Coinsurance

 

Proposed Coinsurance Clause

Necessity for review of the Coinsurance clause

  • Coinsurance arrangement does not apply to policies issued to Individuals. Coinsurance Clause would be applicable to policies issued to other than individuals.
  • As background, the Coinsurance Arrangement was put in its place historically to let the insured decide the consortium of his choice with a view to promote competition and to enable him to get the best of services. In turn, the co-insurance agreement was formulated amongst the insurance companies with a view to give substance to this framework. Accordingly, the responsibility was placed on the lead insurer to collect the entire premium and disburse the entire claim and then have back to back arrangements with the co-insurers to share/collect the premium/claims within the consortium.
  • Ever since the market had opened up in 2001, there are significant changes which have happened in the Indian Non-Life Insurance market. Firstly, the number of companies has gone up from 4 to 27 as of today. Secondly, the capacity to underwrite the risks are different for different companies not just in terms of the limits but also in terms of coverage with the result the magnitude of risks being insured today has become far more complex than before. Therefore the clamour for greater transparency is called for and would ultimately be for the benefit of everyone.
  • Procedurally, the coinsurance clause in its present form places a significant amount of responsibility on the Leader. Keeping in mind that the current coinsurance clause does not accord the same level of treatment to the entire body of the coinsurance consortium, this would also lead the insured to a disadvantageous position and disputes vis-a-vis leader/leader and coinsurers at the time when a genuine claim takes place resulting in delays in claim settlement as well. This would happen particularly in a situation where there are gaps in coverage/understanding/lack of clarity between the leader and its Following coinsurer.
  • The changes sought under the proposed revised coinsurance clause is in no way intended to infringe on the insureds/customers basic rights but only to seek and promote greater transparency in the manner in which coinsurance transactions are agreed and implemented.
  • It therefore becomes necessary to revisit the coinsurance clause to make it relevant to present circumstances. This will The current arrangement has already seen situations where there are information exchanges amongst the insured/leader/coinsurers which are not complete. The above aspects require the existing coinsurance clause to be reviewed to protect the policyholders’ interest, make it more transparent and to put equal responsibility on insured/leader/coinsurer.
  • Ensure a lot of transparency in the Industry as a whole and benefit both the Insured and the Insurer.

Proposed Coinsurance Clause

1. It is hereby declared and agreed that insurers named hereunder severally agree and accept the following for the proportion set against its name.
1.1. In event of any claim being admissible by the insurer towards the liability, to pay or make good to the insured the value of the property at the time of the happening of its loss or destruction or the amount of such damage thereto as provided for under the policy and or
1.2. To indemnify the insured against liability at law or damage to any property or injuries to persons as provided for under the policy
 
2. Co-insurance Schedule:
 
SN Name of the Insurer Share (%)
  (Lead Insurer)  
  (Co-insurer)  
  (Co-insurer)  
  (Co-insurer)  
  (Co-insurer)  
Conditions forming part of this clause
It is hereby agreed and understood that:
 
3.1 It shall be the responsibility of the insured or his authorized intermediary licensed by IRDA to decide on the panel of co-insurers and their respective shares of the risk herein as set out in co-insurance share under paragraph 2 above and communicate the same to all such participating co-insurers, prior to assumption of risk. The duties of insured would devolve upon the authorized intermediary where the insured appoints such authorized intermediary to transact on his behalf with the insurer/s.
 
3.2 The respective shares of premium and refund wherever applicable for the policy shall be paid directly through the modes provided under IRDA (Manner of receipt of premium) Regulations 2002 to/from the lead insurer and the following coinsurers, individually.
 
3.3 It shall be the responsibility of the insured or his authorized representative to ensure that all insurers listed in the co-insurance schedule under paragraph 2 above, are fully aware of the terms and conditions of this policy and shall secure their unqualified acceptance of such terms and conditions prior to issuance of cover and inclusion of names of insurers in this co-insurance arrangement.
 
3.4 During the currency of the policy, if there are any material changes in risk or as changes in original terms and conditions such as variation in Sum Insured, changes in premium charged, extension of policy period, etc., the same shall be communicated by the insured giving sufficient advance notice of 7 days to the leader as well as all other participating co-insurers listed in the co-insurance schedule under paragraph 2 above and procure confirmation thereon. The endorsement to this effect shall be executed by the lead insurer under advice to all other participating co-insurers.
 
3.5 The liability of the insurers shall in no case exceed in respect of each item of the sum expressed in the set schedule to be insured thereon or in the all, the total sum insured hereby or sums as may be substituted thereof by endorsement.
 
3.6 In the event of any of the insurers listed in the co-insurance schedule withdrawing from participation in this policy at any time during its currency, the insured shall arrange for an alternative insurer to take up the full share of risk vacated by the exiting insurer. In the event of insured failing to do so, the insured shall be considered as his own insurer for such share of risk or part thereof which is not taken up by such alternative co-insurer if so arranged by the insured.
 
3.7 In the event of a claim under this policy, the insured shall give notice of its occurrence to all the insurers as listed in clause 2 above.
 
3.8 Upon receipt of such notification of claim, all claim related activities including appointment of surveyors, etc shall be done by the lead insurer who shall decide the admissibility as well as quantum of the claim and the co-insurers shall abide by the same.
 
3.9 In the event of any claim being value of more than Rs.250 million reported, the lead insurer shall be responsible to appoint a surveyor. After receipt of the survey report the lead insurer shall share the same with all the following coinsurer and the respective following coinsurer shall settle the amount directly with the insured. The lead insurer shall decide on the value date as and by when the respective insurers would settle the amount with the insured.
 
3.10 In event of claim being for value of more than Rs.250 million, each insurer shall make payment of their respective share of the claim amount only after a consensus has been reached amongst the insurers regarding appointment of the surveyor from the list of nominated loss adjusters appended to the policy, admissibility and quantum of the claim. In case, insurers fail to reach any consensus amongst them, the decision of the lead insurer shall prevail. Notwithstanding clause 3.7 above, in the event of insured failing to comply with his obligations under provisions of this clause, whereby a co-insurer disputes his share of liability under this clause, the liability of the lead insurer shall be limited to his share and those of other participating co-ixnsurers who have not disputed their liability to their share as per terms and conditions of this policy.
 
3.11 The co-insurers forming part of this agreement shall be entitled to demand and obtain from the insured copies of all policies, endorsements or other claim related documents relevant to this co-insurance clause.
 
In witness, whereof, this policy has been signed by ---------------- General Insurance Company (Lead Insurer) for itself and as authorized agents for other participating insurers named herein Subject otherwise to the terms, exceptions, conditions and limitations of this policy.