India is a common law country and it has no-fault add-on liability system to compensate motor accident victims. With limited resources General Insurers have to deal with the unlimited liability awards pronounced by the Tribunals and Courts. Insurers are not free to have contractual conditions to deal with their insurance product as the Motor Vehicle Act, 1988 doesnot permit insurers to have defenses other than those defined in Sec 149(2) of Motor Vehicle Act.
The insurer's cause of worry doesnot end here. The Act also lays down that once the policy is issued under the Act, notwithstanding that the insurers may be entitled to avoid or cancel the policy, they will pay the claims of the third parties as if they were Judgment Debtors. Due to this provision courts have ordered insurers to satisfy the awards even when the cheques of premium were bounced and the policy became void-ab-initio as per the provisions of Sec 64 VB of Insurance Act. These pay and recover cases are cause of worry to insurers as it has been seen that in most of the cases after satisfaction of the award either the recoveries are not persued or the owner of the vehicle is smart enough to get his property (normally the vehicle) transferred in name of other member of family. But to address this issue first step that is required is change in mindset of the insurers. They should take all possible defenses at the Tribunal at the first instance and if they are not successful they should maintain a seperate record of the Pay and Recover Cases and should put all efforts to make recoveries after satisfying award.
Limited defenses is another cause of worry and except in case of Bhushan Sachdeva Vs United India no relief came to the rescue of insurers even from the Apex Court. In this case Insurers were allowed to contest the case in appeals if the insured failed to make appeal on quantum. But this relief was revered immediately by a larger bench of Apex Court in Nicolletta Rohatagi case. Now after Shakariya Vs United India case it is well settled rule that insurers can go for appeal on merits if the condition precedent in Sec 170 of MV Act is satisfied.
Looking to this insurers position has become more difficult. What they need to do is to change the mindset of its own employees so that cases are contested well in Tribunals, as they can not agitate any new issue in appeal if the same has not been raised and defended in Tribunal, and to ensure that awards are satisfied immediately. EVERY DAY HAS A COST IN MACT CLAIMS and if insures look to their outstanding claims they will agree that every year about 25 to 35% of ICR is burdened only by way of interest. Now with interest provision (2% more than bank interest rate) in Policy Holders Protection rights further burden may be imposed on insurers anytime. Insurers should not delay the process of settlement after pronouncement of the award and should settle the loss immediately.
Friends in another post we will discuss other issues of this interesting portfolio which is a real cause of worry to general insurers.
You can read the comments of Bima Bazar.Com Administrator (Best Rating) on this subject at following link in Article-Insurers are not aggrieved Party in Motor Third Party Awards?
http://www.bimabazaar.com/index.php?option=com_content&view=article&id=97:insurers-are-not-aggrieved-party-in-motor-third-party-awards&catid=44:motor-insurance&Itemid=70
Vinay Verma.
p.s - some important links for reference of this important topic are:
The insurer's cause of worry doesnot end here. The Act also lays down that once the policy is issued under the Act, notwithstanding that the insurers may be entitled to avoid or cancel the policy, they will pay the claims of the third parties as if they were Judgment Debtors. Due to this provision courts have ordered insurers to satisfy the awards even when the cheques of premium were bounced and the policy became void-ab-initio as per the provisions of Sec 64 VB of Insurance Act. These pay and recover cases are cause of worry to insurers as it has been seen that in most of the cases after satisfaction of the award either the recoveries are not persued or the owner of the vehicle is smart enough to get his property (normally the vehicle) transferred in name of other member of family. But to address this issue first step that is required is change in mindset of the insurers. They should take all possible defenses at the Tribunal at the first instance and if they are not successful they should maintain a seperate record of the Pay and Recover Cases and should put all efforts to make recoveries after satisfying award.
Limited defenses is another cause of worry and except in case of Bhushan Sachdeva Vs United India no relief came to the rescue of insurers even from the Apex Court. In this case Insurers were allowed to contest the case in appeals if the insured failed to make appeal on quantum. But this relief was revered immediately by a larger bench of Apex Court in Nicolletta Rohatagi case. Now after Shakariya Vs United India case it is well settled rule that insurers can go for appeal on merits if the condition precedent in Sec 170 of MV Act is satisfied.
Looking to this insurers position has become more difficult. What they need to do is to change the mindset of its own employees so that cases are contested well in Tribunals, as they can not agitate any new issue in appeal if the same has not been raised and defended in Tribunal, and to ensure that awards are satisfied immediately. EVERY DAY HAS A COST IN MACT CLAIMS and if insures look to their outstanding claims they will agree that every year about 25 to 35% of ICR is burdened only by way of interest. Now with interest provision (2% more than bank interest rate) in Policy Holders Protection rights further burden may be imposed on insurers anytime. Insurers should not delay the process of settlement after pronouncement of the award and should settle the loss immediately.
Friends in another post we will discuss other issues of this interesting portfolio which is a real cause of worry to general insurers.
You can read the comments of Bima Bazar.Com Administrator (Best Rating) on this subject at following link in Article-Insurers are not aggrieved Party in Motor Third Party Awards?
http://www.bimabazaar.com/index.php?option=com_content&view=article&id=97:insurers-are-not-aggrieved-party-in-motor-third-party-awards&catid=44:motor-insurance&Itemid=70
Vinay Verma.
p.s - some important links for reference of this important topic are:
- Motor Third Party Claim Management http://www.niapune.com/Research/Book_Motor_TP_Claims.pdf
Any thing on Motor Pool
ReplyDeleteFrom when the Pool Arrangement is on..whether pool underwrite liability policies or even the liability portion of the package policies..Does pool retain some portion with it.
ReplyDelete