A working group headed by TR Alamelu, member( Non-life), IRDA,formed by the insurance regulator IRDAI , has recommended setting up a company with the objective of promoting safety and loss prevention in the general insurance industry.
The panel has suggested that the proposed company should be promoted by the IRDAI as well as the industry.
The company may start working on promoting safety and loss prevention in the areas of property insurance and motor Insurance to begin with and can expand into all areas of general insurance as well as health insurance in the future.
“The existing loss control practices of the insurers are incidental to the primary function of underwriting. Needless to state reducing the frequency and severity of losses would benefit both insurers and insureds, as the overall burning cost and consequently the premium rate would come down;''said the report prepared by the working group..
The proposed company should liaise with government and other relevant agencies to achieve its objectives.
The company should not be directly involved in commercial activities like risk inspection, specific risk management, tracing of cargo, cargo supervision, route surveys, project monitoring etc as these activities should be left to private business units, added the report.
However, the company should capture experience and knowledge in a generic form for education and dissemination.
The company may also set standards and benchmarks for various activities from the insurance perspective and it should be technologically enabled.
The company should collaborate with bodies such as Insurance Information Bureau of India as well as with various academic institutions, bodies dealing with insurance education and build synergies.
Loss prevention and minimisation activities are part and parcel of what insurers do—it helps improve their claims experience.However, industry-wide analyses of risks as well as knowledge sharing of the methodologies to prevent and minimize losses will help build synergies and create greater awareness.
While loss prevention seeks to avoid losses in the first place, loss minimization seeks to mitigate it. These activities are relevant for each of the categories of general insurance, albeit in different ways. It would be in the common interest of both the insurer and the insured to ensure that losses are prevented in the first place and should losses occur, it is necessary for the insured to take immediate steps to minimize it, said the report.