5 reasons why problems occur in property insurance claims

Property insurance is among the oldest branches of insurance. It has been existence for centuries now. This form of insurance is quite well developed with #policywordings standardised in the Indian market, unlike evolving forms of insurance such as cyber insurance. The meanings of policy terms and conditions are fairly well understood by most of the customers, particularly those in the corporate segment. Further the wordings have been juridically tested by litigation over the course of many years. Nevertheless, there are still a variety of problems that are faced at the time of claims by #customers. Sometimes, the #claims are withdrawn or closed due to these problems and at other times, the claims are declined by the #insurance companies. This article seeks to identify five such most common problems and the precautions that can be taken to prevent them.?

1. Delayed notification:

Like any other #insurance, the property insurance policies also require prompt notification of loss. This immediate notification requirement is there in place, as the insurer would want to get involved in the claim from the initial stage itself. He has an interest in management of the situation following the loss, as he is eventually paying for the resultant indemnity. If the insurer is not promptly notified, there can be prejudice caused to him, as the claim may not be professionally handled or even mishandled, from his perspective. This can impact his liability under the policy. While this appears quite straightforward, why does delay in notification still happen?

Firstly, there can be situations where the insured may not be aware of the happening of the loss. The occurrence of loss may not get #detected or noticed on time. There can be #communication gap between frontline staff and the person dealing with #insurance.

Secondly, even when the occurrence of the loss is known, the #seriousness of the event may not be evident. So, the insured may wait for the extent of damage to be known before the loss is reported. It is important for frontline people to understand what constitutes or might constitute a loss and to understand that for every loss, one need not wait for full facts to emerge for reporting purpose. Even circumstance of loss can be notified and must be done, followed by a more detailed event description and an estimate of loss or damage later on.

But if the delay has already happened, how to #salvage the situation? While delayed notification can entitle the insurer to deny claim on technical grounds, there are judgements of the Supreme Court that mere delay without prejudice caused to the insurer, cannot be a ground for #repudiation of claim. Therefore, it is important to demonstrate that the actions taken by the insured after the loss were in #goodfaith, that there were no #omissions or commissions that led to an #aggravation of loss and that the outcome of the claim would have been no different, had the loss been promptly notified to the #insurer.

2. Not gathering and preserving evidence of loss:

Evidence of loss having happened is the most important aspect of any property damage claim. There must be visible evidence of physical loss. These days, everyone is having smart phones with ability to record videos and take photos. If there is any insured event happening, it is important to take real time photos/ videos of such perils operating, to the extent possible, without compromising the safety of personnel. Further, after the event also the photography/videography should be done, showing the true nature and extent of damage. Sometimes, the repair or restoration works are immediately started, without giving an opportunity to the insurer or his representatives, such as a surveyor or #investigator to examine and assess the loss or damage. While the policy may provide for preliminary repairs or to undertake #loss #minimisation efforts, such actions should not in any way compromise the rights of the insurer, to conduct a fair assessment of the loss or damage. Without clear evidence of loss, causation becomes difficult to establish and claims can get compromised. The compliance of policy terms, conditions and warranties are closely related to causation. Besides direct evidence in the form of photos and videos, there should also be corroborative evidence in the form of witness statements, newspaper reports, public records, such as police or fire brigade or meteorological department report, as applicable. When multiple records corroborate the happening of the event, the evidentiary basis of the claim gets strengthened.

3. Discrepancies in supporting documents:

It is important to ensure that there are no discrepancies in the documents provided in support of #claim. Many a time, the cause of loss gets recorded differently in different #documents. In case of #fire, the cause of fire in fire brigade report must match with what is mentioned in the police report or other reports. If one report says the cause of fire is short circuit and another says it is due to self-ignition, then the claim runs into a problem, as the cause of fire comes into doubt. The reports of public authorities such as the fire brigade and police, are usually based on their subjective appreciation of the events, without any detailed investigation. So, it is important to present the true cause of the loss with the likely quantum thereof to them and get it recorded correctly in their reports without discrepancies. Once reports are issued with inconsistencies, it becomes difficult and often impossible to rectify them.?

4. Not having proper asset description in the policy matching with registers:

Property insurance policies are taken with subject matter insured being described in broad headings such as #building, #plant and machinery, #furniture, #fixtures and fittings, #electrical installation, #stocks of raw materials, #finished goods and stocks in process. Bifurcation of assets in #sub-categories may not be done. However, the insured should have an asset register or inventory document to properly back up how the #sum insured have been arrived, so that coverage of assets can be established. For instance, if the value of buildings includes fit outs such as false ceilings, wooden flooring, toilet fittings etc., which are permanently fitted to the building structure, the same should be available in the back up document. If electrical fittings are not separately insured, but included in the value of the building, the same should be recorded suitably. It would be a good practice to have an approach document to sum insured fixation, that forms a basis for negotiation at the time of claim. It is not uncommon to find at the time of loss, that people are unable to explain the basis of sum insured, due to lack of documentation. It would be also in the fitness of things, to agree with the insurer on the categorisation of different subitems in the sum insured headings and to mention the same on the proposal form. This would ensure that there is no confusion at the time of claim. While some #policies do provide for a designation of property clause, to resolve such differences in categorisation, it would be better not to rely on the clause and use it as a fall-back option.

5. Not drawing up a damage list jointly agreed with the surveyor:

When a loss or damage happens, several items get lost or damaged. In case of flood, items can get washed away without any trace. It is important to draw a proper damage list which is jointly checked off with the loss adjuster. Once the damage list is finalised with the #lossadjuster, the estimate of repairs can be finalised with the various suppliers or repairers which forms the basis of assessment of loss. Sometimes it is seen that the damage list is incomplete or improperly drawn up. Giving supplementary estimates later after late discovery of damage is not very helpful. Such damages are difficult to establish as having caused due to the insured peril or otherwise. Getting damage list properly done requires time and patience. This investment is well worth the effort as it avoids disputes as to whether damage occurred or not, at a later date.

To conclude, while there are many other issues that impact #property damage claims, the above five aspects are key to getting the best outcome. Many a time the claims are prejudiced due to lack of attention to these matters. While the people dealing with insurance at customer end may be aware of these matters, the people at the front end may not be. As the saying goes, the chain is as strong as its weakest link, the percolation of this information down to all levels is particularly important to get the best out of property insurance.

Author:

Hari Radhakrishnan , Regional Director

First Policy Insurance Brokers Pvt. Ltd.

[email protected]