RP Samal is the author of ‘The Invisible Sides of Insurance Claims’, a book that intuitively guides insurance managers for judicious settlement of claims to ensure underwriting profit. He is a visiting Faculty to the Mumbai University and has trained insurance executives in many countries. Samal has brought the cat out of the bag by exposing the cause of the malady afflicting our public sector insurance companies. His suggestions can restore the health of the non-life insurance industries if the Government of India pays heed to it. In an interview to The Pioneer, Samal spoke to Sugyan Choudhury suggesting panacea to the ill-afflicted insurance sector.
Three out of four non-life PSU insurance companies are on life support. What are the reasons for such debacle?
Reasons are many and some of them are too sensitive to be discussed in print. I shall touch upon the ones that break the backbone of these companies. If my memory serves well, in 2007 interviews for promotion to GMs from DGMs were conducted twice. There were about sixty candidates each time. On both occasions, some candidates superseded forty to fifty of their senior colleagues to be among the selected six, the repercussions of which were very threatening. For the superseded candidates, it was nightmare; and for the companies, it was disaster. The year next in 2008, similar things happened. Candidates at the bottom of the list without even qualifying for promotion superseded more than fifty of their seniors. It delighted a few but frustrated the entire officer community. With that, the deplorable condition of companies began to take shape. An organisation is not managed by the management books but by the mindset of its leader. With such kind of mindse,t even the best of the companies will break down. Such unfortunate things neither happen in bureaucracy nor in judiciary.
How did those lucky men perform after superseding so many senior colleagues?
Some of them were charge-sheeted during their tenure; some resigned after a brief stay. One of them was boycotted by the entire office staffs because of his misconduct and arrogant behaviour and was finally shunted out to a different office where he created further problems. One of them failed the company he headed. The rest did nothing spectacular to be rated as extraordinary contrary to the perception of their promoter.
How come private companies are making underwriting profits while PSUs are making losses?
PSU companies are not concerned about quick and judicious settlement of claims while for private-sector companies prudent claim management is their foremost priority. I shall give two examples. Stock of wheat was affected by flood in Haryana. A claim of Rs 73 crore was reported to the private sector insurer. Immediately, a team of officials from their Delhi office along with the surveyor came to the site. They got unaffected stock segregated, arranged to dry up the damaged stock and disposed of the salvage at a good price. They collected relevant documents, discussed with the insured and got his consent for Rs 3 crore and paid the claim on the 29th day after the date of loss.
On the other hand, a ship was insured with one of the PSU companies. There was a fire in her engine room. The ship was towed to a nearby port in South Africa for repair. An estimate for Rs 17 crore was submitted. An international Loss Adjuster was appointed. After about 20 days, a revised estimate for about Rs 37 crore was submitted. No one from the company visited the site of claim. A few days later, another revised estimate for Rs 58 crore was submitted. No one visited the site of claim. Then the estimate was further revised twice for Rs 78 crore and Rs 105 crore. No one visited the site. The Adjuster finally assessed the claim for Rs 78 crore and submitted his report. Then, it was too late to do anything else.
What should be the priority of the PSUs in this respect?
A PSU management should know that claim management skill is not acquired from books but through field experience. They should learn it from private sector that claim management is done by visiting the site and supervising with wholehearted fidelity the assessment of claim. The skill is neither acquired at training centres nor reading the survey report in the offices. One of the learned CMDs had expressed it in a conference that there were 20% leakages in claims which makes a huge dent in their balance sheet. But he did nothing and took no interest to prevent that. The management and the employees must realise that a judicious claim management is their most important business and they must be present at the site of claim to prevent inflated assessment which is not uncommon. When their companies are making huge underwriting losses, they cannot afford to leave such a vital function like claims management entirely at disposal of the surveyor. Due to creation of claims hub, BMs and DMs are deprived of the power to settle claims. These officials are the ambassadors of the company. It is like sending the army to the war front without arms and ammunitions. In private sector, the underwriter and the claim manager is the same person. Sooner the DMs and BMs are restored with claim settlement assignments, the better for the companies because they are the people who are in touch with the risk and the insured.
What reforms Government should bring for the industry, especially PSU non-life companies to function more efficiently?
Everyone will agree that it is rational for the IRDAI office to be shifted to Mumbai, the Mecca of insurance industry. As implemented in other countries, Third Party Liability in Motor accident death claims may be fixed at a finite sum, say Rs 20 lakh irrespective of income to make it hassle-free. CMDs need to be appointed at least with a tenure of five years subject to review of performance and accountability. Surveyors’ licences should be issued and renewed by IRDAI without IIISLA intervention. GIPSA may be dismantled because it is more a stumbling block than a bridge. Either the companies should function altogether separately or should be merged into a single unit.