Actions proposed to be taken by IRDA in the Exposure Draft for Insurance Surveyors
(a) Outsourcing of survey work is prohibited, being a core activity as per Outsourcing Guidelines issued by IRDA and it has not to be resorted by any direct or indirect means either by the insurer or by the licensed surveyor and loss assessor himself.
The insurer and insured are two parties to the contract of insurance in terms of which payment of the loss having occurred within the scope of the contract is the obligation of the insurer to discharge and in that context the insured has to substantiate the loss. Â It is in this context that the survey report becomes an important document with required evidential value wherein the inputs are primarily that of the insured by virtue of which he has a reasonable propriety on the documentations supporting the report.
Consequently, the insurer is obliged to engage,Â Â in respect of claims equal to or exceeding Rs.20,000/- in value,Â Â Â Â only the services of a licensed SLA (or the Director/Partner authorised by IRDA in the Â SLA license) for examination of report for making an equitable and fair decision on the settlement/payment or denial of the claim of the insured.
Even in the case of claims valuing less than Rs. 20,000/-,Â Â Equity and fairness demands that insurer should utilise the services of their employees Â who are eligible to be the licensed SLA and who have acquired training/skills/competence to assess such losses.Â Â Outsourcing even in this context is not permitted as admission or repudiation or the administration of the claim lodged by the insured is a core activity and all its integral components have to be dealt by the skilled persons internally employed on the rolls of the insurer.
Survey firms and companies licensed by virtue of section 64UM (1)(d)(ii) read with SLA regulationÂ 4 are subjected to the same discipline as an individual licensed surveyor Â and their directors/partners are mandatorily required to perform their duties and functions â€“ code of conduct and other regulatory requirementsÂ Â prescribed in the regulations in addition to the professional standards issued by IIISLA when the membership is made mandatory.
The employee SLAs of such firms andÂ companies, Â which they might have hired in view of IRDA circular dated 14.5.2002 issued at the time of categorization, shall also be governed accordingly.
These firms and companies shall make disclosure to IIISLA and IRDA about their SLA employeeâ€™s terms and conditions of employment. Â These firms and companies are not permitted to undertake any outsourcing assignment of survey and loss assessment jobs and are also prohibited from franchising with other SLAs (including employee SLA Â of other SLA firms and companies and/or their directors or partners).Â Â This disclosure and compliance shall form part of their half yearly and annual returns to the IIISLA and IRDA.
None of the employee SLAs, Â partner and directors (of SLA firms and companies) and employee SLA of insurers shall be permitted to change their job and assignment unless their obligations towards the consumer about the survey assignments undertaken are complete and NOC obtained from their employer is submitted to IIISLA and IRDA.
It has come to the notice of the Authority that SLAs, Â specially SLA firms and companies, do take contracts from insurers for survey and loss assessment and instead of getting the job done by : the licensed Â SLA, Â partner/directorÂ named Â in Â the Â SLA Â License, Â they Â carry Â out Â such Â assignments through : employees who are not licensed SLAs or persons who may be SLA but not employees of the said firm or companyÂ whom they hire outside their geographical locations. Such contracting is prohibited and violative of regulatory norms and also against the corporate governance and professional standards.
The code of conduct provisions specified in SLA regulation 15(6) mandates that every SLA including SLA firm/company shall not accept or perform work for which he is not competent to undertake unless he obtains some advice and assistance, as to enable him to carry out the work competently. Â This provision is to enable the SLA to take that assistance or advice for which he himself is not competent and requires special inputs other than that of the core functions of an SLA. This provision should not be stressed to mean that the SLAs/ SLA firms and Co. can hire/contract out Â for Â the Â core Â job Â of Â survey Â and Â loss Â assessment Â which Â theyÂ are Â dutyÂ bound Â to Â perform themselves.
It is mandatory that not only the survey and loss assessment is to be done by : the licensed SLA, licensed SLA firmâ€™s partner and licensed director of SLAâ€™s Â Co, licensed SLA employee of such firms/Co/insurers but the survey report Â shall also be signed by him and evidence if any required in any judicial/regulatory forum furnished by him only in the form and manner required by such an Authority. Â Employees performing administrative duties of such SLA firms/companies and insurers shall not perform these duties.
The legislative and regulatory logic behind this provision is loud and clear that the person performing Â the Â job Â has Â to Â be Â licensed Â and Â governed Â by Â the Â regulatoryÂ provisions Â (including standards and code of ethics of IIISLA) Â and be accountable legally to his acts of omissions and commissions which cannot be delegated to any one else than to himself. The sub-contracting or sub SLA mechanism/structure or franchising is not permitted and shall be treated as violative of sectionÂ 42D (including clause (8) and (9), Â and section 64Â UMÂ Â (1) Â (A) of Insurance Act 1938/SLAÂ regulations.
The persons enrolled to receive practical training from the senior licensed surveyor and loss assessors before they hold a valid SLA license from the Authority are not permitted to carry out survey and loss assessment job (which the licensed SLA has to do) and sign the survey report. They are only permitted to work under the supervision and guidance of senior SLA for the purposes of acquiring the survey and loss assessment skills and in the course have interaction with the insured and also the concerned senior SLA/the SLA Director/Partner (but not the employee surveyors).
These persons shall not be used in the assessment of losses under the garb of outsourcing and franchising Â which in itself is prohibited activity.Â Â The code of conduct and professional standards for such trainee students shall be separately issued by the IIISLA when they are enrolled as student members with the said institution.
If there is any practice of permitting automobile manufacturers and dealers to use the services of an interested SLA and SLA firms and companies, due diligence has to be applied by the insurer concerned and also by the said SLA firm/company to ensure that the interest of the policyholders is not prejudiced and that interest of the insurers does not suffer due to the acts of omission and commission of unprofessional conduct, if any.
The agreement and/or MOUs that have been entered into by any of the SLAs/SLA firm and companies and the insurers with the said automobile manufacturers and dealers shall be submitted to IIISLA and IRDA for the purposes of record and examination about the compliance of notified rules, regulations and matters of conduct.Â Â The empanelment with such dealers and manufacturers shall not be made without effecting a contractual obligation with the said entity.
The legislative intent of : section 64 UM of the Insurance Act, 1938 and rules made there-under, the regulations notified by IRDA for the profession of SLA, circulars and guidelines issued on this subject Â do Â enforce Â an Â objective Â that Â the Â assessment Â of Â loss Â is Â based Â on Â the Â principle Â of independent neutral third party i.e. SLA whose code Â of conduct, professional ethics, duties and responsibilities do not permit him to align with any of the interests of the parties to the contract of insurance.
(b) Employees of the insurer, who are licensed surveyors, are obliged to follow the provisions of laws and regulatory framework on the profession and also comply with IIISLA guidelines and professional standards that shall be issued from time to time. Â They would be bound by professional code of ethics which shall be shortly issued by IIISLA with the due approval of IRDA.
These standards will have the force of the law by virtue of contractual obligations between the SLAs and IIISLA under Memorandum of Understanding. Â This MOU shall be agreed and consented upon with the IIISLA by each of the SLA/the employee SLA/each of the Director/Partner engaged in the SLA profession and also the student trainees undergoing practical training required under the regulations.Â Â The mandatory membership conditions shall evolve this mechanism to be in operation.
The employee surveyor shall be in the employment of the insurer only and not in the employment of its group/associate/subsidiary companies
( c ) The licensed Surveyors and Loss Assessors are displayed on the IRDA site Â www.irda.gov.in and this comprises the basic empanelment out of which the insurers and/or the insured person can choose the engagement of an SLA. Â The sub empanelment system used by the general insurers must keep in mind that it is not a permanent feature and they have to have a system of rotation of an empanelled SLA and SLA firm/companies so that the issues of developing clash of interest in the assignment over a period of time does not get developed to the prejudice of the interests of the policyholders.
They shall be required to file Board approved policy in this regard to IIISLA and IRDA in due course and if there is any concern expressed to them in this regard, the same shall be adhered by them.