October 13, 2014
India’s Supreme Court has ordered the country’s four state-owned general insurers to pay out at least 50% of claims arising from the devastating Jammu and Kashmir (J&K) floods without any verification.
These payouts will cost the insurers around INR40 billion (US$653 million), reported the Times of India.
The Supreme Court’s decision, handed down last week, was an endorsement of the J&K High Court’s 30 September order to the insurance companies to provide interim relief of 95% of the claim amounts of those who had taken insurance cover for INR2.5 million or less and 50% for those claims by persons who had taken cover of more than INR2.5 million.
Attorney General Mukul Rohatgi had pleaded with the Supreme Court on behalf of the insurance companies that the High Court order was open to abuse by unscrupulous elements and that the insurers should be permitted to at least conduct a preliminary survey of the damage before settling claims.
He said that the companies did not oppose the payments but were only seeking time till 30 November so that they could conduct assessments. He said if an actual estimate of the damage to insured properties and vehicles was taken, it would not exceed INR10 billion, but the High Court order would cast a burden of INR40 billion on the insurers which are United India, National, Oriental India and New India Insurance.
The Supreme Court bench said instead: “You just have 99 surveyors in the field and those small shopkeepers whose goods were under water for days, what will they be left with? They must get immediate relief as they have suffered heavily.”
The Supreme Court said that the hardship suffered by the people affected by the heavy floods, which hit the region last month, warranted a departure from ordinary procedure.”
Taking into account the Attorney General’s apprehension that the court decision could be abused by unscrupulous elements, the bench said: “If there is a little misuse in such a situation, let it be.
The government-owned insurance companies said that as of 9 October, they had received 9,917 claims involving an estimated amount of INR9.8 billion and that they had already issued 983 cheques for a total of INR251 million.
The Supreme Court decision could make the insurance companies susceptible to similar claims in other flood-affected areas, where affected persons would cite the court order refusing insurance to conduct preliminary damage surveys before settling claims.