Ombudsman is an efficient route for resolving disputes. says Advocate SR Singh

According to advocate Singh, The policyholder should be educated not to accept the discharge voucher in the first instance itself if he is not satisfied with the amount specified in it or which is being offered. At this instance only he should invoke the arbitration clause to which the company is bound to abide by and they have to agree for arbitration. Here are the excerpts from an interview…

ML: How effective is the insurance Ombudsman in settling claims?

SRS: The insurance Ombudsman is a very informal set-up to resolve disputes for matters below Rs20 lakh. It is a mechanism within the insurance sector itself. According to my experience, I think this is an efficient route for resolving disputes. On an average, matters in the Ombudsman are settled in six months.

ML: Where does the surveyor’s role come into play? Who appoints him and how does he function?

SRS: According to section 64UM of the Insurance Act, 1938, the insurance company has to appoint a surveyor when the claim amount is Rs20,000 and above. This means claims beyond Rs20,000 cannot be settled by the company internally. Relevant IRDA regulations regular the functioning and conduct of the surveyors. The surveyor’s job is to assess the quantum that is claimed for. After assessing the amount he makes the survey-report making suggestions if required as to payability and the amount that should be actually paid taking into consideration the relevant deductions.
Broadly speaking, there are three types of deductions—salvage, depreciation and excess provided under the policy. The deductions are made because as an 'indemnity' implies that one cannot make profit out of the insurance policy.

ML: What if the claimant is not satisfied with the assessed amount? How would this dispute be resolved? To whom should the policy holder go to resolve this quantum dispute?

SRS: Often there are disputes in this regard. The insurance policies always contain an arbitration clause which has two things clearly spelt out,
a) There is no arbitration if the question is of liability.
b) It is only the quantum aspect of the claim that is arbitrable .
If the claimant is not happy with the surveyor’s assessment or the amount offered as full and final settlement, he can invoke the arbitration clause on the dispute regarding quantum and not liability. Though this arbitration clause is available in most of the policies, it is usually not given in medical insurances and motor vehicle claims or in any personal line insurance.

ML: The arbitration should be binding on both the parties. However despite insurance being a contract, there are several instances where the insurers are reluctant to go for arbitration. Why this is so?

SRS: The insurance companies resist arbitration due to the discharge vouchers. The practice has been that the company gives discharge voucher, which clearly mentions that acceptance of the voucher, would be full and final settlement of the claim. If the policyholder accepts the voucher, it becomes a binding agreement under the Contract Act. Therefore, after executing the discharge voucher the policyholder cannot claim for rest of the amount later evidences full and final settlement via-vis discharges any further liability of insurance company. 

So, on this ground the companies resist arbitration. In such cases, the recourse left for the policyholder is to file a petition in the high court under section 11(6) of The Arbitration and Conciliation Act, 1996 to seek for appointment appointment of an Arbitral Tribunal.
It is to be noted in a case before the Supreme Court, (National Insurance Company Ltd Vs Bogara (1) SCC 267) Justice RV Raveendran said that such practice of seeking advance discharge voucher and then paying the amount is 'coercive bargaining' or 'undue influence'. Thus many claimants today have filed petitions taking shelter of the aforesaid case-law saying that the discharge voucher was accepted under duress and/or undue influence hence there is no final settlement and the arbitration clause is still open.
Later in 2011, the Supreme Court in a case of Union of India & Ors Vs Master Construction Co 2011 STPL (WEB) 422 SC said that if the voucher is executed and amount accepted then it cannot be further disputed. So there is a mixed view given by the Supreme Court from both the ends.

ML: What the policyholder should do in order to avoid all this litigation?

SRS: The policyholder should be educated not to accept the discharge voucher in the first instance itself if he is not satisfied with the amount specified in it or which is being offered. At this instance he should invoke the arbitration clause to which the company is bound to abide by and they have to agree for arbitration.

ML: Given the fact that roughly 5% to 6% of population in India is insured and yet we have so much litigation in the sector, do we need an appellate tribunal against the Ombudsman order?

SRS: Yes, there should be a two-tier mechanism. This is because, if one wants to appeal the verdict of the Ombudsman today, he has to go back to a civil court or the consumer fora for redressal. These courts/tribunals themselves are flooded with cases. Hence there is an urgent need for an appellate tribunal in the insurance sector. Also, the judgment of the tribunal should be binding on the company and there should be few grounds for appealing the order of the Ombudsman.

(Adv SR Singh is the proprietor of SR Singh & Co, a highly focused and specialized firm in insurance laws and claims. Adv Singh has been one of the prominent and distinguished insurance defense and recovery attorneys and lead counsel in India with over 29 years of experience. He was honorary professor for post graduate degree courses of law and insurance laws Mumbai University. He is also a visiting faculty at the business school of Mumbai Education Trust (MET). He has vast experience in alternate dispute resolution, conciliation and arbitration.)


Britannia lines up new products, eyes better margins

Britannia's consolidated sales grew by 22% to Rs4,605.16 crore in 2010-11 and its net profit was Rs134.20 crore

Biscuits major Britannia Industries is aiming for higher profitability during the current fiscal as the market remains robust and cost pressures are likely to ease.
"We intend to improve the net operating income, or margin, by another 2%-4% during the current fiscal," Britannia director (Health & Wellness) Anuradha Narasimhan told PTI. In 2010-11, the company's gross and net margins stood at around 21% and 4.3%, respectively, she said.

She attributed the positive outlook to the easing price war in the industry, lower inflationary pressure, healthy demand, focus on value-added and niche products and better cost control. The niche category includes health and wellness products. The adult health food segment is pegged at Rs6,000 crore, including healthy cooking oil.

The company said the baked and non-fried snack market, in which Britannia launched two products under the Nutrichoice brand, is worth about Rs 450 crore at present, but is expected to grow sharply in the next two-three years to Rs 1,000-1,500 crore.

Furthermore, Britannia is ready with more breakfast products for expanding its national footprint.

"We have test-marketed oatmeal in Mumbai and recently in Tamil Nadu. We are also test-marketing Poha Upma in these two markets. In the next three months, we expect to take these products to other parts of the country, possibly in phases," Narasimhan said. The Rs200 crore oats category has witnessed annual growth of around 25%-30%. In the first nine months of this fiscal, Britannia hiked product prices by 6% to accommodate cost pressures, she said.

However, she does not foresee any sharp hike in the next quarter as food inflation is declining. Britannia's consolidated sales grew by 22% to Rs4,605.16 crore in 2010-11 and its net profit was Rs134.20 crore.

In the late afternoon, Britannia was trading at around Rs443 per share on the Bombay Stock Exchange, 2.34% down from the previous close.


Supreme Infra completes its first marine project

Supreme Infra has also bagged orders worth Rs212.30 crore

Supreme Infrastructure India Ltd has completed EPC for its first marine project— Kasheli Bridge and commenced tolling operations. The company has added orders worth Rs212.30 crore along with a bridge project for Rs124 crore. The company has also added a road BOT project in Maharashtra. The details of the Kasheli Bridge include:

The EPC work involved building a 6 lane flyover on Old Thane Nashik highway for a length of 1.2 km on the Thane Creek for Rs301 crore. This project was awarded to SIIL in 2009 by the Sangam group and has been completed in 36 months. The project involved complex engineering skills to cast pilling with depths ranging from 15–25 meters. SIIL holds 10% equity stake in the Kasheli Bridge SPV viz. Kalyan Sangam Infratech Ltd. This SPV was involved in the construction of the Kasheli Bridge on a BOT basis. The construction of Kasheli Bridge has been completed and tolling operations have commenced.

The company has also received a project for construction of villas and apartments from BPTP Group, Gurgaon worth Rs71 crore. The project is expected to be executed by March 2014. The company has also bagged orders from Ramprastha, Gurgaon and from MMRDA for construction of Flyovers, Maharashtra.

In the late afternoon, SIIL was trading at around Rs166 per share on the Bombay Stock Exchange, 3.14% up from the previous close.


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