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Insurance companies should not take advantage of clients affected by calamity, observes Insurance companies may cry hoarse over the loss suffered on account of floods in Mumbai, but when it comes to indemnifying the loss suffered by the insured, they had better provide quality service and ensure that the purpose of insurance is truly served. A recent order of the apex consumer court makes it clear that it will not condone attempts by insures to take advantage of consumers affected by calamities, either natural or man-made, and coerce them into accepting much less than what is due under the insurance contract. The order emphasises the need for insurers to be far more sensitive to the victims in such situations and ensure that their losses are indemnified quickly and fully. The apex consumer court’s ire against insurance companies stems from the case of a riot victim, who was left penniless, because of the callous behaviour of the insurer. The victim had to wage a long legal battle for more than a decade to finally get what was due to him under the insurance contract. Criticising the insurance company for its attitude, the apex consumer court pointed out that instead of giving quick relief, the surveyor and the insurance company had tried their best to coerce the consumer into accepting the amount arbitrarily arrived at by the surveyor, thereby subjecting the consumer who had already suffered losses, to further agony and misery. This clearly showed the callousness on the part of the insurance company to the extent of harming the consumer who was already devastated and unable to even feed his family, the apex consumer court commented. Hopefully, criticism such as this will force insurance companies to pull up their socks and provide better after-sales service, particularly when it comes to victims of disasters. This case relates to the loss suffered by a factory — Kohinoor Sizing Factory — during the communal riots in Gujarat in 1992. On December 8, 1992, a mob of about 500 persons attacked the factory and set it on fire, completely destroying it. The company had three insurance policies covering the building, machinery, raw material and the stock-in-process, semi-finished and finished goods. Following an application to the insurers to indemnify the loss, a surveyor was appointed to assess the loss. Since the books of accounts were destroyed in the fire, the stock position was reconstructed on the basis of sales tax returns and bills of purchase and other relevant documents and the loss on account of the destruction of the building and machinery was assessed at Rs 1,14,696 and that of stocks at Rs 1,44,387. The insured accepted the assessment for the building, but strongly contested the calculation made for the stocks and said the actual loss was Rs 4,83,147. His argument was that the stocks were hypothecated to the Bank of India for availing credit facility and therefore every month, the stocks were checked and assessed by the bank. And the bank had given a certificate estimating the worth of the stocks at the time of the fire at Rs 3,98,000 In addition, the insured had purchased goods worth Rs 2,12,260 from two traders (for which too he produced receipts) and all this, he said added up to Rs 4,83,147. When the insurance company refused to accept this estimate, the consumer filed a complaint before the Gujarat State Consumer Disputes Redressal Commission, which asked the insurer to pay the amount with 18 per cent interest. The insurance company filed an appeal before the national commission, only to be chastised for its attitude. The national commission upheld the order of the state commission directing the insurer to pay the consumer Rs 4,50,000 towards indemnifying the loss of stock and Rs 1,14,696 towards loss of machinery and building. However, it reduced the interest to be paid on that amount by the insurance company, from 18 per cent to 12 per cent, and awarded Rs 10,000 as costs to the consumer. (The New India assurance Company vs Kohinoor Sizing Factory). The order should force insurance companies to draw up fresh guidelines on dealing with insurance claims that follow natural or man-made disasters. |
