From insurance in the hands of private players to nationalisation of insurance business and back to the regime of private enterprise and foreign players, the insurance industry has come a full circle
The recent changes to the Insurance Act and the Insurance Regulatory and Development Authority Act through the amendment in 2015 usher in major reforms in the way the business of insurance is conducted in India. Enhancement in foreign investment cap from 26% to 49% ensures not merely capital availability but also increases the competitive edge for better servicing the needs of insured public and obtain a greater insurance penetration in areas hitherto remaining uninsured. Higher penalties ranging from Rs. 1 crore up to Rs. 25 crores for misrepresentation and mis-selling have been made to make consumer welfare at the helm
A consumer has now opportunity to see which amongst the insurance policies serves her needs the most; which collects the least premium for higher coverage of risk, etc. Websites host information with comparative tabulation to help the consumer public make informed choices for particular insurer and its product. ‘Insurance which is a subject matter of solicitation’ is a manner of saying that insurance has to be requested or asked for and not sold. It just cannot be sold by deception. A system of Insurance Agents who worked for higher target of premium collections and consequently higher revenue for the persons who sold the policies are now stepping by to allow for insurance brokers who broker a better deal standing equidistant between insurer and insured.
Bad faith defences of insurers
Even as the business of insurance involves essentially the business of payment, the experiences have been that the exuberance shown at the time of selling a policy is seldom practised at the time when a claim is made on the occurrence of the risk covered under a policy. An insurance agent who actively canvasses for a policy to be taken may do so without apprising all or any of the exclusion covered under the contract. The essential terms marked under fine print are seldom ever brought home at the time when the policy is solicited. The medical examination of the insured which
is hustled through a doctor empanelled by the insurer will invariably be found inadequate if only a claim is made on the basis of assumed risk by digging out information of the past medical history or illness and deny the liability for breach of uberima fides.. And in ever so many motor accident cases the insurer will contend the driver was not negligent or that the driver did not have a valid driving license. Could there be even a motor accident by the careful driving of a driver? Why would an insurer not check whether the owner was putting the vehicle in the hands of a person who did not have a driving license. Common law principles that apply in torts and even in contracts where there is no contra position in statutory provisions are used in US Courts the same way it is done in India. As a corollary to good faith disclosures of the insured, it is expected that insurer does not engage in bad faith defences, and if it is found in trial that the insurer had not settled the matter, even when there was a scope for it, the Supreme Court of Texas in USAA Texas Lloyds Company v Gail Menchaca (2016) and the Supreme Court of Florida in Suzanne Harvey v Geico General Insurance Company (2018) awarded actual damages plus punitive damages to accident victims aggregating to double the amounts of what the extent of insurance cover.
New opportunity to settle
If the scenario of bursting of the courts’ frayed dockets have to be controlled, the first genre of litigation that must go off grid are insurance claims because more often than the claims being fraudulent, the breach of contractual terms by the insurer and the inability to assess the quantum are the main reasons for disputes. In a motor accident compensation claim case in Krishnamoorthy vs New India Assurance (2019) the Supreme Court recognises a key role through the formulation of mediation as a conflict resolution tool in motor accident claims. The judgment seeks to establish a Mediation Council attached to every District Services Legal Authority to process every case before it is taken up for adjudication.
Here then is a great opportunity for the insurance industry to adopt a new paradigm of concluding a case without contest. The practice of mediation will get a significant boost and the public confidence to use it as tool in every other conflict situation taking away much of the burden from courts to address sensitive issues of national interest, interpretation of statues, trial of cases involving heinous crimes, etc. That will leave the courts with just a manageable load that craves for attention requiring the forensic skills of active legal brains of argumentative lawyers and skilful judges.