Cheques and balances by Sucheta Dalal

Cheques & Balances by Sucheta Dalal

August 20, 2000

The travails of making an insurance claim

It was August 13, 1994. Ahmedabad-based D P Agarwal, along with a friend B M Bhatt, Bhatt’s wife Manju and their young son were driving on the Ahmedabad-Gandhinagar highway in his Maruti 800 when a truck moving in the opposite direction rammed into the side of the car.

Agarwal, who was driving the car was badly injured, but Manju Bhatt, who was sitting right behind the driver’s seat took the brunt of the impact and died on the spot. Her husband and child, however, escaped unhurt and completed the formalities of filing a First Information Report (FIR) with the police.
Agarwal’s car was completely damaged and when he recovered, he lodged a claim with his insurer, the New India Assurance Company. Since his papers were in order, he expected the claim process to be a simple formality; instead, he found himself caught up in a harrowing five-year battle which exemplifies the bizarre lengths to which a nationalised insurance company would go to deny a rightful claim.

Four months after Agarwal filed his claim, New India wrote to him turning it down. The insurance company had got hold of the driver of the killer truck and made him to swear an affidavit before a Jamnagar executive magistrate saying that at the time of the accident, the car was not driven by Agarwal, but by the deceased Manju Bhatt.

In fact, Manju Bhatt had never learnt driving and did not even possess a license. But that is precisely what New India and the truck driver tried to use to their advantage. The truck driver could escape liability for rash driving by blaming the accident on the incompetence of the Maruti driver. New India Assurance used the statement to repudiate the insurance claim - a paltry Rs 1.35 lakh, claiming that the car was being driven by a person without a license.

Agarwal then approached the Consumer Education and Research Centre (CERC) for help and after corresponding with the insurance company filed a complaint (783/95) before the Consumer Disputes Redressal Forum of Ahmedabad.

At the end of September 1999, after protracted hearings and cross examination, the Consumer Court ruled in favour of Agarwal on the following basis. It noted that Manju’s husband Bhatt had filed the FIR within hours of the accident which claimed the life of his wife. In his bereaved state, he was unlikely to manipulate his statement to safeguard Agarwal’s insurance claim. The police panchanama which described the tyre marks of the breaking truck also independently indicated that it was the rashly driven truck which hit the Maruti.

Also, immediately after the accident, the truck driver had made a statement to the police where he had admitted that “a lady sitting near the driver of the car had expired”. This was completely contradictory to the evidence he tried to concoct for the insurance company a few months later. Also, New India which had relied on the truck driver’s affidavit failed to produce him before the court for examination.

In its order at the end of 1999, the Consumer Forum noted that the evidence of the driver “created four months from the date of the accident is totally unhealthy on the part of the opponents (New India Assurance) to shirk from the legal contract - an insurance policy”. The order has repeatedly described the insurance company’s actions as “arbitrary” and the evidence of the truck driver and afterthought, “falsely” created to “shirk liability”. It also noted that the insurance company had “miserably failed to produce” the driver as a witness during the hearings or to produce the evidence that it claimed to possess.
It ruled that New India should pay Agarwal’s insurance claim of Rs 1.35 lakh along with 18 per cent interest from the date of accident until payment. It further granted compensation of Rs 10,000 for inconvenience, harassment and mental agony and another Rs 2000 as costs.

Agarwal may have won, but one would argue that New India Assurance got away very lightly. The paltry compensation and award is unlikely to deter it from indulging in grotesque concoctions in the future and trying to similarly deprive other claimants of their rights.

Motor insurance in India is not only mandatory, but since the business was nationalised in 1956 we have no option but to be at the mercy of government-owned insurance companies. Risk management consultant Fali Poncha points out that even with 108 companies operating in India before nationalisation, there was a voluntary Code of Conduct which insurance companies followed. After nationalisation, the Code was considered redundant for the nationalised sector. It was part of Nehru’s dream that the public sector would selflessly serve the public.

Increased competition after the opening up of the insurance sector would hopefully reduce aggravation of the type suffered by Agarwal by driving business to more customer-friendly companies. But the size and network of the nationalised insurance sector will ensure that it is a slow switchover.

Also, merely moving to another insurance company may not be the answer. Indian courts need to be sensitive to consumer rights and the role of consumer organisations. In the Agarwal case, for instance, he may not have been able to put up a sustained fight without help from the consumer organisation. Yet the court rejected the cost claims of the consumer body (Rs 5000). Interestingly, Agarwal’s own claim for mental agony and harassment was very meagre Rs 10,000 - probably because he was afraid of being accused of trying to profit from the accident.

One reason why companies such as New India Assurance have got away by ignoring consumers is the inadequacy of court cases filed against them. The reasons are obvious. Agarwal’s doughty battle in a Consumer Court lasted five years (which it ought to have been completed in three months). He was also fortunate enough to be able to assemble iron-clad evidence to support his claim. Many car owners may have simply written off Rs 1.35 lakh when faced with the audacity of New India Assurance’s concoctions.

Had the case been fought in a civil court, the insurance company would have succeeded by simply wearing down the complainant through sheer delay and the high cost of litigation. Again, paltry compensations handed over by Courts are the biggest disincentive for filing litigations.

The consumers problem begins with the one-sided Policy Contract. Secondly, the fact that litigation could last over a decade with a good chance that compensation granted at the end too low to make it worth the effort. This itself is the biggest encouragement to corruption - consumers find it far more prudent to simply part with a part of their rightful claim as grease money in order to avoid delays, harassment and endless visits to the insurance companies.