MANAGING LARGE CLAIMS IN NON-LIFE INSURANCE INDUSTRY SURVEYOR’S PERSPECTIVE

MANAGING LARGE CLAIMS IN

NON-LIFE INSURANCE INDUSTRY

SURVEYOR’S PERSPECTIVE

ARUN GUPTA FCA, FIIISLA

Associated Surveyors & Consultants, New Delhi

Hello Friends

Good Afternoon

We have already discussed about insurance claims from insurers’ perspective, their point of view.

Now Let’s discuss about the insurance claims, particularly large insurance claims from surveyor’s perspective.



We all know that the insurance industry works on the factor of uncertainly and/or unforeseen events which can cause some unknown damages. We also know that accidents do take place which result into unforeseen losses to the insured and any such sufferer would always look for financial compensation for the loss so sustained.

The loss may be small or big and will vary from case to case. However major losses primarily take place in corporate sector such as large Manufacturing Units, Power Plants, Big Hotels/ Hospitals, Large Warehouses, Telcom Equipment Centers, Big Office Buildings etc.



PREAMABLE Whenever there arises a claim, the insurance companies would always try to

support their customer by compensating them at the earliest / ASAP.

For this purpose, first of all they appoint a surveyor and loss adjuster to carry out the assessment of the loss preferred by the insured.

Actually both in large as well as small claims, surveyor’s role is very important, who acts as a bridge, a line of communication between the insured and the insurance company and has to act without prejudice in the interest of both the sides.

To do his/ her job, the surveyor has to have a professional approach and he/ she has to keep in mind that in most cases, he has better understanding of an insurance claim in comparison to the insured, for most of whom, it may be once in life time incident.

To carry out the loss assessment, the surveyor needs to look into the following main issues.



PRELIMINARY / INITIAL STEPS Insurable Interest

First and foremost, the surveyor needs to verify the insurable interest which in simple terms is the eligibility of an insured to lodge the claim, being preferred by him/ her. He/ she may be doing so in the capacity of an owner, trustee / administrator, tenants (as per the lease agreement) or the bailee for the property in his / her custody.

Coverage

The surveyor also needs to check for the coverage of the following : Insured location vis-à-vis Affected location

- i.e. The affected location finds Coverage under that insurance policy. Period of insurance vis-à-vis date of loss

- i.e. The date of loss falls within the period of insurance as per the policy. Subject mater of insurance vis-à-vis affected properties.

- i.e. The affected properties are covered as per insurance policy. Covered perils vis-à-vis operated peril.

- i.e. The peril so operated finds coverage under the policy in question,



INCIDENT

Cause of Loss i.e. how the incident had taken place. Extent of Damage i.e. the loss in physical terms (it could be

Singular Damage or Multiple Damage). Singular damage means – one type of asset damage viz. Building

or P&M or FFF or Stocks etc. Multiple damages means – various types of asset damage e.g.

compound loss of two or more than two type of assets viz. Building, P&M, FFF, Electrical Equipments, Stocks etc.

For evidence of incident & extent of damage – There is required photography, videography, statement of the eyewitness / insured, Police Report, Fire Brigade Report, newspaper cuttings etc.



DOCUMENTATION

I. Basic / general documents:

Complete set of all relevant insurance policies along with schedules, warranties and clauses attached and endorsements upto the date of loss (if any / whatsoever).

Other relevant insurance policies (if any) obtained from any other insurance company applicable at the affected location/s and / or related to the insured’s business.

Claim form duly filled in, stamped and signed Police report (FIR) / Fire brigade report & News paper clippings. Brief profile of the insured and details of business activities

undertaken by them.



II. Building:

Location, layout plan of the risk premises along with block-

wise occupancy and construction details. Present valuation of the building above the plinth level as well

as separate cost of plinth & foundations. Estimates for reinstatement / repair of damaged building with

expected salvage value. If the coverage is on reinstatement value basis, then bills for

the actual expenses incurred for reinstatement of the damaged items and their payment details along with documentary evidence would also be needed subsequently.



III. Plant & Machinery / FFF:

Layout details of all the items of plant & machinery, electrical installations & other utilities in terms of name of the item, model, make, specifications viz. ratings & capacities etc. and their functions in the production process.

Extent of damage sustained by the respective equipments/machines during the fire. In case of P&M, it is better if supported with OEMs’ / authorised agents’ inspection reports.

If the machines are repairable then repair estimates for the same, otherwise replacement value quotations of the same.

Year-wise capitalization details since inception of business to the date of loss along with respective copies of original purchase invoices, fixed asset register and present replacement value quotations.

If the coverage is on reinstatement value basis, then bills for the actual expenses incurred for repair & reinstatement of the damaged items and their payment details along with documentary evidence would also be needed, subsequently.



IV. Stocks:

Demarcation of the location of various types of stocks of raw

materials, stock-in-process and finished goods in the layout plan.

The surveyors needs to understands about insured’s products & their systems viz. system of purchase / receipt / storage & issue of raw materials for production, production process with process flow-chart as well as process wise details of respective items of stocks and further system of storage of finished goods and system of sales & dispatch of the same.

List of all the raw materials & finished products alongwith standard consumption of major raw materials vis-à-vis standard output of finished goods along with details of by products (if any), finished product wise.



Details of materials lying with job workers (if any). Details of materials of other parties lying with the insured (goods

held in trust) at the time of loss. List of books of accounts maintained by the insured along with

details of excise / VAT records maintained by the insured. Balance Sheets of last three years for trend analysis of gross

profit with regard to expenses and stock valuation. Current period manufacturing & trading account along with purchase / sale and quantitative stock movement details.

Copies of sales tax / VAT returns. Details of demand raised by the excise / VAT department against

cenvat / VAT on account of damages sustained during the fire (wherever applicable).

We should understand that timely & proper documentation (like other aspects of the fire claim), is very important and will always help in faster claim settlement.



SALVAGE

To minimise the loss by getting better salvage recovery, the surveyor should get all the salvage segregated / sorted out and stored in a proper storage area and then salvage disposal should be taken up either through limited quotation route or through tendering process by calling bids through newspapers.



INDEMNIFICATION / LOSS ASSESSMENTAfter concluding the verification of the physical circumstances and that of the relevant documents & details, the surveyor has to work out the loss assessment.

FOR FIXED ASSETS – I.E. BUILDING / P&M / FFF THE STEPS WOULD BE :

i) Value of damaged assets

ii) Less – Cost of improvements (if any)

iii) Less – Depreciation (in case the coverage is on market value basis)

iv) Less – Salvage

v) Less – Under insurance (if any)

vi) Less – Policy deductible (as per the policy)

vii) Net Liability

REMARK:

If the policy is on reinstatement basis, then the depreciation will not be applicable.



STOCKS:

* Value of damaged stock

* Less – Dead / obsolete stock

* Less – Salvage

* Less - under insurance (if any)

* Policy deductible

* Net Liability



ADEQUACY OF COVER

o The value at risk is required to be worked out as per the coverage under the policy.

o In case of declaration policy, the surveyor is also required to work out the adequacy of declaration in addition to adequacy of sum insured.



The surveyor also needs to consider the following on reimbursement basis :

(i) Fire fighting expenses.

(ii) Debris removal expenses.

(iii) Architects’ and Consulting Engineers’ fees.

Remark

Both (ii) & (iii) are subject to the limits specified in the policy.



LOSS MINIMISATION

o Surveyor has also to advise the insured to try his very best to minimize the loss of the insured property.



CONCLUSION

In nutshell, while carrying out the survey & loss assessment, the surveyor should remain fair & judicious and should try to indemnify the insured in a rational manner, keeping in view the coverage as well as terms & conditions of the relevant insurance policy.



THANK YOU

Documents

MANAGING LARGE CLAIMS IN NON-LIFE INSURANCE INDUSTRY SURVEYOR’S PERSPECTIVE