunami, in this instance — to understand the requirements under different types of insurance policies for recovery of loss, as this would be the first step in the direction for a return to the pre-tsunami standard of life.

Life insurance policies

The basic requirement for recovery of a claim under life insurance policy is proof of death in the form of a death certificate and production of the life insurance policy to the insurer. A word of appreciation for Life Insurance Corporation of India in the matter of treatment of tsunami/earthquake affected claimants is the special concessions it has announced dispensing with investigation of a claim, introduction of simplified claim form and acceptance of a death certificate issued by any government authority or certificate from select group of agents.

LIC has gone a step further in the matter of waiver of production of original life insurance policy, which might have been washed away or destroyed by sea water or tidal waves and a special help desk at divisional branch offices in the affected areas will assist the claimants. It is possible for the State government to come to the rescue of the claimants and facilitate recovery of life insurance claims by delegating powers to the lowest authority in the Revenue Department or the municipal administration in the affected areas to issue death certificates.

Anyway officials handling the relief work have completed enumeration of people who have lost their lives. It is easy for the survivors to process their claims with a death certificate obtained from these officials so long as they have knowledge of life insurance policy, if any, taken by the deceased. It is certain that private life insurers would follow the LIC example.

General insurance policies

Personal Accident Insurance: This covers accident to the person, resulting in bodily injury or death. Tsunamis that cause death due to asphyxia and drowning is an accident coming within the purview of this policy. As cover against death is also included in this policy, the claim procedure closely follows the requirements for life insurance policies. It must, however, be noted that settlement of a death claim under a life insurance policy does not deprive the legal heirs/nominee of the insured to recover additionally the claim for death under personal accident insurance policy.

Life and personal accident insurance policies are not contributory but complimentary. Death claims under Janata Personal Accident Insurance policies covering the weaker sections are also enforceable. In cases a tsunami-deceased policy-holder has held more than one personal accident insurance policy, each policy would individually pay and meet the death claim.

Few insurance companies operating in Tamil Nadu have issued personal accident policies covering above 500 fishermen each, for a capital sum of Rs 1 lakh. The legal heirs/nominees of any deceased fisherman in the tsunami/flood accident can recover a claim for death from the general insurance company.

Fire insurance: It is seen from press reports that buildings, hotels and resorts have been affected by flood waters. A standard fire and special perils policy insuring such properties covers loss, destruction or damage caused by flood and inundation. The direct and proximate cause of loss is flood and inundation and a policy-holder is entitled to recover the actual loss incurred subject to the adequacy of the insured value of the affected property.

The value of the property at the time of loss should be equivalent to the insured value failing which the principle of average will apply. The procedure to be followed would include reporting the loss to the insurer, arrange for an insurance survey and submit the claim with estimates of repairs and renewals for the affected property.

Marine insurance

Hull insurance: Ships, trawlers, fishing vessels, sailing vessels and mechanised boats are insured under a hull insurance policy. Ships are generally registered with the Indian Register of Shipping and in the case of all other vessels with the Maritime Board or the Port Authority closest to the place where the boat normally plies. According to media reports, a provisional estimate of a number of trawlers, fishing boats, mechanised vessels lost or damaged severely is reported to be more than 1,500 in Cuddalore/Nagapattinam area and an equal number in other coastal areas of Tamil Nadu.

To speed up settlement of insurance claims under this category, the State government should authorise the officer-in-charge of minor ports or other appropriate authority to issue a causality report where the vessel is a total loss and, in other cases, the details of damage suffered by each vessel with registration particulars. The Director of Fisheries should co-ordinate with the port authorities to ensure that these certificates are issued without loss of time. Most trawlers and fishing vessels are acquired with bank/institutional finance and it will be in the common interests of these financial institutions to co-ordinate with the government agencies and the insurance companies for an early survey, assessment and settlement of the loss.

Cargo insurance: Insurance of goods in transit in port areas, wharfs, godowns and warehouses, awaiting transportation either to an inland destination or for export, would be covered under a marine cargo policy. Tsunamis and tidal waves are called perils of the seas and a cargo insurance policy covers loss or damage caused by such causes.

To facilitate quick settlement of damaged cargo at port, the port trust concerned may arrange for an independent survey of such items and make the same available to the owner of the cargo and, if necessary, collect from him a share of survey fee expenses which will be ultimately reimbursed by the insurance company.

Motor vehicle insurance

The tsunami washed away many motor vehicles. The resultant loss is covered under a motor vehicle package policy (comprehensive policy). As a measure of precaution, the vehicle owner should report the incident to the nearest police station, file an FIR and also inform the bank or finance company if a loan has been taken. If the motor vehicle is a total loss, the insurance company will settle the same for the insured's declared value stated in the policy without any deduction.

For partial damage claims, an estimate of repairs from the authorised dealer should be submitted along with the claim form. Where a motor vehicle was stationery at the relevant point of time of accident, it is not necessary to produce a driving licence.

The need of the hour is to help tsunami victims and this can be done if the general insurers follow the footsteps of LIC of India in simplifying claim forms, arranging for a quick survey of damaged property where the extent of loss is more than Rs 20,000 and insisting upon the surveyors appointed for this purpose to submit their reports within seven days of entrusting the assignment.

Documentation requirements should be simplified and in the case of partial compliance of documents, the insurance company should admit liability and make on account payments, pending final settlement of the claim. The insurers have re-insurance arrangement for catastrophe risks and this will adequately reimburse the settlements effected depending on the extent of re-insurance arranged.

Settlement of insurance claims and reinstatement of damaged properties is part of rebuilding the nation and it is hoped that general insurance companies will be generous in their endeavour while settling tsunami claims.

(The author, an insurance consultant, was formerly a senior official of a General Insurance Company. He is willing to offer free consultancy to tsunami victims. E-mail: ncv6@yahoo.com)

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Insurance: Recovering from tsunami's wrath