Imp Gic4

The New India Assurance Co.
Ltd, Head office Audit Manual

87, M.G.Road, Fort, Mumbai 400 001 Internal Audit Department
1

CHAPTER 1

INTRODUCTION

This Manual gives guidance on matters that need to be considered and procedures that should
be followed by Internal Audit-cum-Inspection Department.

Internal Audit is an independent appraisal function within the organisation for review of systems
and the quality of performance as a service to the organization. It objectively examines,
evaluates and reports on the adequacy of internal control as a contribution to the proper,
economic, effective and efficient use of resources and guards against leakage of revenue.

OBJECTIVES AND SCOPE :

The main features of internal audit set up in The New India Assurance Company Ltd, would be
as under :-

a). Objective :

Internal audit-cum-inspection is not to be regarded as an extraneous activity, concerned with
criticism and fault-finding. It is an integral part of the Companys function and its objective is
to help the management by providing feedback on all the areas of the Companys operations,
so that action can be taken if any thing goes wrong and changes in procedure and methods
can be introduced, if found necessary, in order to tone up administration and improve
efficiency.

b). Functions :

The main functions of the Internal Audit-cum-Inspection Department may be summarized as
follows :-

Review whether the accounting, financial, budgetary and operating control are adequate and
have been efficiently applied.

Examine whether receipts of the Company on account of premium or otherwise have been
correctly assessed and realized as per prescribed tariffs, rules, regulations and orders;
whether they have been correctly accounted and promptly deposited in Banks; whether all
sums of money paid into the banks in cash or by cheques / drafts have been credited to the
Companys accounts; and whether there is effective follow-up for recovery of arrears.

Examine whether payments by way of claims, commission and other expenses have been
made with due regularity and propriety after proper sanction accorded by a competent
authority and have been duly vouched, correctly classified and recorded in accounts;

Ensure that the Companys assets are properly accounted and safeguarded from the losses
of all kinds, and that there is a periodical physical verification to check the accuracy of the
quantity balances in the books;

Examine whether instructions and procedures given in the Companys manuals and Head
Office Circulars ( including rules, regulations, guidelines etc., issued by the Company ) are
strictly followed;

The New India Assurance Co. Ltd, Head office Audit Manual
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Examine whether financial and administrative powers exercised by officials are strictly in
accordance with the delegations or guidelines laid down from time to time.

Examine whether returns / statements / reports required to be furnished by each office /
department to different authorities are correctly complied and sent within the stipulated time.

NB : All Offices are required to maintain a calendar of returns showing the returns required to be
submitted to different authorities, the due dates and the actual dates of their submission.
The Calendar should be submitted every month for inspection by the Head of the office /
department. These apply to the departments in Head Office as well.

Test the accuracy of accounting and other data developed in the Office / Department
inspected.

Examine the delay in issue of documents and settlement of claims.

Spot out missing links, if any in the chain of operations which may give room for financial
irregularities, misappropriations, frauds etc.

Review the register of complaints to see that all complaints have been disposed off within a
reasonable time and the machinery set up for the purpose is adequate and efficient.

Since a complete check of all transactions, records and documents is physically impossible,
the Internal Audit-cum-Inspection Department may exercise a test check of the relevant
transactions, records & documents to the extent prescribed for the purpose of a reasonably
efficient discharge of above functions.

In addition to routine inspection and audit, the Internal Audit-cum-Inspection Department
may also carry out indepth review of particular aspects of the working of any office where
any serious case of defalcation or breakdown in procedures has been noticed, needing
special investigation from the audit angle. Such special reviews may not be undertaken as
substitute for vigilance investigations and may be undertaken only under specific orders
issued by the Financial Advisor in consultation with the Chairman-cum-Managing Director or
vice versa. It should not be open to any lower authorities to divert the Audit Inspection teams
for other items of work.

The Audit may also respond to any reference made by the operating office / department on
any specific file or query by way of considered opinions / clarification.

c). Methods :

The Successful performance of the functions enlisted in sub para (b) call for experience,
sound knowledge of procedures, a flair for details and probing nature. The Inspectors and
Internal Auditors will, however, be greatly assisted in their tasks if the Company has
procedural manuals covering all its departments and all aspects of work. For, in that case,
the Audit-cum-Inspection department can prepare a detailed checklist or questionnaire with
the help of which the Inspection and Audit teams can cover the whole range of operations in
a systematic manner, within the shortest possible time. As a first step, the company should
therefore prepare a complete set of procedure manuals. Existing manuals should be revised
and brought upto-date and new manuals prepared where non-existent. However, as Internal
Audit-cum-Inspection cannot wait till all the manuals are completed, the Inspectors and
Auditors in the mean time will have to carry on with their work on the basis of improvised
questionnaire drawn up on the basis of their own experience.

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Nevertheless, the Internal Audit-cum-Inspection Department should prepare a set of
questionnaire or check lists for the use of their Audit and Inspection teams, so that the work
may be carried out in a thorough and systematic manner.

At the same time, Auditors and Inspectors should be properly briefed. Their task is not
merely to complete the questionnaires or check lists. They should probe into the answers
given for each questions, find out the reasons for recurring irregularities, omissions,
mistakes and delays and wherever possible give their own suggestions for remedial action.

d). Staffing :-

The number and composition of the Audit and Inspection teams required may be assessed
on the basis of the functions indicated. The teams may be located at Regional Offices, so
that the traveling time may be saved to some extent.

The Personnel for audit teams may be drawn from personnel with accounts experience.
Inspection teams may consist of personnel with Administrative and technical background
and experience in underwriting and claims departments.

e). Frequency of Inspection :-

Each Office ( including all the departments at the Head Office and Regional Offices ) should
be inspected once during the year. The audit and inspection work pertaining to the HO may
be entrusted to team located at Regional Offices where the HO is situated.

f). Administrative Procedure :-

Two copies of each Inspection / Internal Audit report should be prepared and sent by the
Audit team to the Competent Authority through proper channel. The HO scrutinizes the
report and thereafter forwards one copy of the report to the Officer-in-charge of the office
inspected and take followup action. Compliance with the requirements of the Internal Audit
and Inspection report should be insisted upon within a reasonable time.

Serious irregularities, pointed out in the report should not be followed up in a routine
manner. These should be taken up separately through demi-official letter addressed to the
Officer-in-charge of the offices concerned.

g). Verification by Sampling :-

i). Audit :

As it will not be practicable to verify each and every entry, resort will have to be made to
sampling in selecting the items for scrutiny. Either of the following methods may be
followed :

Select for scrutiny every 3
rd
payment in a category. If a smaller sample is required,
every 4
th
or 5
th
payment can be selected. The period can also be selected on a regular
basis.
E.g. All transaction of the first 10 days in a month can be covered.

Select all cases of transactions above, say Rs. 1000/-. A variation of this will be to
select systematically a certain number of cases in each layer ( eg. case in the layer
Rs. 500/- to Rs. 1,000/-; 10 cases in the layer Rs. 1,000/- to Rs. 2,000/- and so on. )

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ii). Inspection team should similarly select sample case of files relating to Underwriting,
Claims, Reinsurance etc., and thoroughly scrutinize those files. They should then list out
the irregularities, omissions, mistakes, delays etc., and report on these. The above
methods of sampling are only mentioned by way of an illustration. Teams may use their
own ingenuity in selecting the samples.

h). Scope of Audit :-

Since internal audit is an integral part of the organization, management would like to know
as to whether business is conducted as per laid down rules, procedures, systems
instructions etc. Internal Audit Department is a link between higher management and field
formations at various operative levels by its review of the extent to which objectives and
plans have been achieved. The scope of internal audit should, therefore, be unrestricted in
the coverage of organisations operations.

It is also the objective of Management to see that irregularities, frauds, misappropriations or
non-compliance of its instructions are minimised and corrective measures are undertaken to
ensure that adequate control machinery exists. Besides getting individual irregularities
rectified, Internal Audit should also suggest remedial measures to prevent recurrence of
such irregularities. The basic purpose of Internal Audit is not just to collect instances of
irregularities, but to suggest improvements in systems and procedures with a view to
minimize, if not altogether eliminate chances of repetition of irregularities, and to present a
balanced feed-back report on the working of the office inspected for appropriate corrective
action by the management.

Thus the efficiency of Internal Audit Department would not be measured only from the
number of irregularities it has detected or volume of reports submitted but by increase in
operational effectiveness and the efficiency and economy achieved by the management due
to the application of various remedial measures suggested by the Internal Audit department.

i). Audit sub committee of the Board of Directors :-

Board of Directors of the Company have appointed a sub-committee to review major audit
objections and their compliance on quarterly basis and therefore audit offices must ensure
that the audit objections are given due priority for compliance.

ORGANISATIONAL SET UP :

The Department is headed by the Financial Advisor who is assisted by a Chief Manager and
Managers at Head Office. The Audit teams are posted at Regional Offices under the
supervision of a Manager / Deputy Manager. Audits of Branch and Divisional Offices are
normally conducted by Regional Office audit team and that of Regional Office by teams from
Head Office with assistance of other Regional Audit teams.

Normally one audit team consists of two Audit officers. Audit team at regional Office reports
to the Audit Incharge of regional Audit posted at each Regional Office, who in turn reports to
Head Office, Internal Audit Department so far as its functions are concerned.

With a view to acquaint the Internal Audit team, broad guidelines have been prepared for
conducting audits of Regional Office, Divisional Office and Branch Office which should
normally be followed. If circumstances warrant, further verification of the transactions to
ascertain facts, detailed checking may be done.

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GENERAL :

The Audit manual is in the form of general guidelines. The Audit personnel should carefully
go through the Accounts Manual, Technical Departments Manuals and also the various
circulars & OFOs issued from time to time to update their knowledge.

The following is the list of Acts, Rules, Manuals etc., requiring frequent reference in audit :-

Indian Insurance Act,1938 and rules made thereunder.

The General Insurance Business ( Nationalisation ) Act, 1972.

Elements of General Insurance.

Principles / Practice of General Insurance ( published by the Insurance Institute of India ).

Accounts Manuals for Divisional Offices and Branches ( issued by our Company ).

Financial Authority Powers and limits as amended from time to time ( issued by our
Company ).

Study on audit of companies carrying on General Insurance business ( Published by
Institute of Chartered Accountants of India ).

Department Manuals at Head Office and Regional Offices.

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CHAPTER 2

FINANCIAL AUDIT

In this, all the financial transactions of a Divisional / Branch Office are scrutinised. Financial
transactions normally include :-

a) Premium Collection, depositing and accounting

b) Refund of premium

c) Commission Payment and accounting

d) Claims Payment and accounting

e) Expenses of Management

a). Premium

1. Collection and depositing of premium by Collective Cashier :-

The Collective Cashier receives premium and issues a receipt after allotting a collection
number. He prepares Cash Income Book ( form No. RA-16 ) which is used for depositing
the collections. The points to be checked are as under :-

1. All the documents should be underwritten in system and no premium should be
deposited in the bank without booking of document.

2. Collection receipts should be issued for all the documents underwritten.

3. The cancelled receipts should be kept separately duly certified by Class 1 officer.

4. The days collections are deposited in the Collection Account with the Bank on the
same day / next working day.

5. The cheques of Development Officers, agents and third parties ( not having insurable
interest ) are not accepted.

6. A register showing acknowledgement of the Sub-Staff for cash / cheques / DDs
handed over to him for depositing & subsequently to be checked by the person
responsible for positing.

7. Whether there is delay in remitting the premium to the Collective Cashier by the
Development Officers.

2. Bank Guarantee Accounts :-

1. To verify that this facility is extended only to Fire Schedule Policies where premium is
not ascertainable in advance and Marine Hull Policies.

2. To verify the Bank Guarantee to ascertain its adequacy and validity and that it is on a
requisite stamp paper in the approved form.

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3. To check whether the BG dues are collected in time debits raised in a month should
be collected before the close of succeeding month.

4. The debits to BG a/c should be checked with the Premium register and the credits
with the Collective Cashier Cash Income Book.

5. To verify whether the total of debits to BG a/c do not exceed the Bank Guarantee limit.

6. Whether BG has been invoked where client fails to pay the balance in time.

3. Cash Deposit Account :-

1. All the points enumerated under Bank Guarantee Account are applicable here also
except point nos. (2) & (6).

2. For all other classes of business ( e.g. Marine Transits ) Advance Premium a/c. is
to be maintained. This is to be operated as per the guidelines contained in HO
Circular TECHAGM:10:91, date 03.09.1991.

3. To ensure that not more than one APD A/c is opened in the name of the same insured.

4. Non-operative APD A/c must be closed before expiry of next financial year with duly
discharged vouchers from account holders.

4. Co-insurance :-

A). Inward ( where we are not leaders ) ( A/c codes 5111, 5113 & 5114 ) :-

Premium / refunds are booked on the basis of statements of account / policy copies /
letter advices received from leader company. Each office is required to maintain a co-
insurance register with various details.

This should be checked to see :-

1. Whether sharing of business is as per insureds instructions.

2. Whether refunds / claims pertaining to other policies are adjusted at the time of
settlement of our account. If so, verify JE as well as booking of refunds / claims.

3. Enquire into cases where premium is outstanding.

4. Whether provision is made in the final accounts of Branch / DO for the share of
claims payable to the leader on both paid and outstanding claims.

B). Outward ( where we are leaders ) ( A/c. Codes 5101, 5103 & 5104 )

1. Arrangements for sharing is to be checked. It is to be seen whether adjustments
are correctly made on account of refunds / claims while settling accounts and that
the control codes for accounting coinsurance business are correctly used.

2. To check whether only our share is booked under Premium / Refund / claims and
share of other companies is accounted in Co-insurance control account codes in
Premium Register / Refund Premium Register / Disbursement Vouchers.

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3. Enquire into cases where claims / refunds are outstanding.

4. Co-sharing arrangements within the offices of New India should not be accounted
as co-insurance arrangement. 100% premium is to be accounted by the Policy
issuing office only.

C). Refund of Premium :-

1. To verify whether refunds have been properly allowed and sanctioned as per
Financial authority.

2. To verify the commission recoveries on refunds and to comment on the
unrecovered commission.

3. In respect of Declaration policies to check whether all the declarations are
received when the premium is refunded.

4. To check whether large refunds are intentionally kept pending in the last quarter
and passed in he month of April to inflate premium figures as well to give benefit
to Development Officers for the purpose of Incentives.

5. To check whether the refund voucher is discharged by all the parties.

6. To check premium refund account schedule as if large refunds are appearing as
unpaid for more than 6 months the reasons for the same may be recorded.

D). Commission :-

1. To check whether agency license / brokers license is in force and if the license has
expired whether commission / brokerage has been released. If so to ask for written
explanation from the Office Incharge.

2. Whether Payment of commission is sanctioned by competent authority that is
Office Incharge.

3. Whether TDS has been deducted and deposited in Bank within 7 days of payment.

4. Whether there is proper follow-up in cases where commission recoverable is
outstanding for more than 3 months.

5. Whether Commission / Brokerage expiry register has been generated.

E). Claims Disbursement :-

The various aspects to be seen are as under :-

1. The signature of insured has been obtained on discharge voucher bearing revenue
stamps as per the law.

2. In case of policies where banks / financiers interest is involved, whether signature
of both insured / bankers of financiers were obtained on the discharge voucher
and claim cheque prepared in the name of bank or financier unless letter from
bank / financier is obtained slowing payment directly to the insured.

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3. Claims settling limits prescribed for various cadres of officers are strictly adhered
to.

4. Whether disbursement vouchers give all required details and vouchers are in
serial order.

5. That claim cheques are dispatched by ECS to the address of the insured given in
policy.

6. Whether payment of claims are made by Account payee cheques only.

7. In case of co-insurance claims, where we are leaders and full amount is paid to the
insured, only our share of claim is debited to claims code and share of the co-
insurance is debited to co-insurers account code.

8. Where fresh cheques are issued by canceling previous cheques, whether correct
account codes are used.

9. Legal fees relating to claims and any other specific expenses incurred have been
debited to claims account.

10. In the case of claims settled on behalf of other offices as well as claims settled by
other offices on behalf of the auditee office, control account codes 5553 & 5554
are to be used.

11. Receipts pertaining to salvage disposal should be credited to claims account.

12. In case of TPA the amount stated in the TPA float Account of trial balance tallies
with the Bank Guarantee submitted by TPA.

13. In MACT cases where interest payment to individual beneficiary exceeds
Rs.50,000/- than TDS @ 20% in the absence of PAN and 10% where PAN is
available is deducted or not.

F). Expenses of Management :-

GENERAL :-

All items other than claims and commission fall under this head which normally
include salaries and other allowances to staff, imprest accounts, traveling expenses,
motor vehicle expenses, telephone expenses, conveyance, printing & stationery, rent,
electricity, office upkeep and maintenance, repairs and renewals, capital expenditure
like purchase of furniture, office equipment and real estate and all other
miscellaneous expenses.

Disbursement vouchers are prepared at the time of effecting payments. Scrutiny of
these vouchers constitutes important part in financial audit. While scrutinizing, it
should be ensured that financial powers are exercised as per the provisions and
limits laid down in the standing order on Financial Authority, Powers & Limits. All
deviations should be reported.

All the supporting bills, vouchers, cash memos, receipts, invoices, etc. should be
affixed with PAID stamp giving date and disbursement number at the time of
making payment.

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BUDGET & BUDGETORY CONTROL :-

1) Whether budget proposals have been prepared on a realistic basis and sent by DO
in time to RO.

2) The approved budget should be compared with the actual expenses incurred. If
there are variances, reasons for the same should be obtained and commented
upon.

3) Financial powers delegated to various authorities are subject to availability of
budget. Therefore, it is to be seen that Budget availability position certificate is
indicated on each disbursement voucher to ensure availability of budget before
incurring expenditure. For this purpose, rules stipulate maintenance of register.

IMPREST ACCOUNTS :-

Imprests are of following types :-

1. Petty Cash

2. Postage

3. Revenue Stamp

4. Policy Stamp &

5. Agency Stamp.

The general points to be seen in their audit are :-

I. Imprest balance is within sanctioned limit.

II. Payment vouchers in case of petty cash are attached.

III. Conduct a surprise check of physical balance and tally with book balance.
Difference, if any, is to be enquired into.

IV. In case of policy stamps it should be seen that :-

a. The stamps immediately on purchase are defaced.

b. Separate policy stamp register is maintained.

c. Stamps have not been requisitioned when there was sufficient balance with the
departments.

d. Check up from original policies ready for dispatch that stamps are correctly
affixed.

e. Whether stamps are affixed as per the law, the provisions of which are as
prevailing.

SALARIES & OTHER ALLOWANCES TO EMPLOYEES :-

Points for verification are as under :-
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1. Whether salary is paid as per salary sheet.

2. Whether payments other than normal salary viz. overtime, personal allowance, functional
allowance, leave encashment etc, are properly authorized and paid.

3. Whether advances to staff are made as per rules and whether proper control records are
maintained for various advances given to employees and postings for deductions made.

4. Whether deductions i.e. income-tax, PF, professional tax, CTD, deductions under court
order etc. have been correctly made and deposited with the concerned authorities within
the specified time limit.

5. In case of transferred employees, whether details have been fully received from previous
offices and whether advances / loans, income-tax deductions etc. are accounted for.

6. Whether confirmations pertaining to declarations of investments by employees for
obtaining IT relief are verified.

7. Verify JEs passed by Salary Section / Accounts department.

TRAVELLING EXPENSES :-

1. Whether tour has been sanctioned in advance by the competent authority.

2. The traveling advances have been properly authorized and earlier advances have been
cleared. The advance drawn should be reasonable considering the number of days of
tour and cost of tickets.

3. The traveling bills are supported by hotel bills / receipts, boarding pass, in case of air
travel and are sanctioned by the competent authority.

4. The mode of journey, halting allowance, hotel room charges, conveyance charges,
incidental charges etc. have been claimed as per T.E. Rules.

5. The TE bills have been submitted within one month of completion of tour and the bills
submitted thereafter are approved by Regional Manager. Balance of advance is refunded
to the company immediately.

6. The traveling advances and traveling expenses have been properly accounted through
adjustment columns of Disbursement voucher or Income Receipts, as the case may be.

7. In case of transfer TE bills, the benefits are allowed as per the rules.

8. Halting allowance in case of training or attending conference is allowed as per TE rules /
circulars and that traveling expenses incurred for traveling for attending conferences are
not debited to conference expense.

9. Advances pending for more that 3 months have to be reported as CMD level query.

MOTOR VEHCILE EXPENSES :-

1. In case of leave proper deductions should be done from monthly entitlement as per rules.

2. Insurance, taxes, petrol / diesel, tyres and tubes and batteries are debited to Motor
Vehicle Expenses Account.
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3. Reimbursement of petrol / diesel, tyres and tubes, batteries is made only to entitle
category.

4. Disbursement vouchers are supported by bills and cash receipts.

5. When new car is sanctioned it should be ensured that the sanction is as per rules and in
no case higher valued vehicle is purchased and if the old car is sanctioned under
Conveyance Scheme 2002 which comes in effect from 01.01.2003 the written down value
of the old car along with proportionate one time tax recovery and proportionate Insurance
premium is recovered as per Conveyance Scheme 2011.

6. If the old car is sanctioned as per 80:20 scheme then the depreciation allowance should
be stopped as soon as the loan gets exhausted.

TELEPHONE / TELEX / FAX EXPENSES :-


1. For entitled officers quarterly reimbursement is to be checked for landline and mobile
telephones.

2. For officers who have been allotted telephone at residence in Discretionary quota the
reimbursement /payment of telephone bills is within prescribed limit of Rent plus local
calls allowed.

3. In case Company owned Telephone is provided to the Officer whether the same is
surrendered back to the company on retirement, death, resignation.

RENT ( BOTH OFFICE & RESIDENTIAL ACCOMMODATION )


1. Whether hiring of premises is approved by HO, authority in terms of Area, Rate, Period,
Advance etc. Whether renewal terms are approved by HO. In the case of leasing of office
premises, the tender procedure followed may be checked.

2. Whether payments are made as per agreement and are accounted.

3. Whether adjustment of advance / recovery of interest is made before payment.

4. Whether there is any litigation. If so, enquire into details.

5. Whether Rent register is maintained.

6. Whether the premises rented is not excessive in area and is properly utilized.

7. Whether premises are occupied within reasonable time of taking possession and paying
Advance / Deposit.

8. Whether Income tax is deducted from rent paid where the annual payment is
Rs. 1,20,000/- or more per landlord.

Additional points in case of residential accommodation :-

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A) Owned premises :- Verify the following.

1. Whether register is maintained showing the occupancy and recoveries of License fee
and that they are not idle for long periods.

2. Whether municipal taxes and other statutory payments are regularly made.

3. Whether inventory of assets is maintained.

4. Leave & License Agreement is entered into.

5. If leased to outsiders, reasons thereof may be reviewed.

6. Whether register for repairs to premises is maintained.

7. Electricity and water charges are to be borne by the occupants.

B) Leased premises :- Verify the following.

1. Register of leased premises showing occupancy and recoveries of license fees is
maintained.

2. Where the leased premises are in the name of individual employee, reimbursement is
made on production of rent receipt as per norms.

3. Whether leased premises are taken although company owned premises are available.
If so, enquire into reasons for the same.

4. No furniture should be provided. Fixtures like fans, geyser are provided as per norms.

5. Water & Electricity charges are to be borne by the employees.

6. In case of leased accommodation provided to the officer it should be checked
whether HRA has been stopped and license fee is recovered from the Officer.

7. Whether TDS has been deducted from the rent and deposited in the Bank within
prescribed time limit.

8. Where the monthly rent is more than officers entitlement and company is paying full
rent, then whether the deduction of difference is made from salary of concerned
officer or not.

PRINTING & STATIONERY :

The following points should be covered :-

1. The DO / BO should not incur expenses for printing of letter heads, envelopes,
continuation sheets and all numbered stationery which are to be printed at RO only.

2. Whether there are any obsolete stocks. If so, reasons must be enquired into.

3. Sample checking of stocks should be done.

4. Whether the printing is done as per norms laid down and they are within the budget.

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5. Whether the payments are sanctioned as per financial authority. In some cases the bills
of the same order are split into lower amounts and sanctioned by junior officers. Such
cases should be immediately brought to the notice of higher management.

REPAIRS & MAINTENANCE :-

Verify :-

1. All recurring expenses on a particular item / asset.

2. Is there annual maintenance contract entered into after inviting quotations / rates etc. In
the case of annual maintenance contracts for computers, whether the terms are as per
requirements and guidelines.

3. Whether expenses are debited to correct account code and are economical keeping in
view the life of the asset.

4. In case of major repairs whether approval from competent authority is obtained.

5. Whether income-tax is deducted from payments to contractors as per provision under
Income Tax Act.

CONVEYANCE :-

1. Local conveyance register should be scrutinized.

2. Conveyance and out of pocket expenses for attending Lok Adalats etc. are paid as per
the HO guidelines.

BOOKS & PERIODICALS :

Expenditure on these should be verified with reference to :-

1. Approval for newspapers and magazines purchased.

2. Register maintained for purchase of books.

3. Whether old newspapers / magazines are properly disposed off and sales proceeds are
accounted.

4. A physical check of the books in the library may be conducted. Whether the Librarian has
conducted physical check periodically and whether cost of books that are found missing
have been recovered / written off may be checked.

RURAL INSURANCE EXPENSES :-

Verify that :-

1. Tags are purchased from approved suppliers and supplies received are entered in the
stock register.

2. Whether the stock register gives particulars of tags issued such as quantity and serial
number and to whom it is issued. Seriality of tags is maintained.

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3. Fees paid to veterinary doctors are as per the rates prescribed from time to time and are
verified with the policy documents.

4. Expenses incurred in connection with the participation in exhibition etc are as per the
sanction of competent authority and expenses are accounted properly.

5. Physical checking of stock in hand.

MISCELLANEOUS EXPENSES :-

Verify whether the expenses debited to this account do not pertain to any other account head.

CAPITAL EXPENSES :-

Verify :-

1. Whether the assets are purchased after approval by competent authority.

2. Whether expenses are within approved budget.

SATUTORY PAYMENTS :-

Verify :-

1. Whether income tax deducted at source from salaries, commission, rent and payments to
contractors, surveyors, Advocates is remitted to the Authorities within the stipulated time
limits.

2. Whether Sales Tax collected on the disposal of salvage is remitted in time and return is
filed with the Sales Tax Authorities.

3. Any penalty / fine imposed by any authority for violation of any statute should be
invariably reported.

4. Whether Quarterly/Annual returns are filed with the tax authorities in time. There may be
cases of inordinate delay in filing e-TDS returns which can attract heavy penalties.

NUMBERED STATIONERY CONTROL INCLUDING COVERNOTE CONTROL :-

Points to be seen are :-

1. Whether all the numbered stationery like cover notes are entered in the register soon
after receipt and preserved properly.

2. Strict control is exercised by DO / Branch on cover notes issued to the Development
Officers by maintaining cover note control register. Check whether all cover notes issued
to inspectors are either accounted or returned for cancellation. Check missing or
unaccounted cover notes in depth. All provisions of HO circular ref. IBD:ADMN, dated
09.01.1991, issued by the CMD should be strictly observed. Documents taken over from
Development Officers who have retired, resigned or deceased are to be listed & cancelled
to prevent their misuse.

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3. In case of cancellation of cover notes to check 1. The reason of cancellation 2. Date of
cancellation 3. Date of deposit of cancelled cover note in the office 4. Whether all the 4
copies are deposited. 5. Whether control number for receipt of cancelled cover notes is
maintained or not.

4. Whether HO / RO instructions regarding control over cover notes and other numbered
stationery are followed. All deviations should be reported.

5. Whether all the numbered stationery are kept under lock and key.

6. Physical verification of some of the items should be done by the visiting audit teams.

7. Obsolete stationery should be destroyed to prevent their misuse.

SERVICE TAX :-

1. Whether service tax is collected properly. Whether total amount collected is intimated to
RO in time as per the instructions of Central Accounts Department, HO after deducting
service tax on refunds made.

2. In case of co-insurance, the leader should alone collect the full amount of service tax.

3. Whether the office is taking Input Credit of Service Tax correctly and intimating the same
to higher office properly.

CHEQUE DISHONOURED BOOK :-

Verify to ensure that :-

1. All cheque dishonoured to be booked through system immediately on receipt from bank.

2. In the case of cancellation of Motor Policy arising out of dishonour of cheque, whether
the RTO is informed promptly by Registered Post AD. Also Bank / financer is to be
informed.

3. Whether cancellation endorsements are sent to the insured promptly.

4. Commission paid is recovered where policy is cancelled.

5. Where there are frequent instances of dishonour of cheques under any Development
Officer code, reasons for the same should be looked into by the audit party. Suitable
observations should be made in the audit report.

6. Cases where there are repeated cases of cheque dishonour pertaining to one insured or
where third party cheques / Agents cheques / development Officers cheques are
dishonoured, a Xerox copy of such cheque may be taken as a supporting evidence to
audit query / investigation.

7. Whether there are instances of dishonour of cheques not reported to the DO / Branch, but
revealed at the time of bank reconciliation. In all such cases, reasons for the same should
be looked into and also the aspect of who collected the dishonoured cheque advice from
the bank should be seen.

8. Whether there are any claims registered on policies in respect of which premium
cheques have been dishonoured. This could be done on a test check basis.
17

9. All Audit Incharges should review the cheque dishonoured statements received and take
prompt action wherever warranted.

10. Bank charges on cheque dishonour to be recovered from concerned Agent /
Development Officer.

BANKING :-


1. Presently only two accounts viz. Collection account and Disbursement account are to be
operated by a DO / Branch.

2. Due to introduction of new banking system- Zero balance accounts, the idle funds lying
in old collection/disbursement accounts are transferred or not. Whether initiative for
closer of old accounts is taken or not.

3. Whether bank statements are received regularly.

4. Whether bank reconciliation is done regularly on monthly basis.

5. Whether prompt follow-up action is taken on items outstanding in reconciliation
particularly Code-2, Code-5 and Code 6 items.

6. Whether funds are transferred as per the standing instructions viz. on every Saturday
from the Branch collection a/c. to the DO Collection a/c. and on every Saturday from the
DO Collection a/c. to Head Office.

7. Whether the DO is sending to RO on weekly basis, the details of transfers to HO such as
the date, TT No., amount and book balance after transfer. Similarly, the DO has to send
statement for transfers received from HO.

8. In all cases of delayed transfers, penal interest should be calculated @12% per annum
and reported. Similarly, penal interest should be calculated even where the banks have
not transferred entire balance unless it is justified because the bank is giving immediate
credit and the balance not transferred represents the uncleared portion.

9. Surplus funds lying in the Disbursement accounts should also be transferred to
Collection account.

10. Whether the bank charges levied on transfers are as per the IBA regulations in force.

11. All the JEs passed to clear the items in bank reconciliation are to be checked. It should
also be verified whether all items pending in bank reconciliation particularly for stale
cheques ( to be taken from Code-1), Bank charges ( Code-3 ), cheques dishonoured
( Code-6) are accounted by suitable JEs atleast at the time of closing of accounts. Audit
to point out only if they are not cleared at the year end while reviewing the latest audited
Trial Balance.

BANK RECONCILIATION :-

Bank Reconciliation is to be done on monthly basis and if the same is not done reasons for the
same may be recorded.

18

While checking Bank Reconciliation following codes should be checked in details :-

1. Code 1 Cheques issued but not debited by the Bank :-

Many times claims cheques are prepared but the same are not sent to the client, which
results in cheque appearing as outstanding. Such cases should be examined in detail
and the reasons for the same should be ascertained.

2. Code - 2 Cheque deposited but not credited :-

If items are outstanding for more than 6 months the cheques become stale and the
amount will never be credited. If any claim is registered and paid on such policy Section
64 VB confirmation should be checked in order to find the officer who has signed the
same. Such matters should be brought to the notice of higher management immediately.

3. Code 6 Cheques dishonoured but not accounted in our books :-

If such cases are found the same should be immediately reported because in case of TP
claim there will be no defence available with the company and the claim will have to be
paid even though the cheque has been dishonoured.

4. Code 8 Cheques debited by Bank but not accounted in our Books :-

This is also a very serious matter because in some cases there may be cases of forgery
where our account will be debited even though we might have issued a cheque for
smaller amount. Further in some cases TP awards, which become ex-party, may be
debited to our Account.

JOURNAL VOUCHERS :-

Introduction :-

JEs are prepared for rectification of errors viz. errors of omission or commission or principle.
Closing JEs are passed to account depreciation, outstanding claims, outstanding expenses,
accrued income, prepaid expenses, money-in-transit, etc. All the JEs are to be authorized by the
Accountant and the Officer Incharge.

The following types of JEs need full attention :-

1) JEs passed for booking of premium, claims, cheque dishonoured and refunds are to be
checked and their impact ( due to inflating / suppression of premium / claims etc ) on
performance appraisal of the office or a Development Officer are to be studied and to be
reported.

When business is shared by two or more offices of New India, 100% premium is to be
accounted by the policy issuing offices only. If any JE is passed by offices other than
policy issuing office, the same should be commented upon.

2) All expenses booked through JEs are to be supported by proper bills / vouchers in which
case all rules for verifying a disbursement voucher are applicable here also.

3) Any unauthorised writing off any advance / debit balance is to be reported.

4) In the case of transfer of employees, whether suitable JEs are passed in respect of
various loans and advances to staff.
19

FINAL ACCOUNTS GENERAL LEDGER, TRIAL BALANCE WITH SCHEDULES :-

1) Postings from various income / outgo books, journals may be traced for the months
selected.

2) Verification of brought forward / carried forward of closing / opening balances is to be
done on a test check basis.

3) Scrutiny of schedules are to be undertaken, items pending for a long time appearing
under various advances codes / Suspense a/c. and control codes are to be examined and
commented upon.

4) Items which are basically revenue in nature but appearing in the Schedule ( e.g.
incentives paid / leave encashment not adjusted appearing as Advance Salary ) are to be
looked into.

5) To check whether the schedules are drawn wherever required showing opening balance,
additions, deductions and closing balance instead of just showing closing balance only.
e.g. vehicle loan schedule.

6) Whether action has been taken on previous years report of statutory auditors and items
appearing in schedules and notes forming part of audited trail balance. ( indicate
corrective measures taken to avoid repetition ).

7) Whether the accounted figures as appearing in the audited trial balance agree with the
statistics appearing in various statistical returns. If the differences are material, reasons
are to be looked into and are to be reported if there are no valid reasons.

PERSONNEL DEPARTMENT :-

General :-

1) Whether attendance is properly marked.

2) Whether half day CL is debited for each and every occasion of late arrival / early going
occurring after three late comings / early goings in a calendar month.

3) Whether accrued leave is calculated properly and entered in the leave records. No
privilege leave accrues for the period when the employee is on PL, SL, LWP,
unauthorised absence and under suspension.

4) Whether leave applications are received from employees for the leave availed as per the
Attendance register and are posted to leave records properly.

5) In the case of Leave Without Pay ( LWP ), the aspects to be seen are :-

Whether competent authority has sanctioned it, whether timely and correct advices are
sent to Salary section, whether recovery is actually made by the Salary section, whether
increment is postponed in cases where LWP exceeds 30 days in a year, whether GIC has
been advised where the LWP exceeds 180 days and whether suitable disciplinary action
under CDA rules is taken wherever warranted.

In case of LWP, to ensure that salary is not generated for unauthorized absence and all
statutory deductions are also withheld in case of unauthorisedly absent employee.

20

6) In the case of promotions, whether fixation is done properly.

7) In the case of transfers, whether personnel record ( including leave record ) is also
transferred giving details of eligibility regarding LTS, leave encashment, brief case,
mediclaim and domiciliary treatment.

8) In case of transfer of vehicle in the name of officer under the New Conveyance Scheme
the WDV to be checked whether calculated according to given norms applicable only for
vehicles under Conveyance Scheme 2002. In case of vehicles transferred to
Conveyance Scheme 2011, the WDV to be added to income and tax to be deducted.

9) In case of recommendations for settlement of terminal dues, the basic pay, pay
recoverable in case of exit taking place during the month, leave encashment
components, various benefits available as per options.

10) Whether various staff benefits such as Leave encashment, LTS / Foreign LTS, brief case
etc. are allowed as per rules.

11) Overtime, if any, should be approved by the Competent authority at HO.

12) In cases where disciplinary action is in the form of stoppage / deferment of increments,
whether it is implemented correctly. In the case of Development Officers, the fact of such
disciplinary action is to be recorded in the Performance Appraisal sheet for control
purposes.

13) Ceilings as per the applicable scales of pay for each cadre are to be kept in mind at the
time of checking of stagnation increments. Rules governing stagnation increments are to
be strictly observed.

14) Proper enrolment forms are obtained for coverage under staff mediclaim. Premium
recovery is to be checked. Test check of a few claims paid is to be made to ascertain
whether the same are settled as per rules.

15) In the case of employees kept under suspension, whether the subsistence allowance was
paid correctly and on revocation of suspension, whether relevant rules regarding pay and
allowances, deductions and leave are observed.

HOUSING LOAN :-

1) Whether there are any cases where housing loan was given and the employee continues
occupation of Companys Quarters even after completion of construction of his own
premises.

2) Whether loan is sanctioned by competent authority.

3) Whether agreement is executed as per approved terms.

4) Whether the loan is secured as per the provisions of Housing Loan Scheme.

5) Whether the property is adequately insured and kept renewed.

6) Whether loan & interest recoveries are regularly effected as per rules and the advices are
acted upon by the salary section.

7) Whether documents are preserved in safe custody.
21

8) Whether recovery has started immediately for supplementary loan.

9) Whether the quantum of supplementary loan is sanctioned as per rules.

VEHICLE LOAN :-

1). Approved make :-

The vehicle purchased should be of approved make. Even if the employee is willing to
bear the difference in cost between the approved make and any higher model, it cannot
be allowed.

2). Hypothecation agreement is submitted and the endorsement is made in the RC book.

3). In the case of non-entitled employees, interest is recovered and shown under separate
code in the salary sheet.

SPECIAL POINTS PECULIAR TO VARIOUS CLASSES OF EMPLOYEES :-

1) When an Officer is converted from Development side to Administration, non-core benefits
and entertainment allowance are withdrawn.

2) In case of promotion from Development Officer to AO(D) only fixed conveyance
allowance is payable until confirmation. Petrol expenses reimbursement will be
applicable only from the date of confirmation.

3) In the case of officers availing leased accommodation / company-owned accommodation,
whether license fee is deducted as per norms.

4) Where an employee is promoted from Class III to Class I, qualification pay is to be
withdrawn.

5) When change of assignment takes place, functional allowance is withdrawn (e.g.) Audit
Officer, Vigilance Officer, Cash handling allowance, etc.

CLASS II CELL :-

1) Non-core allowance ( e.g. conveyance allowance ) are released as per scheduled
premium income ( SPI ). Arising out of audit, if SPI is revised, suitable change in the
quantum of non-core allowance is to be made.

2) In the case of Development Officers with excess cost, cost control and decrement
procedure are to be observed as per the scheme.

3) INCENTIVE AUDIT :-

The aspects to be seen are :-

a. To check the arithmetical accuracy of incentive calculation sheet as well as the
working sheet for arriving at the data on premium, claims, commission and cost of
individual Development Officer.

b. Agreement of accounted premium of the branch with the Development Officer wise
premium.

22

c. Transfer of business from direct code / Development Officers code to another are to
be examined from the point of view of GIC circular dated 14.11.1992.

d. Whether relevant items appearing under Inter Office codes ( 5553 / 5554 ) are
considered.

e. Whether various JEs passed for accounting refunds, claims, coinsurance
arrangements, premium booking etc are considered.

f. In the case of policies with co-sharing arrangements or where the business is shared
between different codes within the same office or master policy credits, whether the
respective share of claims also is considered.

4. Arising out of audit, if any Development Officer becomes ineligible for a car loan, then
interest @12% p.a. is chargeable on the loan amount till he becomes eligible. In addition,
conveyance allowance is payable on no car basis till he becomes eligible.

5. Limits of permissible calls on residential telephone are as under : ( Telephone Allowance
is to be withdrawn from the date of installation of telephone in the Residence )

ASPI

No. of calls p.a.

Not exceed Rs. 3.00 lacs.

2750

Between Rs. 3 lacs & Rs. 8 lacs.

3250


3750


4250


4750

Above Rs. 30 lacs.

5000

CLASS III & IV :-

1. Various functional allowances are released correctly and withdrawn at the time of
transfers / promotions / change of duties.

2. Whether any inapplicable allowances are released.

3. Qualification pay is released as per rules and withdrawn on promotion to Class I

23

GRIEVANCE CELL :-

Grievance cases register is to be checked. Correctness of number of cases pending and new
cases reported, cases settled during the period under audit may be test checked. The reasons
for pending cases, especially cases which are pending for more than six months may also be
test checked to see how far the action taken on the grievance was prompt. Bad cases of delay
before the case was taken up by the cell may be highlighted after ascertaining the systems
failure and remedial action taken in such cases. Comments to be given on the lapses which had
resulted in grievances.

CUSTOMER SERVICE :-


1. Instances of abnormal overcharging of premium along with reasons such as non-receipt
of circulars / instructions, lack of knowledge of tariff.

2. Commission allowed in lieu of special discount is to be recovered from the agents and
refunded to the insured.

3. In certain claims, penalty is levied for non-observance of warranties, some of which
could have been avoided by timely risk inspection and proper risk management advices.

4. Inordinate delay in submission of survey reports, in issuance of documents, settlement
of claims and in granting of genuine refunds.

5. Review of grievance cell cases ascertaining the lapse which had resulted in grievances
and the remedial action taken.

24

CHAPTER 3A

UNDERWRITING AUDIT COMMON POINTS

(I) GENERAL GUIDELINES:

1. Except for Motor Third Party risks, for all other new insurances and renewals effective on or
after 1 January 2008, insurers shall be free to quote rates of premium in accordance with the
rate schedules and rating guidelines that have been filed with the Authority.

2. The premium rates for Motor Third Party risks will continue to be regulated by the Authority.

3. Risks qualifying as large risks under paragraph 19(v) of the circular no. 021/IRDA/F&U/Sep-
06, dated 28
th
September 2006, shall be insured at the rates, terms and conditions and basis
of insurance exactly as the rates, terms etc. as developed from the re-insurers with no
variation.

4. Any revision in rates shall only be given effect to on renewal date of the insurance and
insurers shall not be permitted to cancel existing insurances and replace them by new
insurances at revised rates. The insured has, however, the right to require cancellation of his
insurance in which case, premium at short period scale as applicable shall be chargeable.

5. The terms & conditions of cover and the wordings of policies, endorsements, warranties and
clauses set out in the erstwhile tariffs shall continue to apply until fresh market wordings are
examined and accepted by the Authority after considering the views of various stakeholders.

6. All the above are subject to periodic changes and periodic updating of knowledge and
database is required for effective and accurate underwriting.

(II) PRELIMINARIES AND GENERAL ASPECTS TO BE VERIFIED:

1. Before proceeding to DO (including branches) for audit, The audit officers should ensure
that they are fully conversant with the latest position with respect to approvals, references,
ratings, matters referred by the DO and the position thereon.

2. Check whether the rules pertaining to the limits of acceptances, as modified by the Company
from time to time, are strictly adhered to.

3. Verify that the rates and discounts applied are as per the Companys guidelines. Department-
wise guidelines are given briefly, hereunder, for ready reference. For further details and in
the event of any doubts, you are advised to take recourse to the individual Company
Manuals, which are the final authorities on the subject.

4. In the case of refunds, whether financial authority, powers and limits are observed strictly.

5. Whether Co-insurance, if any, has been duly accounted.

6. Whether statistical returns are sent to R.O./ H.O. in time.

7. Check whether there exists proper system of filing and referencing, in place, for circulars
received from R.O./H.O./TAC.

8. Verify if all the registers, as per IRDA guidelines, are being maintained at all levels.

25

(III) AUDIT OF FIRE POLICIES

1. Classification of products:

Risks under Fire Insurance have been categorised on the basis of Sum Insured as follows:

PRODUCT
CATEGORIZATION OF PRODUCTS
CLASS RATED INDIVIDUAL RATED
LIMIT OF SUM INSURED LIMIT OF SUM INSURED
Standard Fire and
Special Perils
Policy.
Upto Rs.5 crores on Material
Damage.
Beyond Rs.5 crores on Material
Damage.
Consequential Loss
Policy.
Where MD sum insured is upto
Rs.5 crores
Where MD sum insured is
beyond Rs.5 crores.
Industrial All Risk
Insurance
-- Minimum Rs.100 Crores
Petrochemical Risk -- Minimum Rs. 50 crores.

Knowledge of the above classifications are necessary in order to verify that the rates
charged are in order

2. Class Rated products:

UNDERWRITING PROCEDURE

They are to be underwritten using the following procedure:

A. Use guide rates

B. Grant applicable discounts:

a) Types of discount: Discount for class rated products is as shown below :-

Discount
|
--------------------------------------------------
| |
Technical Discretionary
|
----------------------------------
| |
Construction Claims Experience

b) Procedure for Technical Discount:

1. Discount for standard construction 10%

2. Claims experience discount - 10%

26

c) Claims experience Discount: The discount pattern is as per table shown below:

* CLAIMS EXPERIENCE % DISCOUNT %
Upto 40 10
41 - 60 5
Above 60 NIL

d) Maximum Technical Discount: 1 + 2 = 16% - (Excl. Terrorism Prem.)

* NB:
(i) For the purpose of marks / discount towards claims experience the incurred
claims ratio for the preceding 36 months excluding the expiry policy period of
the risks rateable under Sections III VII shall be considered.

(ii) The total experience of all the policies in the name of the insured at any one
complex / compound shall be taken into account.

(iii) The premium and claims considered shall be those of the perils covered under
the basic policy.

(iv) Experience under add on covers / perils shall not be considered.

(v) If there is only one loss due to STFI perils, it may be ignored for the purpose of
marks i.e. it shall not form part of the claims experience.

(vi) Total discount for standard construction and claims experience put together
shall not exceed 16%.

(vii) Branch Manager is authorised to give this discount.

C. Discretionary discount permissible can be upto a maximum of 10% on guide rate.
Divisional Manager may moderate the rates so arrived at as per authority given to retain
the existing business / in procuring new business.

D. No type of discount to be allowed on Terrorism Premium.

RATING PATTERN

The rating of these policies shall be as follows:

A. Apply the Rate as per the Internal Guide Tariff
B. Less: Rate for deletion of STFI and/or RSMD peril
C. Add: Rate for add on peril e.g. Earthquake, Spontaneous Combustion(as per section VIII)
D. Less: Technical Discount upto a maximum of 16% towards Standard construction and/
claims experience to be calculated on (A B + C)
E. Less: Discretionary Discount upto a maximum of 10% to be calculated on the Guide Rate
i.e. A B + C
F. Arrive at the Net Rate.
G. Less: Discount % for option of Voluntary Deductible.
H. Arrive at Net Rate.
I. Add: Premium for add-on covers if opted* e.g. Debris removal
J. Add: Terrorism Rate **
K. Add: Service Tax at the prevailing rate.
27

Note: Rate at H will be applicable for calculation of premium on Add on Covers
** No type of discount is to be allowed on terrorism premium.

Rates are on gross basis i.e. including commission / brokerage. In case business comes
directly without intermediary, the guide rates can be reduced to the extent of commission
/ brokerage payable

SHORT PERIOD SCALES APPLICABLE:
To be charged as pro-rata premium + 10% applicable on the following:

a) Policies issued or renewed for periods shorter than 12 months, and,

b) Policies which are cancelled during currency at the request of the insured.

3. Individually Rated products:

UNDERWRITING PROCEDURE

a) Individual Rated Products will be underwritten by DO/RO/HO nominated
underwriters depending on the office limits of acceptance.

b) These risks are not to be rated at the Branch unless they are being rated as per
class rated procedure.

c) The D.O. nominated underwriter will underwrite for all individual rated risks falling
in Br. / DO limits of acceptance using the following procedure.

(i) Rating of risk is based on duly filled up proposal form and inspection report (as per
methodology indicated in the later part of the instructions) using Internal Guide Rate
(Base Rate) as the starting point.

(ii) Grant applicable discounts as enumerated below :

Types of discount: Refer Schematic sketch given in the next page.

Technical discount: is based on the marks allotted for physical features, claims
experience and FEA. The maximum permissible technical discount as per the
parameters prescribed and marks allotted shall not exceed 21%.

Add-on perils: The technical discount is applicable on add on perils rate also.

VOLUNTARY DEDUCTIBLES SCHEME FOR DISCOUNT:

DEDUCTIBLE AMOUNT (RS. IN LACS)

DISCOUNT % AOG PERILS 5% OF CLAIM AMOUNT
SUBJECT TO MINIMUM OF
OTHER PERILS
10 5 3
20 10 6
30 15 9
60 30 12
100 50 15

NB: Voluntary deductible discount to be given on the Net Rate.
28

INDIVIDUALLY RATED PRODUCTS - TYPES OF DISCOUNTS (SCHEMATIC SKETCH)
|
---------------------------------------------------------------
| |
TECHNICAL DISCRETIONERY
|
|--------------------------------------------|--------------------------------------------|
PHYSICAL FEATURES* CLAIMS EXPERIENCE** FEA ***
(30 MARKS) (40 MARKS) (20 MARKS)
| | |
S.
NO
ASPECTS OF
PHYSICAL
FEATURES
MA
RK
S

CLAIM
S EXP
%
MARKS TYPE OF INSTALLATION
MAR
KS
1 Age of the Plant
(upto 5 years)
2 Up to
10
40 Hand Appliances &
Trailer Pump Engines
5
2 Security
arrangement &
their trg. in fire
fighting
2 11 - 20 30 Hand Appliances &
Hydrant Systems
10
3 Proneness to
flood due to
location of
nearby
rivers/tunnels
Independent sprinkler/
Fixed Water spray
system
15
4 Construction of
blocks
Hydrant System & Fixed
Water spray system
20
5 Spacing of
utilities like
boiler, furnaces
from the
storage/
hazardous
process areas
4 41 - 50 15
6 General
condition of
electrical
installation
including
lightning
arrestor system,
plant earthing &
records
maintained
4 51 - 60 10
7 No open
storage of
combustible
materials
2 More
than 60
Nil

29

8 Process /
storage
blocks at
higher
elevation
compared to
ground level
2 * Marks are allotted as per the scheme. The
marks indicated are the maximum marks
allowable.
** Basis for claims experience calculation in
the same as given for class rated risk.
*** As per scale indicated.

Scheme for allowing
Technical Discounts
9 Nearness of
Public Fire
Brigade
(response
time upto 15
minutes)
2
Total
Marks

Tech
Disc-
ount
(%)

10 Safety Mgmt.
System
(Safety
Dept.,
Systems &
Procedures
for Fire
Safety, Trg.
of
employees &
Emergency
Mgmt.
system).
4 Upto 10 NIL
11-20 3
21-30 6
31-40 9
41-50 12
51-60 15
61-70 18
> 70 21
Total 30

RATING PATTERN:
The rating of these individually rated products shall be as follows :

A) Apply the Rate as per Internal Guide Tariff.
B) Less: Rate for deletion of STFI and/or RSMD perils
C) Add: Rate for add on peril e.g. earthquake, spontaneous combustion (as per Section VIII).
D) Less: Technical Discount upto a maximum of 21% towards Standard construction and/or
claims experience to be calculated on (A B + C)
E) Less: Discretionary Discount upto a maximum of 10% to be calculated on the Guide Tariff
Rate i.e. A B + C
F) Arrive at the Net Rate.
G) Less: % of discount for Voluntary Deductible selected.
H) Arrive at Net Rate.
I) Add: premium for add on covers if opted e.g. debris removal.*
J) Add: Terrorism Rate **
K) Add: Service Tax at the prevailing rate.

Note: Rate at H will be applicable for calculation of premium on Add on Covers.
** No type of discount is to be allowed on terrorism premium.
Rates are on gross basis i.e. including commission / brokerage. In case business
comes directly without intermediary, the guide rates can be reduced to the extent of
commission / brokerage payable

30

SHORT PERIOD SCALES APPLICABLE:

To be charged as pro-rata premium + 10% applicable on the following.

a) Policies issued or renewed for periods shorter than 12 months, and,
b) Policies which are cancelled during currency at the request of the insured.

3. Acceptance limits - % of Discounts:

a) Following shall be the acceptance limits for various operating offices:

OFFICE
ACCEPTANCE
LIMITS (RS. IN
CRORES)
MAXIMUM PERMISSIBLE DISCOUNT (%)
TECHNICAL COMMERCIAL
CLASS
RATED
INDIVIDUAL
RATED
CLASS
RATED
INDIVIDUAL
RATED
BRANCH 25 16 21 NIL NIL
DIVISION 75 16 21 10 10
R.O. 600 16 21 10 10

b). Risks above sum insured of Rs.600 crores are to be referred to Head Office for approval
with supporting documents like Inspection Reports, Recommendation of Underwriting
Office and any other relevant information.
c). The above limits are per risk and not per policy.
Eg: If the sum insured for a policy falls within the acceptance limits say branch and the overall
sum insured of the risk is beyond Rs.25 crores then it can be accepted only at the appropriate
level as per the above table.

4. Consequential Loss Policies:

a) All Consequential Loss proposals shall be accepted only at the Regional Office except in
case of risks where the Material Damage policy requires reference to Head Office.
b) Basis of Rating:

(i) 25% loading on the basis rate to continue and no further loading for continuous
process.
(ii) Earlier rates communicated for customers and suppliers extensions to continue.

5. Petrochemical Risks:

a) To be rated as per erstwhile Petrochemical Tariff.

b) Discounts will be offered on case by case basis depending on favourable physical
features, claims experience and competition, as per the Merit Rating Scheme.

6. Rating for Industrial All Risks Insurance:

a) IAR Policies will continue to be governed by the terms and conditions of the existing IAR
Guide Rate.

b) The Material Damage rate shall be as per the fire rates (to be used from 01.01.2008) with
applicable discounts.

c) The rate for Machinery Breakdown shall be Rs. 1.75%o with applicable discounts.

d) The rate for LOP shall be the average fire material damage rate with a 10% discount.
31

e) The Machinery Breakdown LOP rate will be decided on a case to case basis.

(IV) AUDIT OF MARINE CARGO POLICIES

(A) General points to be examined:

1. Whether details like name of insured, name of the vessel, expected date of sailing,
voyage: to and from, goods their packing, risks to be covered, sum insured, etc., are
elicited through a proposal or declaration form.
2. Whether proposals are examined in regard to interest, packing, client, susceptibility of
goods to damage, etc., and proper cover granted at adequate rate bearing in mind the
past claim experience and profitability.
3. Whether risks in excess of acceptance limits are referred to controlling office and
approval obtained, also any deviation in terms suggested by controlling office while
according approval for cover of the risk.
4. Whether collection of premium is in time vis-a-vis date of commencement of risk.
5. All Marine Policies are to be issued only on standard MAR Policy Forms. They should be
signed by Duly Constituted Authority.
6. Detailed description of the interest must be clearly mentioned.
7. Whether the terms and conditions of insurance are clear and unambiguous.
8. Standard Clauses attached, should be in conformity with the terms granted.
9. Special warranties if any, must be clearly specified.
10. Airway Bill NO. / Bill of lading No. / L.R. No. / R. R. No., name of the lorry Transporter and
ship and date must be incorporated.
11. Goods described are required to be prefixed with the word Said to contain.
12. Whether the rates charged for different types of commodities both for inland transit as
well as for import-export cargoes, are in conformity with the guide rates laid down and
modified by the Management from time to time. In the event rates charged are below the
guide rates, the same is required to be justified adequately with facts and figures.

(B) Inland Transit (rail/road) Policies:

1. Issue of Policy to Transport contractor or Transport companies or freight forwarders or
clearing & forwarding and commission agents either in their name or jointly with owners
of the goods is prohibited, except on goods owned by them.
2. Order of application of Extras and Discounts must be as laid down in the guidelines.

(C) Special Declaration Policies:

1. Completed proposal forms shall be obtained and the same details should be
incorporated in the policy with reference to the proposal.
2. The authority to sanction turnover discounts, which shall be strictly as per the
parameters laid down in the erstwhile Tariff will be vested in the Divisional In-charges.
3. Issuance of this policy to transport operators / contractors, clearing, forwarding and
commission agents except on goods owned by them is prohibited. Policy should not
be issued in joint names.
4. Mid-term increase of sum insured should not be allowed more than Twice during the
currency of the policy. If two mid term increases are not adequate, the insured should
take only ordinary open policy without discount for the remaining period. Special
Declaration policy for next year should be at least for the sum insured equivalent to
total turnover under-special declaration policy and the open policies. Terms cannot
be altered during the currency of the policy.
5. Sum Insured should not exceed C.I.F., value + 10%

32

6. When the cover is for basic transit risk, the turnover discount shall be granted only if
the loss ratio does not exceed 70% at the net rate after discount for wider that basic
cover the DO may consider growing of Turnover discount in such a way that after the
discount the loss ratio for last 3 years other than expiring year shall not exceed 70%
under the policy at the net rate. However, no discount is allowable on SRCC rates.
7. Each transit including inter-depot transfers, despatch to distribution and re-
processing centres, etc. should be treated as separate transit.
8. Certified statement of declarations shall be received at least on completion of each
quarter and final declaration shall be obtained within 60 days from the expiry of the
policy. The mode of declarations to be followed should be clearly specified on the
face of the policy.
9. The policy shall not be renewed as a special declaration policy if assured fails to give
declaration at least for the first 9 months.
10. Full premium should have been collected in advance.
11. When more than one category and separate sum insured is declared, appropriate
rates for each category should be charged. As per granting of discount in such cases,
slab wise pattern of discount for respective sum insured is to be applied.
12. The turn over discount on storage cover may be granted under the SDP policy and
while calculating loss ratio, premium and claim under the storage extension should
also be taken into consideration(III).

(D) Annual Policies:

1. Policies issued covering the risk for a full year.
2. These policies are to be checked to see whether they are issued in line with the relevant
provisions.

(E) Open Policies:

This policy is suitable for inland transit where despatches are large. An open policy is
stamped document with sum insured against collection of full premium in advance. This
policy must be checked from drafting and rating point of view and the control on the receipt
and accounting of declarations must be examined with special reference to the following:
1. Whether the Insured declares all despatches.
2. Open policy control register is maintained, showing amount declared and balance of
undeclared sum insured.
3. Limit per sending is specified and declaration clause is incorporated apart from other
requirements of a specific policy.
4. Whether despatches are declared in time. In respect of certain clients who enjoy the
facility of declaring through monthly statements care should be taken to see that the
facility is not misused and there is no leakage of premium.
5. Undue delay in declarations of despatches is to be reported.
6. Premium for enhancement of sum insured is collected before the sum insured is
exhausted to avoid over declaration.
7. Open Policy clause shall be attached to all open policies in addition to the standard
inland transit clause as applicable.
8. All open policies will be issued for a period of 12 months.
9. Suitable discount may be granted at the discretion of underwriting offices in respect of
open policies under which the average claim ratio for the preceding 3 years, excluding
the expiring policy year or for lesser period for which the policy has been in operation
does not exceed 60%. However, the net discounted rate shall not be less than 40% of the
Minimum rates given in the annexure of the new schedule.

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(F) Inland Vessels Policies:

1. Sailing warranty stipulates that if voyage, does not commerce within 7 days, risk shall
reattach on commencement of the voyage. This 7 days period may be extended at the
discretion of the Underwriter, with or without any extra premium.
2. For combined Transits, Trans-shipment extra is to be charged for each trans-shipment.
3. Policy covers craft risk in vessels belonging to the carrying company concerned, but
otherwise craft risk can be covered by charging extra premium (from shore to vessels,
from place of loading), depending on the distance involved.

Indian Coast Ports Tariff:

1. Different rates are applicable for ICC(C) and ICC(B) covers (Indian Coast Ports) based on
the category of ports of commencement of voyage and ports of destination. For wider
than ICC(B) cover, additional premium should be charged.
2. For risks commencing or terminating outside the port town, the rates and terms of Inland
transit (Rail / Road) Tariff and Inland vessels tariff must also be applied.
3. Cover against Total loss only following total loss of vessel may be granted at 75% of
ICC(C) rates but extra for overage, under-tonnage and non-classification should be
charged in full.
4. For covering Deck cargo, additional rates to be charged depending upon the cover
required.

F. O.B. Cover:

1. Cover is granted as an extension of inland transit policy. Clauses are to be attached
depending upon practice of loading i.e. direct loading, or loading by craft, rate or lighter.
2. Cover continues till goods are pleased on board or expiry of two weeks after arrival of
goods at storage place, whichever occurs first. Extension of storage risk may be allowed
at additional premium at 0.03% per two weeks or part thereof.
3. Risk of jettisoning due to stress of weather only, may be covered by charging extra
premium.
4. Extension of cover up to on board overseas vessel, may also be granted by charging
extra premium in addition to appropriate premium chargeable for Inland Risk. Additional
rates are also applicable for shutout cargo.

(G) Sailing Vessel Policies (Country Crafts):

1. Rates charged for overseas voyage depend upon the trading zone.
2. Discounts and loading, for mechanized and non mechanized vessels and for specified
trading routes should be charged as per the guidelines laid down by the Company from
time to time.
3. All extras and discounts should be worked out in the order stipulated in the guidelines.

(H) Bullion and Specie Cover:

1. Rates charged are as provided in the tariff.
2. Securities are insured at face value or market value whichever is less and 60% discount
is allowed on premium for covering securities.
3. Indemnity is limited to cost of obtaining duplicate securities except when the lost
securities are fraudulently encashed.
4. Only for valuables carried in Bullion room of a liner, discount may be allowed.
5. Additional rate is charged for door to door cover in conjunction with Transit risk
depending upon sum-insured.

34

6. Additional premium may be charged for covering risk of infidelity of the assureds
employees.

Export/Import of diamonds/precious stones, jewellery, etc. from and to India and Overseas:

1. The rates charged should be as per the guide rate specified.
2. War and strike rate will be charged additionally as per the prevailing schedules.
3. The sendings by post parcel are to be charged a loaded rate at the discretion of the RO.
This business is to be written with utmost caution.
4. Despatches to the inland destination points in conjunction with air freight sendings are to
be covered at an additional rate under merits of each proposal. Such extensions are to be
covered with approval of RO.

(I) Open Covers:

1. This cover is suitable for imports/exports.
2. An open cover is unstamped document without a fixed sum insured.
3. The terms and rates are fixed and Advance Premium Deposit A/c is arranged for ensuring
adequate premium.
4. Location clause should be incorporated in the policy.
5. Shipments are made per classed vessels only and shipments by other vessels are held
covered at a premium to be arranged.
6. All the shipments must be declared for insurance.
7. Insured is not allowed to have another open cover with another Insurance company
covering the identical interest.
8. Appropriate premium is collected before issuing certificate of Insurance.
9. Open covers shall be issued for a period of 12 months.

(J) Increased value and duty Insurance:

1. Cover is given before the arrival of the ship at the destination port.
2. Extras are to be charged as applicable to the cargo.
3. Premium rate must not be less than 75% of the rate on the CIF policy for Duty cover.
4. Premium rate must not be less than 100% of the rate on CIF policy for increased value
cover.
5. Refund endorsement must be checked to see that the refund premium is correctly
worked out and that the commission allowed is recovered.
6. It has to be also ascertained whether details of endorsements are noted on policies.

(V) AUDIT OF MARINE HULL POLICIES

(A) Classes of Marine hulls

Insurance of Marine Hull is on Agreed Value Basis. In view of the different nature of
deployment, operations, and hazards encountered, all types of Marine Hull, broadly
speaking, are divided into the following three groups:
1. Ocean going vessels and other vessels rated exclusively by the Tariff Advisory
Committee.
2. Sundry Hulls - all vessels rateable under the various Marine Hull Tariffs such as
Fishing vessels, sailing vessels and Inland vessels etc.
3. Vessels under construction etc.

Issuance of policies falling under Fishing Vessels and Sailing Vessels are decentralized to
the Divisional Office level. So far as ocean going vessels and Inland vessels cover are
concerned, the authority still rests with H.O. Dept.
35

For vessels falling under the Fishing Vessel Tariff and sailing Vessel tariff, following
underwriting points are to be verified.

(B) General Points:

1. To verify that companys standard proposal form duly completed in all respects and
signed by the Insured is obtained for new proposals as well as each renewal. The
proposal must be submitted along with satisfactory general condition survey report-cum-
valuation report. The proposal must be submitted along with a copy of the registration
certificate.
2. Policies should not be issued in the joint names of the insured and financier. Policy is to
be issued only in the name of the Insured and financiers interest should be recorded on
the policy by way of assignment clause.
3. Personal Accident Extension for unnamed persons should be granted only at the time of
inception of policy by charging appropriate premium.
4. War risks premium should be sent to HO on a Quarterly basis.
5. Ensure that the minimum premium, per vessel, is charged.
6. All rates contained in the fishing vessels Tariff and Sailing vessels tariff are subject to
Cancellation Return only (CRO). Cancellation Return only means an appropriate premium
will be returned only on cancellation of policy and that no lay-up returns are recoverable
under the policy.
7. The policy shall be issued only for the aggregate value of Hull, Machinery, Accessories
etc., and separate values of these items shall not be shown therein.
8. Short period cover for less than 12 months may be granted by charging 1/8th of the
annual rate per month or part thereof.
9. Premium Installment Clause:
a) For Fishing Vessels and sailing vessels, with Hull Machinery Sum insured not
exceeding Rs.20 Lakhs: The policy to be issued for 3 months with 40% of Annual
premium. The policy will be subject to automatic renewal for a further period of 3
months and 6 months by way of extension endorsement on payment of second and
third installment respectively @ 30% of the Annual Premium each payable before the
expiry of the current policy and or its Extension periods. If Premium for subsequent
quarter is not received before expiry of policy/extension endorsement period, risk
under the policy ceases and new policy could be issued for 3 months only by
charging 40% of the Annual premium once again.
b) For fishing Vessels and Sailing Vessels with Hull & Machinery Sum Insured between
Rs. 20 Lakhs and Rs. 50 Lakhs: Payment of Stipulated premium is to be done in 4
Installment Clause showing details of instalment and due dates should be attached
with the policy. In the event of Total with loss or CTL or Arranged T. L. of the vessel
during the currency of the policy, all subsequent installments shall immediately be
collected before claim is settled.

In both the above cases, annual stamp duty is to be collected along with the first
installment. Similarly, in both the cases, annual policy could be issued by collecting full
annual premium at the inception of the policy.

10. Prohibition to grant cover to premium defaultees: While considering ocean going vessels
& Inland vessels where there is a change of insurer, no cover shall be granted without
obtaining a declaration in writing from the proponent that all premiums due under the
policies issued during the previous year have been fully paid.
11. Wherever there is interest of bank/department as financiers and the loans outstanding
exceed three instalments, the insurance cover on such vessels by the Insurance
Companies may be limited to 80% of the value shown in the valuation report and the
insured will be deemed as his own insurer for the balance 20%. Necessary coinsurance
clause will have to be inserted on such policies.
36

12. Documents/Statistics to be forwarded by the DO to the RO:
a) Copies of policies and endorsements issued during the month along with the cession
cards.
b) Monthly Statement of intimated and paid claims.
c) Hull premium booked client-wise.

(C) Points specific applicable to Fishing Vessels:

1. Fishing vessel rates are applicable to all fishing vessels (mechanised or non
mechanised), valued up to Rs. 50 lakhs. All fishing vessels forming part of a fleet
should be rated according to this tariff.
2. The rates are not applicable to Mechanised and non-mechanised Fishing Vessels
engaged in operations other than fishing.
3. For vessels over 5 years of age with value less than Rs. 50,000/- valuation certificate
is not required.
4. Fishing Vessels of plastic and/or wooden constructions are to be rated separately.
5. Appropriate premium rate is charged depending upon type of vessel whether
mechanised or non-mechanised and its deployment in the concerned trading zone.
6. Owners discount may be allowed only on Vessels with Sum Insured between Rs. 20
lakhs and Rs. 50 lakhs.
7. Proper monsoon warranty for lay-up period is applied as per vessels deployment in
the concerned trading zone.
8. For waiving lay-up warranty additional premium is charged depending upon the
trading zone where vessel is usually employed.
9. Additional premium, at the appropriate rate is charged to cover breach of lay-up
warranty provided vessels operate within the port limits of respective ports. However,
no additional premium is to be charged to cover breach of lay-up warranty provided
vessels operate in sheltered river water or in sheltered ports/harbours only. within the
break-waters.
10. Where a vessel is engaged in fishing and operations connected therewith beyond one
zone, the highest rate applicable for the zones concerned is applied. Additional
premium, at the applicable rates, for each additional zone shall be charged.
11. When wider cover for partial loss or damage arising out of fire, collision liability etc.,
is given appropriate extra premium is charged depending upon whether fishing vessel
is mechanised or non mechanised and proper deductibles re applied.
12. P. A. Cover for unnamed person, at the appropriate rate is extended only to fishing
vessel with Sum Insured less than Rs. 20 lacs.

(D) Points specific applicable to Sailing Vessels:

1. Sailing vessel rates are applicable to all applicable to all sailing vessels (Mechanised
or non-mechanised) valued upto Rs. 50 lakhs. All sailing vessels forming part of a
Major fleet should also be rated according to tariff.
2. Valuation certificate is required only for total loss, constructive total loss and when
wider cover like partial loss or damage arising out of fire, collision liability, P & I
liability etc., is granted.

3. Additional points mentioned under items (C) 5 to 12 above may also be kept in view
except that in the last point No. (C) 12, P. A. cover for unnamed person is extended
only to crew of a vessel with sum Insured less than Rs. 20 lacs.

(E) Points specific applicable to Vallums and Catamarans:
1. Vallums and Catamarans fitted with outboard engines can be covered at the
appropriate premium, per annum, subject to Total Loss/Constructive Total Loss/
Salvage charges and Sue & Labour charges only.
37

2. Total loss of Machinery can be paid if and only if, total loss of vessel is paid.

(F) Builders Risk Policies:

1. This section is applicable to all vessels mechanised or non-mechanised irrespective of
value whilst under construction in any shipyard or boat building workshop in India.
Those proposals which do not conform to conditions of this tariff are to be referred to
HO.
2. All the risks (hull or machinery) are to be accepted with a time limit.
3. Completed proposal form must be obtained in all cases.
4. Rating on the basis of gradually progressing value is not allowed but the proper basis is
as under:

a) Full Contract value or full completed value whichever is greater.
b) Contract period or the period from its inception of any work in yards or shop until that
delivery whichever shall be the longer subject always to the limitation of the Duration
or risk clause. Extension of cover beyond the period mentioned in the policy may be
allowed by changing additional premium as per scale of monthly rate for each
category of vessel.
c) Premium rate is charged as per category of vessel under Construction.
d) Premium instalment payment facility on quarterly basis is granted only when the
period of construction is 12 months or more. First installment has to be 5% more than
the rest.

5. Discounts:

a) For good claims record, yard discount is given as per scale of rates provided in the
Tariff depending upon claim experience of preceding 5 years. The discount is granted
if the policy is issued either in the name of the builder or in the joint name of the
builder and the owner.
b) For adverse claims record with loss ratio of 75% or more for a yard, the case may be
referred to HO for fixing the underwriting basis to be applied.

6. Deductibles:

a) Deductibles are applied as per category of vessels under construction.
b) All deductibles are mentioned in rupees and not as percentage in policy.
c) Deductibles mentioned in the policy are not subject to upward or downward revision
irrespective of the change in full completed / contract value of the vessel. If the
builders desire to opt for higher deductibles than the scale provided, the same is to
be referred to HO for fixing the allowance to be granted thereof.

7. Necessary adjustment is done when full contract value/full completed value and full
contract period is finally declared.

8. Cover may be granted on Hull value initially if machinery risk is to attach subsequently.
In such a case, machinery is to be rated at appropriate scale plus the monthly rate from
the time the first item of the same is delivered at the yard.

(G) Inland Vessel Policies:

1. Vessels such as barges, pontoons, tugs, passenger vessels plying in Inland waters of
India shall be rated under this section.
2. Rates and Warranties vary according to the type of the vessel.

38

(VI) AUDIT OF MOTOR POLICIES

1. Rating and Terms and Conditions:
a) Branch Offices and Divisional Offices will underwrite all Motor Package Policies and
Liability only Policies.
b) Third Party Liability premium under Package and Liability Only policies is collected on
behalf of the Indian Motor Third Party Insurance Pool (IMTPIP).
c) No Agency Commission or Brokerage will be payable in respect of Motor Third Party
Insurance business.
d) The rating for different classes of vehicles, for Motor Own Damage as well as Third Party
Premium, is to be done on the basis of the Guide Rates framed by the Company from
time to time.
e) The Regional in Charge, at his/her discretion may allow reduction of 2.5 % from the
Internal Motor Guide Tariff 2008 based on the volume of business generated from a
particular source, like Bancassurance, Corporate Agents, Brokers, Dealers etc, provided
that there shall be a minimum premium of Rs.50 lakhs from a particular source and the
Motor Incurred Claims Ratio does not exceed 40%.
f) Any revision in rates shall only be given effect to on renewal date of the insurance and it
is not permissible to cancel existing insurances and replace them by new insurances at
revised rates. The insured has, however, the right to cancel his insurance in which case,
premium on short period scale, as applicable, shall be chargeable.
g) Third Party Liability Premium under Package and Liability Only policies will continue to
be regulated by IRDA.
h) The terms & conditions of cover and the wordings of policies, endorsements, warranties
and clauses set out in the erstwhile tariff i.e. IMT-2002 shall continue to apply until fresh
market wordings are examined and accepted by the IRDA.
i) For all Auto tie-ups, the old rates prevailing as on December 2007 will continue and with
regard to Pay outs by whatever nomenclature they call, please refer to HO circular
dated 27
th
December 2007.

2. Documentation for Underwriting Motor Package and Liability Insurance:

a) Proposal form:

I. Separate proposal form has been devised for Third Party Liability Insurance and
Package Insurance.
II. The questions have been formulated with a view to collect-required data for a smooth
transition to Risk Factor- based rating.
III. The proposal form must be filled up completely by the proposer along with his
signature and date.
IV. The proposer may be the owner of the vehicle or his legal representative.
V. The proposal form should be carefully scrutinized and must bear the signature of the
underwriter in support of his acceptance of the proposal.
VI. The proposal form should be carefully preserved for necessary review at the time of
processing of claim.

b). Documents to be collected along with the proposal form: (For all classes of vehicle
including private cars and two wheelers)

I. Copy of R.C. Book
II. Invoice copy (details of accessories such as electric/electronic fittings)
III. Previous insurance policy
IV. Documents for confirmation of No Claim Bonus (if applicable)
V. For Commercial Vehicles in addition to the above documents copies of permit, fitness,
route permit and proof of residence of the owner, duly verified, must be collected.
39

3. Coverage:

Policies insuring Motor Vehicles are to be issued only for:

I. Private Car: Motor Vehicles used for social, domestic and pleasure purposes(excluding
the carriage of goods other than samples) of Insured or anyone else with Insureds
knowledge and consent excluding use for hire or reward, racing, pace making,
reliability trial, speed testing and use for any purpose in connection with the Motor
Trade.

II. Two Wheeler: Motorized two wheelers (with or without side car) used for social,
domestic and pleasure purposes (excluding the carriage of goods other than samples)
of the insured or anyone else with insureds knowledge and consent but excluding use
for hire or reward, racing, pace making, reliability trial, speed testing and use for any
purpose in connection with the Motor Trade.

III. Commercial Vehicle: Motor Vehicles other than as mentioned in (i) and (ii) above:

The Commercial Vehicles are classified as follows:

A. Goods Carrying Vehicles
A.1 Public Carriers (other than three wheelers)
A.2 Private Carriers (other than three wheelers)
A.3 Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles(Public
Carriers).
A.4 Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles(Private
Carriers).

B. Trailers (Any truck, cart, carriage or other vehicle, including agricultural implements,
without means of self-propulsion, drawn or hauled by any self-propelled vehicle is
referred to as trailer for the purpose of these Guidelines

C. Vehicles used for carrying Passengers
This is sub classified into :
C.1 Vehicles Carrying Passengers for Hire and Reward.
C.2 Vehicles Carrying Passengers Other than Hire and Reward.

D. Miscellaneous Vehicles
D1 Agricultural And forestry Vehicles
D2 Special Purpose Vehicles other than Goods and Passenger carrying vehicles

(Note: The own damage cover for any special purpose vehicles, fitted with specialty
equipments whose value is more than the value of vehicle itself, is not to be
underwritten in the Motor Department).

E. Motor Trade - Road Transit Risks only

F. Motor Trade - Road Risks only

G. Motor Trade - Internal Risks only

4. Insureds Declared Value (IDV):
a) The Insureds Declared Value (IDV) of the vehicle will be deemed to be the SUM
INSURED for the purpose of these guidelines and it will be fixed at the commencement of
each policy period for each insured vehicle.
40

b) The IDV of the vehicle is to be fixed on the basis of manufacturers listed selling price of
the brand and model of the vehicle proposed for insurance at the commencement of
insurance / renewal and adjusted for depreciation (as per schedule specified below).
c) The IDV of the side car and / or accessories, if any, fitted to the vehicle but not included
in the manufacturers listed selling price of the vehicle is likewise to be fixed in the same
manner.
d) IDV of vehicles beyond 5 years of age and of obsolete models of the vehicles (i.e. models
which the manufacturers have discontinued to manufacture) is to be agreed between the
Insurer and the Insured on the basis of its Market Value taking into account its make
model, age, mileage, condition and circumstances of its purchase by insured.

5. IDV and Constructive Total Losses:

a) A vehicle will be considered to be a CTL, where the aggregate cost of retrieval and / or
repair of the vehicle subject to terms and conditions of the policy exceeds 75% of the
IDV. Insurer may at its own option repair, reinstate or replace the vehicle or any part
thereof and/or accessories thereon or may pay in cash the amount of the loss or damage
but Insurers liability will not exceed:
(i) For total loss/constructive total loss of the vehicle: the Insureds Declared Value (IDV)
of the vehicle (including accessories thereon) as specified in the Schedule.
(ii) For partial losses( i.e. losses other than Total Loss/Constructive Total Loss of the
vehicle): actual and reasonable costs of repair and/or replacement of parts
lost/damaged subject to depreciation.
b) For the purpose of TL/CTL claim settlement, this IDV will not change during the currency
of the period of insurance in question.
c) It is clearly understood that the liability of the Insurance company shall in no claim
exceed the IDV as specified in the policy schedule.

6. Vintage Cars:
a) Any car manufactured prior to 31-12-1940 and duly certified by the Vintage and Classic
Car Club of India can be considered a Vintage car for the purpose of these guidelines.
b) It is in order to issue Agreed Value Policy for vintage Cars. Under an Agreed Value
Policy a specified sum agreed as the insured value of the vehicle is paid as
compensation in case of Total Loss/Constructive Total Loss of the vehicle without any
deduction for depreciation.

7. Fleet Discount:
a) A Fleet discount of 10% can be given only on the Own Damage portion as under:
(i) The Fleet of the vehicle should all be owned and operated by the same Juristic Person
(Corporate entity, Firm, Partnership etc.)

(ii) There should be at least 10 vehicles in the Fleet.
(iii) The basic premium should derive from the Internal Guide tariff for the vehicles.
b) The Fleet discount can be given, provided the Motor Own Damage Claims Ratio of the
entire Fleet in the previous does not exceed 50%.

8. Additional points to be noted:
a) Period of Insurance:
(i) No policy is to be issued or renewed for any period longer than twelve months.
(ii) It is, however, in order to extend the period of insurance under the policy for any
period less than twelve months by payment of extra premium calculated on insurers
short period scale, to be adjusted on prorata basis if renewed for a further period of
twelve months with the same insurer immediately after expiry of such an extension
without any gap.

41

(iii) However, a short period cover / renewal, may be granted for periods of less than
twelve months at short period rate fixed by the Insurer.
b) Payment of Premium: The full premium is required to be collected before commencement
of cover. Premium cannot be collected in instalments.
c) Limitations as to use: There are various limitations specific to every class of vehicle,
which come into play at the time of claim, for which reference may be made to the
provisions of the Tariff.
d) Vehicles Subject to Hire Purchase Agreement: Policies and Certificates of Insurance are
to be issued in the name of the Hirer only and not in the joint names of the Hirer and the
Owner. If Owner's interest is to be protected, it should be done by the use of an
endorsement.
e) Vehicles subject to Lease Agreement: Policies and Certificates of Insurance are to be
issued in the name of the Lessee only and not in the joint names of the Lessee and
Lessor. If Lessors interest is to be protected, it should be done by the use of an
endorsement.
f) Vehicles subject to Hypothecation agreement: Policies and Certificates of Insurance are
to be issued in the name of the Registered Owner only and not in the joint names of the
Registered Owner and Pledgee. If Pledgees interest is to be protected, it should be done
by the use of Endorsement.
g) Cover Note:
(i) Cover Notes insuring Motor Vehicles are to be issued only in Form 52 in terms of Rule
142 Sub-Rule (1) of the Central Motor Vehicles Rules 1989.
(ii) In terms of Rule 142, Sub-Rule (2) of Central Motor Vehicles Rules 1989, a Cover Note shall be
valid for a period of sixty days from the date of its issue and the insurer shall issue a policy of
insurance before the date of expiry of the Cover Note.
a) Certificate of Insurance: A Certificate of Insurance for a Motor Vehicle is to be issued only
in FORM 51 in terms of Rule 141 of Central Motor Vehicle Rules 1989.
b) No Claim Bonus:
(i) NCB, the rate of which will be at the discretion of the Insurer, may be earned only in
the Own Damage section of the Policies covering all classes of vehicles but not on
Motor Trade Policies (Road Transit Risks / Road Risks / Internal Risks) and policies
which cover only Fire and / or Theft Risks.
(ii) The Insured will be entitled to NCB at a renewal if no claim is made in preceding full
year of insurance. It is, however, understood that policies where Own Damage cover
is restricted to Fire and/or Theft cover, whether with or without Third Party Liability
Cover will not be entitled to any No Claim Bonus.
(iii) The entitlement of NCB shall follow the fortune of the original Insured and not the
vehicle or the Policy.
(iv) Where the Insured is an individual and on his/her death the custody and use of the
vehicle passes to his/her spouse and/or children and/or parents, the NCB entitlement
of the original Insured will pass on to such person/s to whom the custody and use of
the vehicle passes.

c) Depreciation on replacement of parts:
a) Assembly
In case of an assembly comprising of various parts and / or individual parts where the
individual part of the assembly is not separately available as per the catalogue of the
manufacturer, depreciation on such part will be levied at the highest rate applicable to
any of the parts of the assembly.
b) Composite part
Part comprising of more than one kind of material (metal, rubber, plastic, fibre etc.)
which cannot be separated from each other will attract a flat depreciation of 30% or as
per the age of the vehicle, whichever is higher.

42

c. Reduction of Covers: The Insurers have the freedom to reduce the cover from that listed
in Section : Loss of or damage to the Vehicle under Section 2: Loss of or damage
to the Vehicle insured under Motor Policy Private Car / Two Wheeler / Commercial /
Trade Package. For example, cover only for fire and theft or theft only cover and
provide appropriate endorsements to the Policy.

d. Fraud and Forfeiture: If any claim is made that is Fraudulent or any false declaration or
statement in support thereof is made, the Policy of Insurance will become void and the
Insurer will not be liable to make any payment in respect thereof. The Insured will also
not be entitled to any return of Premium in the event the Policy of Insurance is treated
as void.

e. Mis-description and Non-disclosure: The Policy will be voidable in the event of
misrepresentation, mis-description or nondisclosure of any material particulars. No
claim is payable in such cases.

f. Specific exclusions: Note must be taken of the specific exclusions mentioned under each
section of the tariff. The Insurer is not liable in such cases.

(VII) AUDIT OF MISCELLANEOUS POLICIES

1. General aspects to be verified:

a) Whether duly completed proposal forms are obtained, wherever applicable.
b) Whether any increase in S.I. allowed mid term, which is not permitted.
c) Whether good feature discounts allowed are properly justified.
d) Whether first loss policies have been issued. If so whether correct premium has been
charged.
e) Whether veterinary Doctors certificate is obtained for valuation & health of animals.
f) Whether ear tags numbers are correctly stated in the policy in respect of each animal.
g) In case of retagging whether endorsement is passed.
h) In cases where discretionary discounts are given, whether they are supported by
documentary evidences.

2. Burglary Insurance:
a) To check if corresponding fire insurance of the risk is already on our books. Burglary
cover should be given only if we have given corresponding Fire Insurance.
b) As per loss control measures guidelines of H.O. Inspection of major risks has to be done
before acceptance of the risk.
c) First loss policies should be issued only in proper cases and rating has to be properly
done so that company does not lose much premium.
d) In case of policies on declaration basis, declarations should be received in time and
adjustment of premium has to be made at the end of the policy period.
e) Key Clause and Pair and set clauses have to be used while covering jewellery and
valuables.

3. Plate Glass Insurance:

a) Only glass which are fixed and not moveable can be covered under the policy.
b) Plate glasses in the entire premises have to be covered and there should be no selection.
c) Fire and allied perils including earthquake, cyclone, flood, riot & strike are excluded from
the purview of the policy.

43

4. Bankers Indemnity:

Whether basic S.I., increased during currency of policy; If so, whether retroactive clause is
incorporated?

5. Public Liability Underwriting:
a) Rating has to be as per Market Agreement for aggregate limit of indemnity for any one
year up to the limit currently applicable.
b) Proposals which are outside geographical limits of India and where aggregate limits of
indemnity exceed the limit have to be referred to the Market Agreement Committee.
c) Maximum ratio of limit of indemnity for any one accident or any one year shall not exceed
1:4.
d) Turnover of the insured has to be accurately assessed and declared by the insured at the
inception. In case insured anticipates any increase in turnover, such anticipated increase
must be advised to the company and additional premium paid thereof. It is not
permissible to adjust the premium for the turnover on expiry of the policy.
e) The insured dealing in hazardous substance are legally liable for insurance as per Public
Liability Act, 1991. Wherever environmental fund is collected, it is to be credited to the
Environment Fund Account. No co-insurance arrangement is permitted under the policies
issued to cover the Public Liability Act requirements.

6. Product Liability Insurance:
a) Rating has to be as per Market Agreement. Market Agreement is applicable to all policies
with a maximum limit of indemnity of Rs.3.50 crores for any one year. Other proposals
have to be referred to Committee.
b) Turnover must be accurately assessed at the time of inception of policy. In case insured
anticipates any increase in turnover he must inform the company and pay additional
premium.
c) Premium for the turnover cannot be adjusted on expiry of the policy.

7. Jewellers Block insurance:
a) Rating has to be done as per the HO guidelines/reference rates.
b) Good features discount @ 10% to 15% under Section-I is to be allowed only after getting a
written confirmation of the good features from the insured.
c) In the event of any claim, no claim discount allowed is withdrawn entirely and not slab-
wise.

8. All Risks Insurance:
a) Items covered have to be described in detail in the policy.
b) Valuation certificate for jewellery and valuables has to be obtained.
c) Prudent underwriting practice is followed or not i.e. insurance is to be given to proposers
with good moral hazard/reputed clients having all other insurances with us. Incidence of
claims on polices given to stray client should be reported.
d) No selection of risk is to be allowed.
e) For camera/wrist watches etc., warranty as to exclusion or scratching damage should be
incorporated.

9. Money-in-Transit Insurance:
a) This is intended to cover loss by robbery, theft or any other cause whatsoever including
loss due to dishonesty of the insureds employees engaged for carrying the money.
b) Carriage between specified places is covered and hence, the places, the distance
between them and character of the neighbourhood should be ascertained.
c) Information regarding the mode of transport, the limit per carrying, number of employees
escorting, their designation and status and whether armed guards are provided should
also be obtained.
44

d) Premium rate is per mile and is chargeable on the estimated annual turnover of cash in
transit.
e) Premium has to be adjusted on expiry of the policy on the basis of actual carrying of
cash.
f) Premium rate is to be fixed depending on distance, mode of transit, limit of carrying and
other underwriting factors.
g) Cash-in-safe should be covered under Endorsement CT-2. The rate chargeable is per
cent.

10. Baggage Insurance:
a) The entire baggage has to be covered for intrinsic value only.
b) Only accompanied baggage can be covered.

11. Householders Insurance:
a) Minimum three covers are to be taken out of which section 1-B is compulsory.
b) On non-tariff premium, discount is to be given @ 15% if cover for 5 to 6 sections
(including tariff covers) is taken.
c) The discount is 20% if more than 6 sections (including tariff covers) are taken.

12. Shopkeepers Insurance:
a) Total Sum insured Section I should not exceed the limit laid down by the Company from
time to time.
b) If any policy is found to have been issued for more than the limit mentioned above, the
Guide Rates appropriate to the particular Insurance are to be applied, without the benefit
of the package discounts and the difference should be shown as short charged. In
addition, commission recovery and non-tariff discount recovery should also be reported.
c) Maximum sum insured for plate glass, neon signs, baggage, fidelity guarantee, public
liability, business interruption must be strictly observed.
d) Discount @ 15% is given on non-tariff premium if cover is taken for 5 to 6 sections
including tariff sections.
e) If the cover is taken for more than 6 sections, then 20% discount is allowed on non-tariff
premium.
f) Sum insured for contents under Sections I-B and II should be identical.

13. Carriers Legal Liability Insurance:
a) Premium has to be charged as per tariff for basic cover. For wider cover, rating is left to
the discretion of the underwriter.
b) Discount in premium can be given depending on age of the vehicles.
c) For Riot & Strike cover, extra premium, at the appropriate rate has to be charged. No
discount can be given on this premium.
d) There has to be Motor comprehensive cover for the vehicle.
e) Maintenance of log book for each vehicle is compulsory.

14. Workmens Compensation Insurance:
a) Risk has to be classified properly and appropriate tariff rate has to be charged.
b) All categories of workers have to be covered and there should be no selection.
c) Premium has to be paid in advance and is adjusted at the end of the policy period based
on actual wages paid.
d) Where policy is extended to cover medical, surgical and hospital expenses, premium has
to be loaded as per tariff.
e) Where wages exceed the applicable limit, which may be revised from time to time, per
month per head, then the rate is to be reduced for the sum by which it exceeds this limit,
as per the General Regulations of the W.C. Tariff.

45

15. Personal Accident Insurance (Individual):
a) Capital sum insured should be based on earning capacity/financial status of the insured.
Previous claims history of the insured should be studied, if available.
b) Rating has to be as per the guidelines & guide rates, laid down by the Company.
c) When Medical expenses are to be covered, extra premium has to be charged at the
appropriate rate.
d) Policy can be issued only to persons between 5 to 70 years. Where a higher aged person
is to be covered, the guide rate has to be appropriately loaded. In such a case, cover
should be given based on satisfactory health certificate and after obtaining approval of
Head Office.
e) in the case of children, maximum cover is to be limited to death and permanent
disablement, i.e.Table B benefits only.
f) Cumulative Bonus under the policy shall, not accrue if the policy is not renewed within 30
days of its expiry.

16. Group personal Accident Insurance:
a) Group policy can be issued covering more than one person. However, group discount
can be granted only if the number of persons in a group exceeds 25.
b) Group discount once allowed should not be reviewed during the currency of the policy.
c) Group discount pattern for fresh covered and for renewals are different.
d) New Persons may be added to the group in the course of the policy period by charging
pro-rata premium.
e) In case of deletion of names from group policies during the currency of the policy, refund
of premium on pro-rata basis can be allowed only if there is no claim respect of the
particular insured person.
f) Claim experience of the preceding three years excluding expiring year has to be reviewed
and appropriate loading may be applied.

17. Janata Personal Accident Insurance
a) Only one policy can be issued to an individual.
b) Proper control over JPA documents is to be maintained.
c) The minimum and maximum age limits of 10 and 70 years respectively are observed.
d) In case of Group Policies whether discount is allowed correctly. Discounts should be
given based on actual size of the group and not on anticipated number of the group.
e) Whether long-term JPA policy issued in excess of 1 lace S.I.
f) Whether long-term JPA policies issued for more then 1 lacs has been cancelled as per
circular issued in 2002.

18. Family Floater Medi-claim Policy

Covers all the family members with one sum insured. The terms and conditions are as per
Medi-claim Policy 2007 with the following amendments:

a) Floater benefit: Means the sum insured as specified for the Proposer under the policy is
available for any or all the members of his/her family for one or more claims during the
tenure of the policy.
b) Age: Can be issued to persons up to the age of 60 years of age covering self spouse
dependant children(max 2). Renewals beyond 60 years can be allowed.
c) Parents/Parents in law/brothers/sisters: are not covered even if they are residing with the
proposer under this policy.
d) Sum Insured: Minimum Rs 2 Lacs and Max Rs 5 Lacs
e) Premium: As per Medi-claim Policy 2007. Basic premium will be the highest age of the
family member and 50% loading for covering spouse and 25% loading for covering every
additional dependant child. Loading for pre existing condition and pre acceptance health
check up is as per Medi-claim Policy 2007.
46

f) Cumulative Bonus and cost of health check up: Benefits are not available under this
policy

19. Mediclaim -- group mediclaim 2007
Coverage: All terms and conditions are as per Mediclaim Policy 2007 except for the
following.
a) Cumulative Bonus , Cost of health check up and Family Disc: Not applicable.
b) Group proposed for Insurance must comply with the provisions of definitions of group
issued by IRDA.
c) Group Discount: Applicable as per existing rules and the rates are as under:
d) Number of Persons Discount %:
101 500 = 2.5
500 - 1000 = 5
1001 2000 = 7.5
2001-10000 = 10
10001-15000 = 12.5
15001-25000 = 15
25001-50000 = 20
Above-50000 = 30
e) Age limit, basic premium, benefits and exclusions as per Mediclaim Policy 2007
f) Extention for Maternity Benefits: This is an optional cover which can be obtained on
Payment of 20% of Total Basic premium for ALL the insured person under the policy.
Maximum Benefit allowable under this clause will be 10% of the Sum Insured for Normal
Delivery subject to Maximum of Rs25000/-. Under Caesarean Section benefit will be 20%
of Sum Insured subject to Maximum Rs.50000/-. Pre and Post natal expenses are not
covered. The overall liability including Maternity Benefit will not exceed the basic sum
insured. Waiting period of 9 months is applicable for payment of any claim.
g) Renewals from other insurer will be treated as FRESH proposals.
h) No Policy to be issued for Unnamed Group.
i) Policy for persons below 100 can be given without Group Discount.
j) Additions/Deletions of named persons during the currency of the policy is allowed on pro
- rata basis. Bonus / Malus will apply at the time of Renewal depending upon the claims
ratio. Premium Chart: As per Mediclaim Policy 2007.

20. Mediclaim Policy-2007:
a) Coverage: Covers reimbursement of Hospitalisation Expenses for illness/diseases or
injuries sustained during the policy period.
b) Age: 18 Years to 60 Years. Children between 3 months to 18 years can be covered if
parents are also covered under the policy.
c) Renewals beyond 60 years can be allowed provided there is no break in insurance.
d) Proof of age should be submitted.
e) Renewals beyond the age of 70 years will be loaded by 2.5% per year on the premium
applicable for the age band 65-70 years.
f) Medical Examination: Persons above 45 years of Age opting for Mediclaim Policy for
the first time will have to undergo prescribed Pre health check up from an empanelled
Doctor.
g) Proposal form along with pre-acceptance health checkup report (if necessary), duly
completed in all respects are mandatory for Underwriting.
h) Sum Insured: Minimum Sum Insured is Rs.1 lac Sum Insured for each of the family
member should be equivalent to that of the proposer. For Dependant Children sum
insured can be up to 50% of the Proposer subject to minimum of Rs.1 lac. Mid-term
increase in Sum Insured is not allowed. Enhancement of Sum insured at renewal is
subject to satisfactory Pre-acceptance health check up irrespective of Age.

47

i) Family: Comprises of Insured, spouse, eligible dependant children above the age of 3
months (Max 2 children) and dependant parents/parents in law(below the age of 60
years). All members of the family should be covered without any selection. Brothers and
Sisters residing with the proposer can be covered without Family Discount.
j) Discounts:
I. Family discount: 10% discount in premium for covering Family members. (family as
defined above). Mid term inclusion for child attaining the age of 3 months and newly
married couple by charging pro rata premium without Family Discount.
II. Loyalty discount: The proposer with age less than 40 years is entitled for Loyalty
Discount on renewal without break. This discount will be given when the insured
enters the next age band. The Loyalty Discount is 10% of Gross renewal Premium for
the family and the same will be withdrawn permanently when a claim is lodged under
the policy for any member of the family.
III. Good health discount: 2.5% for members of Recognised Health Club/Gymnasium
subject to proof of upto date membership.

21. Overseas Mediclaim Policy
Policy provides Worldwide cover for Indian Residents making bonafide trips abroad for A)
Business and Holiday Purpose B) Employment and Studies.

a) Eligibility:
I. Any Indian Resident.
II. Foreign Nationals working in India with Indian employers of multinational companies
getting salary in Indian Rupees.
III. Foreign Nationals domiciled in India subject to verification of Ration Card and Filing
of IT returns.
IV. Employment Policy for Persons deputed abroad on Contract by Indian employers.
V. Study Policy for Students going abroad for Study or persons deputed for training
purpose.
b) Age: 6 months to 70 Years.
c) Proposal over 70 Years to be accepted after obtaining Medical reports and appropriate
loading of premium.
d) Loading: In case of age over 70 years
71 & 72 years : 25% (if no adverse history)
73 & 74 years : 50% (if no adverse history)
Over 75 years : 100% (if no adverse history)
e) Medical Reports: Must for Proposers over the age of 70 years-visiting abroad excluding
USA AND CANADA and over the age of 60 years visiting USA AND CANADA
f) Blood Sugar/Urine Strip Test and ECG printout. Medical reports are required when the
proposer is travelling for more than 60 days.
g) In case the proposer is not able to submit required Medical reports, it is possible to issue
a policy by restricting the sum insured under medical expenses to US $ 10,000 for Plan A
and B only.
h) Period: Initial cover up to 180 days under Business and Holiday. Extension for a further
period of Maximum 180 days subject to declaration of Good Health and No Claim.
i) Premium: Depends upon the Age, Country visited by the Proposer and No. of Days of
Stay.

22. Fidelity Guarantee Insurance
a) Only full time employees, on whom employer has full control, should be covered.
b) Their names. designation, nature of duties, credit worthiness and degree of trust, place
must be disclosed in the proposal.
48
c) The amount of guarantee granted should commensurate with the
annual income of the person guaranteed.
d) Where floater cover is given, in addition to premium on floater amount, per capita amount
has to be charged on the number of employees covered.

23. Bankers Indemnity Insurance
a) Rating has to be as per the guidelines and guide rates laid down by HO.
b) The policy shall run concurrently with the financial year of the bank.
c) The term employee includes all permanent employees, temporary staff, appraisers,
Janata agents, Pygmy Collector etc.
d) Basic sum insured cannot be increased during currency of the policy. But additional
limits under Section A & B only can be granted by charging extra premium as per
guidelines.

(VIII) AUDIT OF ENGINEERING POLICIES

1. Classification of Engineering Policies/Acceptance limits for Underwriting & Rating:
(Applicable to risks with S.I. up to RS. 2500 CR, Risks with S.I. Exceeding RS 2500 CR are
considered as large risks)

SR.
NO.
CLASS OF BUSINESS
REGIONAL
OFFICE
DIVISIONA
L OFFICE
BRANCH
OFFICE
1. Erection All Risks Insurance - Note (c)
Including ALOP(Refer Note (a) below).
400 crores 50 crores 1 crore
2. Contractors All Risks Insurance
Including ALOP (Refer Note (a) below).

a) Wet risks bridges, dam and other work
either on river or sea or where installations
are on marshy soil etc

b) Others

50 crores

NIL

NIL

400 crores

50 crores

1 crores
3. Contractors Plant and Machinery Insurance 30 crores 5 crores 1 crores
4. Machinery Breakdown Insurance 30 crores 5 crores 50 lakhs
5. Boiler Explosion Insurance 30 crores 5 crores 50 lakhs
6. Electronic Equipment Insurance 30 crores 1 crores 10 lakhs
7. CECR including LOP 30 crores NIL NIL
8. Windmill Package including MLOP. 30 crores NIL NIL
9. Deterioration of Stock (Potatoes) 30 crores NIL NIL
10. MLOP NIL NIL NIL

Notes:
a. ALOP rate to be approved by R.O. only for risks upto R.O. Limits.
b. The above acceptance limits are subject to changes, as and when the Company deems it
fit.
c. Limits are applicable for new plants. In respect of proposals involving second hand
plants, only R.O. will have limit of Rs. 10 Crores.
d. It is hereby clarified that risks within the acceptance limits of Branches are CLASS
RATED PRODUCTS and risks beyond the Branch acceptance limits are INDIVIDUAL
RATED PRODUCTS. The products at SL. nos 7 to 10 are EXPOSURE RATED PRODUCTS.

49

2. Class Rated Products:

UNDERWRITING PROCEDURE AND RATING
They are to be underwritten using the following procedure :
(A). Apply the Rate as per The Internal Guide Tariff
(B).Grant applicable discounts as per the Schematic diagram shown on the next page and
the procedure detailed below:
Technical Discounts:
(i) The parameters for Technical Discount for class rated risks along with the maximum
discount % that can be allowed for each feature are shown in Table A & B
(ii) It may be noted that Maximum Technical discount of 16% and 10% is permissible on
Annual Policies and Project Policies respectively.

TABLE A
ANNUAL POLICIES - MAXIMUM 16% ON GUIDE RATES

SR.
NO
FEATURE REMARK DISCOUNT (%)
1 CLAIMS <40% 16
CLAIMS > 40% & UPTO 60% 8
2 MAINTENANCE GOOD 16
MAINTENANCE BAD 0

TABLE B
PROJECT POLICIES MAXIMUM 10% ON GUIDE RATES

SR.
NO
FEATURE REMARK
DISCOUNT
(%)
1 LOCATION RISKS GOOD 10
LOCATION RISKS BAD 0
2 MANAGEMENT GOOD 10
MANAGEMENT BAD 0

Discretionary Discounts:

(ii) Divisional Incharge or Regional Incharge may moderate the rate so arrived at as per
the authority given to retain the existing business or for procuring new business.

(iii) For annual policies the discretionary discount is upto a maximum of 10% and for
project policies the discretionary discount is upto 5%.

3. Individual Rated Products:

(i) Individual rated products will be underwritten by DO/RO/HO nominated underwriters
depending on the office limits of acceptance.
(ii) These risks are not be underwritten at the Branch. The DO nominated underwriter will
underwrite for all individual rated risks falling in Branch / DO limits of acceptance using
the following procedure.
(iii) Rating of risk is based on duly filled up proposal form and inspection report using guide
rate as base rate.
(iv) To make matters simple there is a proforma for Risk Inspection / Inspection cum Merit
Rating for each of the policy types.
(v) Accordingly, the forms can be filled up by the risk engineer to enable the underwriter to
allocate marks and arrive at the Technical discount %.
50

UNDERWRITING PROCEDURE AND RATING
They are to be underwritten using the following procedure :
(A) Apply the Rate as per The Internal Guide Tariff
(B) Grant applicable discounts as per the Schematic diagram shown below and the
procedure detailed below:

Technical Discounts:
(ii) The technical discount components vary depending on the Policy type.
(iii) The maximum permissible discount for technical factors are as per marks obtained
and shall be not more than 21% for Annual Policies and 10% for Project Policies.
(iv) The technical discount shall be applicable for add on perils also.

Discretionary Discounts:
(i) Divisional Incharge or Regional Incharge may moderate the rate so arrived at as per
the authority given to retain the existing business or for procuring new business.
(ii) For all Engineering policies the discretionary discount is upto a maximum of 10%.
(iii) No Discounts are to be granted on Terrorism Rate.

ENGINEERING POLICIES - TYPES OF DISCOUNTS (SCHEMATIC SKETCH)
__________________________________

Annual Policies Project Policies
----------------------------- ----------------------------------

Class Individual Class Individual
Rated Rated Rated Rated
--------------- ----------------- -------------- ----------------

Tech. Discr. Tech. Discr. Tech. Discr.
Discount Discount Discount Discount Discount Discount
--------------- 10% 10%

Max 16% Max 10% Max 21% Max 10%
Tech. Discr.
Discount Discount

Max 10% Max 5%

4. Aspects specific to individual Engineering Insurance covers:

The following areas are also required to be considered/verified, while auditing the specific
engineering policies:

A) Machinery Breakdown Insurance:

The following aspects need to be verified:

1. Whether the S.I. is reinstatement value of machinery.

2. Whether name plate details including the year of manufacture & location are provided
in the policy.

3. Whether adequate loading for adverse claims experience has been done.

4. Whether deductible franchise is stated on the policy.
51

5. Whether inspections of machinery has been carried out, wherever compulsory.

6. Whether Portable/Mobile equipments are covered, which should be discouraged and
the appropriate policy issued instead.

7. Appropriate Endorsement for special equipment, should be applied :

a) Diesel Engine of DG Set.
b) Induction Furnace.
c) Gear Box.
d) Extruders / Injection Moulding Machines.
e) Carding Machines.
f) Standby Machines.
g) Imported Machinery.

(B) Boiler/Pressure Plant Insurance:

1. Rate has to be charged depending upon the age of boiler.

2. For Boiler not certified by Boiler Inspectorate, rate is to be loaded by 50%.

3. S.I. should be replacement value of boiler.

4. Identity of boiler should be clearly stated in the policy.

5. No excess should be applied.

(C ) Marine-cum-Erection/Storage-cum-Erection:

1. Inspection of machinery is to be done to exclude all loses prior to attachment of cover,
i.e, in the case of storage cum erection. This is necessary in case of MCE also, if part of
the transit is not covered with us.

2. When erection is over, value of project is to be obtained and premium to be collected or
refunded in respect of custom duty cost of erection, freight & handling charges.

3. Proper excess for cover for Act of God perils and other perils has to be imposed.

4. Rating has to be as per tariff when policy is extended and additional premium has to be
charged.

5. When instalment facilities are given for long term policies, whether the instalments have
been collected in time. If not, policy is void.

6. When Marine policy and SCE are separately taken for same machinery, rating under
Marine Policy should be as per Engineering Tariff.

7. Extension for maintenance visits, cover to be taken at the time of inception only.

8. If any policy is terminated, the termination clause should be applied, keeping in mind the
following:

a. Claims experience should be below 60%
b. Balance period 25% or 3 months.
c. Testing should not have commenced.
52

9. Declaration should be periodically received. Declarations should be verified to check on
coverage of fragile items so that adequate premium is charged. Further whether sum
insured has been taken for required amount can be checked & if necessary, insured can
be advised by Branch to increase the S.I.

10. Premium should be collected since inception for increase in S. I.

(D) Contractors All Risk Insurance:

1. S.I. should represent the entire contract value. On expiry of policy premium has to be
adjusted depending on actual contract value.

2. When instalment facilities are given for long term policies, installments have to be
collected in time.

3. Rating has to be as per tariff. For escalation clause and extension of policy period
necessary premium has to be charged.

4. Whether the provisions regarding EQ, D.F. & excess has been followed as per HO
guidelines.

(E) Electronic Equipment Insurance:

1. Whether full description of the items covered has been given in policy.

2. Whether discount is in accordance with excess applied.

3. Whether cover granted for Dish-antenna, which is to be excluded.

4. Premium has be to charged as per laid down rates.

5. Information about Annual maintenance contract is to be produced. Otherwise, the
premium is to be loaded appropriately.

*********************

53

CHAPTER 3B

CLAIMS AUDIT COMMON POINTS

(I) GENERAL GUIDELINES

1) The guidelines laid down here are not exhaustive and are general in nature. It is possible that
some of the guidelines cannot be followed due the particular circumstances of the case.
Auditors should note that, such non-compliance need not, therefore, render the claim
invalid. The Claim Settling Authority can use his discretion by recording his reasons for the
deviation.
2) The sample of claim folder selected for audit should be made representative by considering
all types of settlement of claims.
3) Whether financial authority, powers and limits are observed strictly.
4) As per the Insurance Act, for claims less than Rs. 20,000/-, survey by a licensed surveyor is
not mandatory. If survey is really required, such losses may be surveyed by the Companys
officials. Survey fees should be calculated and paid as per the scales laid down.
5) Whether salvage is disposed as per the guidelines.
6) Whether, detailed investigation is immediately instituted when a loss occurs in close
proximity, i.e. within 5 days for all classes of insurances (except marine voyage policies), of
the date of inception of risk.
7) Section 64 VB compliance certificate should be available in all the files.
8) After approval of the claim by the competent authority, the insured/claimant should be
advised of the final amount of claim approved, with details thereof.
9) Remaining formalities of obtaining full and final discharge and bank/financial institutions
discharge (where required) should be completed before release of the amount of claim.
10) If the loss or any part thereof is recoverable from a Third Party, a letter of subrogation and/or
assignment and special Power of Attorney, to suit special cases, is to be sent to the insured
for completion on requisite stamp paper and return before settlement.
11) Whether Paid (with date) stamp is affixed on disbursement voucher, discharge voucher,
bills and other important papers of claim folders.

12) Rectification of policy after a loss: Rectification of a policy after a loss, reported for reasons
other than breach of condition/warranty, should be carried out as under:
(i) Where rectification involves collection of additional premium, the additional premium
may be charged only on the affected policy period in which the claim has arisen.
(ii) Rectification can be done by the Authority Competent for settlement of the claim.

13. Repudiation of Claims: If a claim warrants repudiation, the competent authority would be the
authority competent to repudiate the claim. Letter of repudiation may state the reasons
and/or the policy condition under which it is repudiated.

14. On Account Payment: may be considered, subject to the following:
a) Loss is due to an Insured peril.
b) Liability of the Insurer is established, and
c) Minimum liability of the Insurer is confirmed.

15. Close proximity: Immediate investigation and reference to the overseeing RO is mandatory
in all such cases.

16. Re-opening of Claim files: Reopening of claim file can be done by the authority one step
higher than the appropriate claim settlement authority.

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(II) FIRE INSURANCE

1. The following documents should be available in the file and scrutinized:
(i) Copy of the policy complete with terms, conditions and warranties.
(ii) Claim form duly completed by the insured
(iii) Survey report, which should include -
a) indication of the cause of loss
b) establishment of liability
c) assessment of loss
d) confirmation of compliance of policy terms, conditions and warranties
e) admissibility of the claim
(iv) Photographs
(v) Police report and } if necessary
(vi) Fire Brigade report }
Note : Items (v) and (vi) may be waived if the survey report is clear and does not cause any
doubt on the occurrence as well as the extent of loss.
2. Claims Arising out of Act of God perils : In addition to the documents specified under 1)
above, other documents like newspaper cuttings, photographs and meteorological reports
are helpful in substantiating such losses. Where the incident is localised, not reported in the
media or not recorded by any Meteorological Department, the surveyor should enquire about
the incident from local government/ statutory authorities and support the description of the
occurrence and the loss by taking photographs of the damage. Where the Surveyor
confirms the incident clearly and unambiguously, the documents detailed above may be
waived.
3. While checking the claims, attention is to be also paid to concurrent policy(s) and Financial
Institute clauses.
4. Losses reported under the RSMTD peril: In case of isolated losses under this endorsement,
copy of the First Information Report lodged with police and their Final Investigation report
should be verified.
5. Disposal of Salvage: Salvage from Fire and allied perils losses tend to deteriorate faster.
Therefore, check whether the disposal of the salvage was undertaken on a priority basis for
and on behalf of the concerned parties without waiting for the liability to be established. The
provision of the disposal of salvage guidelines should be followed in all such cases.

(III) ENGINEERING INSURANCE

General points to be verified in all Engineering Insurance claims:

1. The following Documents should be available in the file and verified:
a) Copy of the policy with full terms, conditions and warranties
b) Claim form
c) Survey report, which should clearly indicate -
i) cause of loss
ii) extent of damage and loss
iii) establishment of liability
iv) assessment of loss
v) confirmation of compliance of policy terms, conditions and warranties
vi) admissibility of the loss
d) Photographs }
e) Police Report } if necessary

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f) Fire Brigade report
Note: Items (e) and (f) may be waived where the survey report is clear and does not
cause any doubt on the occurrence as well as extent of loss. Where occurrence of riot is
in the public knowledge, production of Final Police Investigation Report and Fire Brigade
report may be waived.
2. In case of theft losses, whether a copy of the First Information Report or proof of complaint
lodged by the insured with the police, such as registered AD letter, have been collected.
Final investigation report may be waived depending on the merits of the case.
3. The steps involved in loss adjustment should be as under:
Gross loss assessed:
a) Less: Depreciation, if any,
b) Less: Salvage
c) Less: Under Insurance
d) Less: Excess
e) Net Claim Payable

MCE Claims

1. The Marine practice is to be followed for settlement of Marine claims under MCE policies.
2. In case of mega projects, the services of an on-site representative/outside project monitoring
agency could be retained to:
a) Monitor the progress of the project activity;
b) Receive report, on general conditions prevailing at site, from loss minimization point of
view;
c) Co-ordinate with different authorities at site;
d) Collect required documents for claims already lodged to expedite disposal;
e) Conduct survey of losses falling within the self-survey limit.
f) Preliminary survey of losses
3. Incidental expenses like supervision charges, storage charges may be considered to the
extent they are included in the sum insured and actually incurred.
4. When the replacement value is not ascertainable, the assessment can be based on the
original invoice value plus escalation if provided in the policy. However, it may be left to the
surveyor to arrive at the value.
5. The loss under various extensions like additional custom duty, air freight, express freight,
overtime wages, etc., are to be assessed separately. The expenses under these extensions
will be available only when incurred by the insured. The liability under these extensions will
be over and above the ones allowed under the standard policy provided the limit is not
exhausted by earlier settled claims and/or claims reported but pending settlement.
6. If the claim is assessed both under the main policy and extensions like additional custom
duty, express freight, overtime wages etc., the specified excess should be applied for each
of these sections separately.

Contractors All Risk Insurance Claims:

1. The surveyor should have confirmed that the damage was not due to faulty design as the
policy completely excludes loss due to faulty design unlike the erection policy where only a
particular portion is excluded and resultant damage is paid.
2. Excess as specified is to be applied.

Contractors Plant and Machinery Insurance Claims:

1. Being an Annual Policy, the validity of the policy at the time of occurrence should be
verified.
2. Identification of the damaged equipment/item should be available, to confirm coverage under
the policy. This is necessary since selection of equipments for insurance is allowed.
56

3. The surveyor should have confirmed the accidental damage to the equipment.
4. For items fabricated by the contractor and replacement values not available, the surveyor
should have assessed the loss on the basis of actual costs incurred by the insured

Machinery Insurance Claims:

1. Test reports of the damaged parts, if deemed necessary by the surveyor and/or suggested
by the insurers, should be available in the file and checked.
2. Repairs/replacement should be confirmed by the surveyor
3. The claim payable may include costs of dismantling, transportation to the repairers shop,
repairs and re-transportation and re-erection and other incidental expenses. If damaged
equipment being sent out is covered under a Marine Transit Policy, the cost of such
insurance may also be reimbursed.
4. If repeated losses are reported on the same equipment, the underwriting office may take the
help of an outside expert to ascertain the precise cause of repeated losses and suggest
measures for avoidance/minimisation of re-occurrence of breakdown/loss.
5. The exclusion of damage to Belts, Ropes, Chains, Rubber Tyres, Dyes, Moulds, etc is to be
considered.
6. As to the oil and other operating media in the transformer and equipment, these may be
reimbursed only when specifically covered under the policy.
7. The losses under the other extensions like additional custom duty, air freight, express
freight, etc are to be assessed separately and the underwriting office should confirm the
availability of additional sum insured specifically for such items of expenditure while
recommending the claim for settlement.
8. If the assessment involves additional expenses for repair/replacement, the surveyor should
confirm that the expenses are reasonable.

Boiler Explosion Insurance Claims:

1. Verify the copy of the certificate issued by inspectorate of Boilers (wherever applicable) for
operation.

2. Check the boiler inspection report on the occurrence.

Machinery Loss of Profits Insurance Claims:

1. A loss of Profit claim is admissible only if loss or damage to Machinery or Boiler covered
under corresponding policy is admissible.

2. As selection of equipment under the MLOP is allowed, the underwriting office should re-
confirm the coverage of the equipment involved.

3. Attention is drawn to the applicable time excess and surveyor is to be appointed in
consultation with Regional Office/Head Office only in those cases where the interruption
period is likely to exceed the time excess. As the selection of the indemnity period is made
depending upon the type of machinery, the underwriting office should make a policy copy
available to the LOP surveyor and draw his attention to the indemnity period available
against the affected item.

4. The material damage surveyor and the loss of profit surveyor should report on the steps
initiated by them in helping the insured to reduce the period of indemnity by expediting
repairs/replacements or adopting temporary measures.

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5. As a principle, the Company Engineer should be associated as far as possible along with the
surveyor to minimize the loss under the Machinery Loss of Profit policy.

Electronic Equipment Insurance Claims:

1. Since the selection of equipment is allowed, the existence of cover for the damaged item
should be checked.
2. It should be ensured that claim does not fall under any of the exclusions.

Deterioration of Stocks:

Ascertain whether the surveyor has ensured that the insured takes the following loss
minimization measures:

i) No fresh stock should be loaded in the cold storage chambers.
ii) Cold storage doors should be sealed to maintain temperature and avoid temperature rise.
iii) If possible, the insured should be requested to shift stocks to some other running cold
storage premises preferably in cool evening/ night period or by refrigerated vans.
iv) The Insured should be requested to carry out repairs to the refrigerator plant most
expeditiously.
v) If there is no possibility of completing the repairs immediately, the insured should be
advised to unload stocks from cold chamber for disposal in the local market as quickly as
possible, and at the best available price in association with the surveyor/local authorities.

ALOP Insurance Claims :

1. For a material damage claim reported under a Marine Cargo Policy or a Project policy, verify
whether HO has immediately taken steps to monitor the facts of delay in repairs/replacement
that could trigger a claim under the ALOP/Marine ALOP section.
1. Deputation of surveyors for ALOP claims should be only with the authorization of the
HO(Tech).

(IV) MISCELLANEOUS ACCIDENT INSURANCE CLAIMS

General points to be considered in all Miscellaneous Insurance claims:

1. The important aspect to be noted is that Miscellaneous Accident Insurance includes a
number of covers which are in the nature of package policies. In this situation specific
guidelines applicable to respective sections are to be followed in the settlement of claims.
2. The guidelines given accordingly recommend a broad framework to be judiciously utilized,
on merits.

Workmens Compensation Insurance Claims:

1. In addition to the claim form, the scrutiny of following documents is required in all W/C
claims :
a) Medical Certificate
b) Wages Statement
c) Proof of age as recorded by the employer
2. Temporary Disablement Claims: requires payment of fortnightly compensation to the
employee directly against proper receipt.
3. Permanent Total Disablement Claims: The memorandum of agreement is required to be
submitted to W/C Commissioner while depositing compensation as per W/C act.
4. Fatal Claims: Perusal of death certificate and post-mortem report is important.

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N.B. a) Often Contractors workmen or Sub-contractors workmen are involved in an
accident. Whether wages for this were separately specified and whether premium
was collected has to be verified.
b) The company is not liable for payment of fines and penalties imposed on Insured.

Personal Accident Insurance Claims:

1. Generally, the scrutiny of following documents is important whilst processing all P.A. claims
(a) Duly completed claim form
(b) Report of attending Doctor either as a separate document or on the reverse of claim form
if provision is made thereof
(c) Investigation reports like laboratory test, X-rays and reports essential for confirmation of
the injury,
(d) Police reports, wherever necessary
(e) Certificate of proof of age of dependent child in case the claim is under education grant
provision
(f) Medical bill corresponding to doctors prescription where medical extension is granted.
Note: Vitamins and tonics are deemed medicines ONLY if prescribed by the Doctor, as a part of
treatment.
2. In case of fatal accident cases the following documents need to be scrutinized.
a) Death certificate
b) Post-mortem report }
c) Coroners report }
d) Inquest report } wherever necessary/applicable
3. The original documents may be returned only if duly attested xerox copies are retained.
4. Bills/receipts are for companys records.
5. In respect of fatal claims the payment is to be made to the assignee named under the policy.
If there is no assignee the payment is made to the legal representative as identified by
Will/Probate/Letter of Administration/Succession Certificate. Where the above documents
are not available and the amount of claim is up to Rs. 5,00,000/- the following procedure may
be followed:
(i) an affidavit from the claimant(s) that he/she (they) is (are) the legal heir(s) of the
deceased.
(ii) an affidavit from other near relatives of the deceased that they have no objection if the
claim amount is paid to the claimant(s).
(iii) Surety bond executed by persons of reasonable standing.
6. In case of group policy the payment is to be made to the individual beneficiary only.
However, claim payment to the employer in respect of employee is permissible. Where
provision is made for writing the name of the beneficiary and if Insured organisation wants
payment to be made directly to such beneficiary, joint discharge should be obtained.
7. If in a particular case Doctor certifies that the claimant has lost 30% use of one limb, in such
case claimant would be entitled to 30% of the compensation payable had he lost use of one
entire limb.
8. The policy is to be obtained for cancellation in case of claim involving death, permanent total
disablement, loss of two limbs, one limb or one eye i.e. wherever capital sum insured
becomes payable.
9. In case of permanent partial disability claim the policy should be obtained for endorsement
for reducing the capital Sum Insured. The weekly benefit, however, should be based on
original C.S.I.
10. For Temporary Total Disablement claims the overall physical condition is to be considered
and not any single criterion.
11. Weekly compensation should not be paid unless the total claim amount is ascertained and
agreed.
12. Claims for exaggerated amount or for claims of doubtful nature the finding of panel
Physician or surgeon to be obtained.
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Medi-claim

1. Hospitalisation claims: The following supporting documents are required for the purpose of
scrutiny:
i) Duly completed claim form
ii) Bills, receipts and discharge certificate/card from the hospital
iii) Cash memos from the hospital
iv) Bills from chemist(s) supported by proper prescription
v) Receipt and Pathological test reports from a Pathologist supported by the note from
attending medical practitioner/ surgeon prescribing such pathological tests.
vi) Nature of operation performed and surgeons bill and receipt

In case of mediclaim claims the receipts and bills need to be original but copies of
treatment papers, diagnostic reports etc. have to be retained after verification with one
originals. If the Insured wishes to keep the originals provided the originals are verified,
the same may be returned after retaining Xerox copies of the same.

The following issues may be specially looked into:
i) In case, previous medical history is not shown on discharge card/narrative summary
of the hospital/admission papers of the hospital should be called for.
ii) That admission to hospital is not for routine check up
iii} That figures and/or dates of purchase in the cash memos are not altered by way of
erasure superimposition of writing or added writing with a different ink.
iv} That treatment taken is in line with nature of disease

2. Domiciliary Hospitalization Claims: In the case of domiciliary hospitalisation claims,
compliance of the coverage as explained under definition 2.4 of the policy should be verified.

3. In the case of death of insured after having incurred medical expenses the amount of
admissible claim should be reimbursed to legal representative of the deceased or any other
insured family member submitting original bills, cash memos etc. after obtaining proper
declaration by that person to the effect that the person claiming reimbursement of expenses
actually incurred such expenses for the treatment of the insured person.

4. On Account payment in medi-claim policy: In exceptional circumstances where the treatment
involves high expenses, on account payment may be considered if dealing office is satisfied
about the admissibility of the claim.

5. Panel doctors: Only such claims where suspicions are aroused in relation to disease
allegedly suffered, linked to pre-existing condition, may be referred to the doctor, for
investigation. Reference to panel doctor/ referee for investigations should not be made as
routine but selectively on merits.

Overseas Medi-claim Insurance Claims:

1. Mercury International Assistance and Claims Ltd., London are claims settling agents for
Overseas Mediclaim Insurance.
2. To avoid delay claim form is attached to the policy so that Indian citizens visiting any part of
the World may write to claim settling agency directly.
3. Mercury should be informed of specific exclusions under the policy.
4. In case any premium cheque is dishonoured information should be sent to Mercury
immediately either by fax or e-mail.

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Bhavishya Arogya Policy Claims:

1. The guidelines for mediclaim insurance will generally hold good for this type of insurance
also. However the following aspects are important :
a. Pre-existing condition is not applicable
b. Pre and post hospitalisation expenses are not payable
2. For any one illness the payment of claim is limited to 40% of original Sum Insured. The
settlement of any claim will reduce the limit available.

Horse Insurance Claims:

1. The following supporting documents are required in the file and verified:
ii) Veterinary certificate
iii) Valuation of the animal
iv) Post mortem report
v) Pathological tests involving tissue sample
vi) Treatment chart
2. On intimation of any accident or illness which is likely to result in a claim, deployment of
veterinary doctor should be considered.
3. If animal is killed, whether circumstances necessitated such killing is to be verified.
4. Mercy killing is considered subject to advance notice
5. If death is due to operation whether companys approval was obtained and additional
premium was charged.

All Risk Insurance Claims:

1. Claims may be settled on the basis of completed claim form, if settling authority is satisfied
about genuineness of the claim.
2. Surveyor/investigator may be appointed only if considered necessary.

Theft claims:

1. In case of personal effects the invoice/ bill may not be insisted upon but market value should
be the basis of claim settlement.
2. While final police report should be called for, where it is not forthcoming within a period of
six months of the loss, the claim may be settled on the basis of First Investigation Report
lodged provided other documents are in order.
3. Indemnity bond is to be obtained before settlement.

Baggage Insurance Claims:

The above provisions are applicable to claims under this class of insurance also.

Burglary Insurance claims:

1. The following documents are to be checked:
ii) Final Investigation Report from the police
iii) Survey report
iv) Photographs
2. In case of small losses up to a specified amount the dealing office can arrange for settlement
of claim on the basis of completed claim form /First information report registered with the
police provided they are satisfied about the genuineness of the claim.

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3. It is preferable in cases of burglary/theft which involves assessment of losses involving
checking books of accounts to appoint an investigator with surveyors licence and
knowledge of accounts.
4. Waiver of Final Investigation Report of the police can be considered at the discretion of the
Competent Authority so long as the investigator cum surveyors report does not raise any
doubt in regard to the cause and quantum of loss. Subrogation/ indemnity letter from the
Insured is a must.

Money policy Claims:

a) Duly completed claim form
b) Final Investigation Report from the police
c) Survey report
2. In case of losses reported from the premises, the procedure to be followed for settlement of
claims is on similar lines as that of burglary policy.
3. However, if infidelity of the employee is involved, departmental proceedings and/or criminal
action to be initiated against the erring employee wherever applicable and such reports to be
available on file and checked.
4. The limit per sending declared will be the maximum indemnity and average will not apply if
the cash carried is more than the limit intimated.
5. Since the policy is on adjustment basis, the annual estimate of carrying does not have any
bearing on the claim.

Bankers indemnity insurance Claims:

ii) First Information Report to the police
iii) Survey report
2. The Bankers Indemnity cover being wide in nature legal opinion may be sought before
settlement of any major and/or doubtful claim in nature and should be checked.
3. Reinstatement of the sum insured : whether additional premium is either collected or
deducted from the claim amount.
4. Policy is subject to single reinstatement clause by which the companys liability under the
policy is restricted to double the sum insured shown in the policy schedule. Care has to be
taken if there are number of claims under the same policy.
5. Although, forgery of documents is covered under the policy, it is to be noted that this relates
to the specified documents only issued by the bank and none-other. Policy does not cover
claim involving losses prior to retroactive date. In case of change in Insurer, fresh
retroactive date is applied or effected.

Jewellers Block Insurance Claims:

ii) First Information Report from police
iii) Survey report
2. Most of the losses reported under this class of business relate to hold-up, robbery, theft etc.
and hence claim form and also contents of First Information Report to be verified
3. Check whether a competent surveyor conversant with the trade was deputed.
4. For recovery of insured property, when it is in the custody of police or court authorities,
whether attempt was made to approach the concerned authorities by appointing a lawyer.
This matter is required to be pursued by the office at regular intervals particularly in view of
nature of commodity involved.
62

5. Furthermore, whether the claim settling authority considered availing of services of expert
valuer / advocate/ surveyor of diamond and/ or jewellery while taking delivery of property.

Fidelity Guarantee Insurance Claims:

1. Processing of claim should have been considered based on the completed claim form,
survey report and/or investigators report and Final Investigation Report.
2. Check whether the office has verified with the employer whether any amount was due to the
defaulting employee which could be withheld by the employer and adjusted against the
claim.
3. However, final investigation report may be waived where the surveyor and/or investigator
have not raised any doubt as to the cause and quantum of loss.
4. Whether letter of indemnity/subrogation obtained from the Insured.
5. Where departmental inquiry by the employer has established guilt of the employee and
assessment report is clean, whether suitable indemnity/ subrogation letter is received from
the Insured without waiting for the outcome of any criminal action pending in any court of
law.

Shopkeepers Insurance policy Claims:

1. This is a package policy providing various covers such as Fire, Burglary, Cash-in-transit, PA
and/or liability.
2. Depending on the section under which the claim is lodged the procedure for settlement of
claims for that specified class of risk as given in the guidelines may be followed.

Householders Comprehensive policy Claims:

1. The procedure for settlement of claims in respect of each specified class of risk like Fire,
Burglary, Cash-in transit etc. under the policy would be the same for that specified class of
risk given in the guidelines.
2. Where claims under Personal insurance involving articles of daily use liable to depreciation
are involved, it would be in order to accept the present day replacement value with
reasonable depreciation for a period of use and it may be taken as a fair measure of
indemnity subject to adequacy of the sum insured individually and collectively as the case
may be. For such items, purchase vouchers/ cash memo need not be insisted upon.

Janata Medi-claim Policy

1. Policy stipulates specific Maximum charges inclusive of Room Rent ICU charges, Surgeon
Fees, Cost of Medicines etc., for various types of illness/operations.
2. In case of the specified illness/operation, Maximum amount of Claim payable will be as per
the specified charges given in the policy itself subject to the Sum Insured.
3. For any charges not mentioned in the schedule, the payment will be considered as per the
Central Govt Health Scheme(CGHS) rates prevalent at the time of claims.

(V) LIABILITY INSURANCE CLAIMS

General facts about Liability Insurance claims:

1. Liability Insurance comprises covers issued under :
(a) Public Liability Insurance Act, 1991.
(b) Market Agreement for :
Public liability Insurance for Industrial Risks
Public Liability Insurance for non-industrial risks
Product Liability Insurance
63

Professional Indemnity Insurance for Doctors, Medical Establishments, Architects,
Solicitors, Chartered Accountants, Consulting Engineers, Financial Consultants, etc.

2. In addition other Liability Policies like Carriers Liability, Specific Liabilities as part of
package Policies like Householders Comprehensive, Shopkeepers, LPG (Traders
Combined), Couriers Liability, Libel, Freight Consolidators Liability, Stevedores Liability,
Inland Vessels Act Liability are also issued. This list is not exhaustive and policies covering
other specific types of Liability may also be issued.
3. In claims under Liability Insurance Policies there has first to be a claim on the insured by a
third party, followed by a claim by the insured on the Insurance Company. It is essential that
the insured is legally liable to the third party for a claim to be considered under the
Insurance Policy. It is, however, not necessary that the policy will pay for all claims that the
insured is liable to the third party. There are various provisions, exceptions and conditions
under the policy which may negate or reduce the Insurers liability as compared to the
insureds liability to the third party.
4. Liability to Third Party may arise out of:
(a) Tort or Common law
(b) Contract
(c) Statute
The remedy is payment of damages.
Tort involves breach of duty. Tort may be of various kinds like negligence, nuisance,
trespass, slander, assault, etc. As regards Liability arising out of Contract, it is liability
assumed by the insured by agreement and which would not have attached in the absence of
such agreement. This is not covered in the normal course.
The Statutory Liability arises out of various legislations / acts like Public Liability Insurance
Act 1991, Inland Vessel Act 1917 etc.
5. Liability Policies are policies of Indemnity and insure the legal liability of the insured to pay
compensation in respect of
(a) Injury, which means death, bodily injury, illness or disease of or to any person and
(b) Damage, which means loss of possession or control of or actual destruction (whether full
or partial) to tangible property and
(c) Pecuniary Loss
6. The Policy pays claimants costs, fees and expenses incurred with insurers consent in
defending any claim made against the insured. However, these are payable within the limit
of liability, unless otherwise specified.

Matters to be considered/verified in all Liability Claims:

1. Whether Sec. 64-VB of the Insurance Act has been complied with by the insured affecting in
particular the retroactive date.
2. Whether the accident has occurred during the period of insurance and the claim is made
during the policy period or within 90 days from the date of expiry in the event of non-renewal
or cancellation of the policy.
3. Limit of Indemnity applicable under the policy.
4. Depending upon the circumstances and extent of injuries/loss reported to have been caused,
Whether an independent/ in-house agency was appointed without prejudice, to verify the
facts and collect all evidences for defence in a discreet manner without alerting the affected
parties or other agencies to lodge claim which otherwise may not have been lodged.
5. Simultaneously, whether the insured was also advised to pass on to the insurer any notice of
claim that may be received without admitting liability.
6. Whether The Investigators Report and the connected documents are preserved at the Claim
Handling Office till a regular claim is preferred by the claimant against the insured.
Thereafter, the general procedure as described below may be followed in dealing with the
claim.

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7. In cases wherein notices or summons are received directly from the court whether or not any
intimation has been made by the insured, a competent advocate should be engaged to
defend the case effectively. Generally, defence is taken on lack of privity of contract
between the claimants and the insurer, as the insurer is liable to indemnify the insured only
subject to the terms and condition of policy of insurance.
8. It is also to be verified whether the claim is barred by limitation placed by statute or by policy
conditions.
9. Depending on individual circumstance, reliance may be placed on the following documents
and information/appropriate:
a) Detailed version about the incident / alleged misfeasance
b) Details of loss caused/injury/death/property damage including all available information
on victims as well as estimated quantum of liability.
c) Steps taken by the insured to mitigate the loss.
d) Statements from witnesses, sketch plans, photographs, visual records of
evidence/circumstance, video, etc.
e) Any other evidence in support of claim
f) Press reports
g) FIR/Investigation report of Police
h) Survey/Investigation Report; Survey Report on the damaged property of some other
surveyor, if any
i) All notices/summons of the court
j) Weather (Meteorological) report.
k) Pollution Control Board Report
l) Post Mortem Report/Medical Certificate
m) Consumer Action Group / Society / Group representation /Report
n) Details of other Insurance
o) Legal opinion/ Experts opinion on admission of liability / appeal
p) Details of claims, if any, preferred by the affected party / insured for the same loss from
any other source.
q) Evidence of legal liability of the insured.
10. In the event of an Award being passed by the appropriate authority, a copy of the Award
should be available and verified.

Product Liability:

1. Whether the item is covered under the policy
2. Date of sale vis-a-vis the retroactive date
3. Whether quality control measures as prescribed had been fully complied with by the
insured.
4. Whether manufacturing defect in product is established.
5. Whether specific instructions for use given by insured, if any, have been complied with or
not.
6. Whether Vendors Liability covered and claim has arisen thereunder
7. Specialists/Experts to be engaged to determine whether product is defective
8. Collaborators Liability
9. Whether compromised settlement is worthwhile.
10. Recovery Rights, if any.
11. Loss Minimisation Measures - recall; stoppage of sale/destruction of the concerned
product.
12. Where claims arise in a foreign county, it is usual to appoint claims settling agents
overseas who are conversant with handling such claim in the country in which they have
occurred and follow their advices.

65

Public Liability Act Policy Claims:

1. No fault Liability provisions as incorporated in the Public Liability Insurance Act, 1991 are
in the nature of social welfare measure. The Act Liability claims have to be expeditiously
settled and neither the insurer nor the advocates appointed need contest where it is
established that the claim is payable as per the provisions of the Act.
2. The following documents are to be verified:
a. Letter from the insured narrating the circumstance leading to the claim scenario.
b. F.I.R
c. Post Mortem Report or death Certificate, wherever applicable
d. Medical Certificate in case of permanent disability / injury
e. Details of Property damaged.
3. On receipt of notice from the Collector, whether representation was made on behalf of the
insured as well as the insurer before the Collector.
4. On receipt of the copy of the Award from the Collector, whether the same was satisfied
within the time stipulated by the Act.
5. Where the Collector has given the Award but the liability does not, however, strictly fall
within the purview of the PLI Act Policy, whether a competent advocate was immediately
consulted for further course of action. However it must be borne in mind that Act allows a
period of 30 days, calculated from the date of award for its satisfaction and speed in follow-
up action is therefore of essence.
Carriers Legal Liability:

1. Scope of cover should be looked into i.e. whether wider or basic - verify whether the claim
falls within the purview of the policy.
2. To verify admission of liability under Own Damage Section of Motor Policy.
3. To verify the lorry receipt, Invoice and ascertain whether the consignment is the subject
matter of the transit.
4. Verify the survey report.
5. Whether F.I.R. copy was obtained.

(VI) MARINE CARGO CLAIMS

Documents generally required to be verified and matters to be considered in the case of various
types of claims (EX : Ship, Air port, Multimodal Transport), are as under:

In case of Marine Open policies before the claim is registered due care should be taken to verify
whether there is sufficient balance available to cover the declaration under which claim has to
be lodged.

General:

1. Original insurance policy/declaration under the open policy duly endorsed by the insured, or
letter of indemnity, if the original is lost.
2. Original or a signed coy of sale invoice along with packing list wherever available.
3. Signed copy of Bill of Lading (in case of sea voyage)/ Air Consignment Note (for air
cargo/MTD/CTD (for multimodal transport)/postal receipt for sendings by post.
4. Triplicate or exchange control copy of Bill of Entry (to facilitate verification of the date of
filing to ascertain whether there has been any delay and also to check duty payment details).
5. In case of General Average, G. A. Guarantee and Counter Guarantee or original Cash Deposit
Receipt with Letter of Transfer as the case may be. Reference be made to the separate para
on G.A.
6. Letter of Subrogation duly stamped and executed (only where recovery from carriers/other
third parties is possible).
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7. Special Power of Attorney (wherever recovery from Railway/other carriers is involved. In
other cases as required)
8. Lost Over board Certificate where loss has taken place during loading/unloading.
9. Copies of claim notice served on carriers and correspondence exchanged with them along
with the Registered A/D cards or any other valid evidence of service of claim notice within
the statutory time limits.

In case of short-landing/non-delivery of complete consignment:

1. Full set of original Bill of lading/Air Consignment Note/Postal Receipt, etc. as applicable
endorsed in favour of insurers.
2. The original contract of affreightment should be endorsed by the carrier confirming short-
landing/non-delivery of the entire consignment by them or with a separate short-landing/non-
delivery certificate.
3. An undertaking to be obtained from the claimant that he would take delivery of the cargo, if
traced, under an insurance survey.

In case of partial non-delivery/short-landing:

Non-delivery and/or landed but missing certificate from the sea-air/CTO carrier/postal
authority/Port Trust, as applicable.

In case of partial loss or damage:

1. Assessment report by sea/air/CTO carrier/postal authority
2. Survey Report of independent surveyor (if survey has not been waived)
3. Claim form/claim bill
4. In case of a consignors claim to be settled in India for export shipment, Bankers Certificate
confirming non-receipt of export proceeds in India in an approved manner.

Non-delivery (short-landing or landed but missing):

1. Either short-landing certificate or landed but missing certificate from the port authorities or
the steamer company within the period allowed under statute/Port Rules.

2. When the short landing or landed but missing certificate is obtained, notice to the carrier or
the Port authorities, as the same may be, for the value of the lost cargo (CIF value and/or
duty and/or profit), duly acknowledged.
3. A claim on the carrier or the port authorities should be accompanied by
a) Original of shortlanding or landed but missing certificate.
b) Copy of Bill of Lading
c) Copy of invoice
4. Certificates from Individuals or agencies specialized in the work of tracing missing cargo, in
the case of missing cargo with high values. Where such certificates are not forthcoming in
time, notice to carriers and port authorities etc. must be served by the claimant within the
statutory time limits for the value of cargo not received.

Total and/or constructive total loss:

Where total and/or constructive total loss of the cargo has been caused whilst in the custody of
the steamer company or port authorities :

a) Copy of valued claim on the carrier/port authorities (as the case may be ) and
acknowledgement thereof.

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b) Notice of abandonment in case of C.T.L. to customs authorities

c) Open assessment/delivery certificate/ ship survey report.

Particular Average partial loss i.e. theft, pilferage, shortage and other damages (in cases where
loss or damage is reported before clearance from the dock):

1. Steamer/port survey report
2. Customs examination certificate before clearance of consignment from docks.
3. Independent survey report.
4. As regards claim for shortage from externally sound cases, it is essential to verify whether
the claimants were asked by the office to refer the matter to their suppliers about the
possibility of short-packing at their end. Only on receipt of confirmation from the suppliers
about correct packing as per invoice, further processing of claim on merits should be done.
5. Surveyors should be asked to examine whether there was sufficient empty space in the case
to hold the missing items or whether the missing items were replaced by some foreign
materials by comparing the weight of consignment stated in the invoice/packing list with the
package received at the destination in order to determine skillful pilferage in transit.
6. It may also be checked as to whether the missing items had been extracted by Customs for
examination or other purposes.

Claim under Duty and Increased Value Insurance Policy :

1. In the case of certified short-landing, no duty is payable.
2. Claims other than short-landing have to be scrutinized with due regard to the basis of duty
insurance and payment should have been made only for the actual value of the loss
including the actual customs duty paid but not exceeding the proportionate insured value on
duty.
3. As regards Increased Value Insurance, the claim would be payable for proportionate
increased value insured under the policy as per the Increased Value Insurance Clause.
4. As provided in the duty insurance clause a claim under duty/increased value policy is
admissible only if the loss is admissible in terms of the cover granted under the marine
cargo policy covering the same consignment. This provision however need not apply to
cases where the CIF is insured overseas due to contractual obligation.
5. Further, if a marine claim is within the ambit of the policy conditions but declined by the
Insurers for other reasons like non-compliance of Section 64 VB of the Insurance Act this
will not affect the admissibility of the duty claim. Therefore the claimant is required to
furnish to the company proof of liability for loss under the marine policy as per terms and
conditions of the policy.
6. The other documents required are :
a) Original Insurance Duty Policy duly endorsed
b) Copy of Bill of Lading
c) Copy of Invoice
d) Bill of Entry
e) Survey Report
f) Copies of correspondence exchanged with customs/ carriers relating to the claim lodged
with them.

Claims on consignments by Rail/Road:

1. As in the case of sea/air/multi-modal transport/postal claims, the insured has to furnish
evidence of (i) insurance, (ii) transit, (iii) value, and (vi) loss.
2. The following documents are required to be submitted to insurers in support of claims under
rail/road transit policies :

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General documents:
a) Original policy or certificate of insurance duly endorsed.
b) Invoice (original or copy)/packing list/weight specification.
c) Independent Surveyors Report, if any
d) Letter of Subrogation (if recovery is possible)

Other documents depending on the nature of claim:

a) Original Railway Receipt (Non-delivery cases)
b) Copy of the Railway Receipt (damage claim)
c) Original Consignment Note (Non-delivery cases - Road transit claims)
d) A copy of the Consignment Note (Damage claim - Road transit claims)
e) Non-delivery or Partial delivery certificate from the Railways/Road Transport operators.
f) Open Delivery/Assessment Delivery certificate (Rail/Road)
g) Certified copy of the Remarks in the Railway Delivery Book (Damage Claims)
h) Certified copy of the remarks in the delivery challan (Road Transit Claims)
i) Copy of:
(i) Notice of claim lodged on the carriers (Rail/Road)
(ii) Acknowledgement.
(iii) Subsequent correspondence with the carriers.
j) Special Power of Attorney (Rail Transit Claims)
k) Letter of Authority (Rail Transit Claims)

Statutory time limits for lodging claim and for filing suits:

The following list is indicative which are liable to change from time to time as per law and
companies should act on the actual positions at law at the material time in each case.

Time limit
Negligent
Party
For filing claims Filing Suit
Major ports 7 days from date of discharge 6 months from date of
discharge
Steamer Company Application for steamer Survey of
goods should be within 3 days of date
of discharge. Notice of claim to be
served as quickly as possible but
definitely within 1 year from the date of
discharge.
1 year from the date of
discharge.
* Where CTD is
issued *
* 9 months from the date of
discharge. Or as applicable at
the material time
Customs
Authority
Refund of Duty should be claimed
within 6 months from date of payment
of duty.

Air Carriers
(Domestic)
7 days from the date of delivery in the
case of damage/shortage, 14 days from
date of booking in case of non-delivery.
2 years from date of booking or
the date of arrival of aircraft (as
applicable).
Air Carriers
(International)
14 days and 21 days respectively for
above circumstances
---- do ----
Railways 6 months from date of booking 3 years from date of delivery of
damaged goods or the date
when delivery ought to have
been given (as applicable)
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Road Carriers 6 months from knowledge of loss/date
of transport receipt (as applicable)
---- do ----
Postal Authorities 1 month from date of delivery
in case of shortage/damage. 3 months
from booking in case of non-delivery.
3 years from date of booking.

* This is only indicative as the actual legal position in the country relating to multi-modal
transport is not clear.

(VII) MARINE HULL

General Information:

1. For the sake of convenience and also in view of the different nature of deployment,
operations and hazards encountered, for the purpose of these guidelines Marine Hulls are
divided into three groups, viz:
a) Oceangoing vessels and other vessels rated exclusively by the Tariff Advisory
Committee.
b) Vessels insured under Builders Risks policies, Ship Repairers Liability Policies, ship
Breaking Policies and Charterers Liability Policies.
c) All vessels and/or operations for which rates have been provided in Marine Hull Manual
under specific Tariffs or otherwise and all other vessels/operations not covered by (a)
and (b) above.
2. The types of claims which occur in connection with Hull Insurance are:
a) Total Loss/Constructive Total Loss ;
b) Particular Average/Particular charges i.e. Partial Losses/Expenses;
c) Salvage and Salvage Charges - either Salvage Awards or Salvage under contract;
d) General Average
e) Collision Liability
f) Sue & Labour Charges
g) Liability and non-liability Claims (such as wreck removal) falling under the P & I Section
of the policy where such cover is granted ;
h) Personal Accident Claims for crew covered under Sailing/Fishing vessels Tariffs.

Procedure for settlement of claims:

1. Oceangoing Vessels: In view of,
a) nature and quantum of claims likely to arise under this category;
b) likelihood of occurrence of loss in distant foreign waters;
c) involvement of Laws and Practices of foreign jurisdictions, and,
d) involvement of foreign professional and/or firms like surveyors, repair yards, adjusters,
solicitors, arbitrators, Courts, etc., the current system of processing these claims in
accordance with the international practices and traditions will continue except in so far
as the provisions of the Indian Statutes are concerned.

2. Sundry Hulls (including Sailing vessels, Fishing vessels, Inland vessels, etc.):

a) While a Licensed Surveyor should be appointed in all cases of Partial Losses/Expenses,
such licensed Surveyor is to be appointed in case of TL/CTL only where the vessel or its
wreck, of reasonable value is available for inspection or making reasonable attempt to
salvage.
b) Notice of Abandonment of the vessel/wreck in writing is a pre-requisite for a Constructive
Total Loss Claim. As a matter of practice, insurers must decline, prima facie, acceptance
of the Notice of Abandonment.
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However, Insurers refusal to accept Abandonment does not legally prejudice the
insureds claim for a CTL once the Notice of Abandonment has been issued by him and
received by the Insurer. Notwithstanding this the Insurer must still refuse acceptance of
abandonment of the wreck till the probable liabilities attaching to the wreck (Port and
other dues, statutory requirement of wreck removal in case of vessel sunk in navigable
channel ; etc.) are reasonably estimated or considered.
c) Total loss claim can be settled on the basis of the statements and documents, as also the
Investigators/Surveyors report as the case may be if the circumstances are found to be
reasonably acceptable. As per Marine Insurance Act, following acceptance of a claim for
Total Loss of a vessel, the insurers become entitled to the wreck or the proceeds thereof,
if any. However, before enforcing such entitlement, it is advisable to ascertain whether
or not any liability, statutory or other wise, is reasonably likely to attach to such wreck or
proceeds thereof.
d) Since Marine Hull Policy is issued for a composite sum insured, representing the
aggregate values of Hull and Machinery and showing Hull or Machinery value separately
in the policy being prohibited, no claim for Total or Constructive Total Loss can be
considered for settlement on the basis of and on account of either Hull or Machinery
value alone.
e) In case of Partial Loss, as far as possible, efforts should be made by the Surveyors to
achieve assessment net of salvage, if any, because it is difficult and very often not
economical for the Underwriters to get involved in salvage take-over and disposal.
However, where this is not possible, arrangements should be made to take over the
salvage from the insured before the settlement of the claim and it should be disposed of
as early as possible as per the guidelines for disposal of salvage.
f) Claims occurring in foreign waters should be dealt with in the same manner as in the
case of Oceangoing vessels.

Documentation/matters to be verified:

1. The Final Survey Report, which, inter-alia should incorporate the following:
a) Name of the registered owner of the vessel
b) Identity of the vessel including registration details. Licence particulars including validity
thereof wherever applicable.
c) The details of loss suffered;
d) The Surveyors observation on the alleged circumstances of the loss;
e) The reasonable probability of the alleged circumstances giving rise to the losses noticed
and/or claimed.
f) Quantification of repairs/replacement cost, Salvage, Sue and Labour etc. where
applicable.
g) Cause of loss as per the Perils Clause of the policy.
h) Confirmation of class if applicable.
i) Confirmation on compliance with Conditions and Warranties relating to Trading, Weather,
Lay up, Watch and Ward etc., and also the provisions of the applicable statutes.
j) Adequacy of sum insured for G.A, Salvage, Sue &Labour, Collision liability claims etc.
k) In case of total loss claims, specific recommendations of the surveyors whether the claim
is actual total loss or constructive total loss with reasons.
l) Comments as to the direction, speed and angle of blow in respect of collision claim
together with opinion on degree of blame attaching to each vessel.
m) Photographs of the wreck, salvage operations, Sue and Labour etc. wherever practicable.
2. Copy of Certificate of Registration and License, if any, issued by the concerned authorities.
3. Original of the Certificate/Letter of Cancellation of Registration of vessel in respect of Total
Loss claims.
4. Weather Report for the relevant place, date and time from the competent authority in case
Adverse Weather Warranty is involved.

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5. Affidavits and/or statements by the Owner, Tindal and all members of the crew separately of
the insured vessel and/or rescuing vessel, if any, made to any authority such as Police,
Magistrate, Notary Public, Port Office, Indian Consulate etc.
6. Marine Casualty Form issued by Mercantile Marine Department where applicable.
NB: Marine Casualty form is available only if any member of the crew including Tindal has
survived the casualty. If all the crew members including the Tindal employed in the
particular adventure die due to the casualty or are missing beyond trace, the Marine
Casualty Form is not issued by Mercantile Marine Department as no statement from any
of the crew regarding the casualty can be recorded by the Department. However, in
such cases, the Mercantile Marine Department issues a certificate confirming that the
casualty has been reported to them.
7. Police Report for claims within the territorial waters and for SRCC claims.
8. The loss should be reported to the Port Authorities if occurring within the port area.
9. In view of the localised and small scale operation, Salvage Charges covered under the
Fishing Vessels policy is to be seen differently from that under Ocean-going Vessels Policy
in as much as neither the Lloyds Open Form for salvage agreement nor any international
professional salvor is ever likely to be involved in salving such vessels. Therefore, in most
of the cases the salvage services rendered to fishing vessels will be contracted salvage and,
for the purpose of eliminating unnecessary complications, it is advisable to treat such
Salvage Charges as Sue and Labour costs for all practical purposes. It is, however, to be
ascertained that the amounts claimed for such costs are both actually incurred and
judiciously and reasonably incurred as also incurred to avoid or minimise a loss that would
otherwise be admissible under the policy.
10. In the event of a Total and/or Constructive Total Loss claim being considered for admission,
the original insurance policy duly discharged by the insured is to be collected. However,
where the original policy is reported to be lost, an appropriate Letter of Indemnity in lieu
thereof should be obtained from the insured.
11. In the event of a claim for Partial Loss/Expenses, Salvage, Salvage Charges or Sue and
Labour Charges, original repair bills, cash memos and similar documents duly verified and
certified by the Surveyor as also Salvors/divers Report where applicable, are to be
furnished. Claims for Sue & Labour Charges may have to be considered for settlement over
and above the TL/CTL claim settlement. For these also original bills/cash memos in support
of expenses incurred are required.
12. For claims other than TL / CTL, the applicable deductible should be first deducted from the
total claim amount as provided for in the clauses attached to and forming part of the policy.
13. In addition to the above, the following documents have to be collected for Sailing vessel
claims.
a) Certificate of Inspection
b) Free Board Certificate before commencement of the voyage;
c) Cargo Manifest
d) Load Line Certificate
e) Port Clearance Certificate;
14. In case of Fishing Vessels, wherever the provisions of the Merchant Shipping(Amendment)
Act 1983 Part XVA, Section 435A to X are applicable, the Surveyors should be directed to
report on the compliance thereof.

Fixed Jetties and Pontoons:

1. Since these are fixed structures and are included in the Hull Department more as an
extension of the principles of Hull Insurance than for any other reason, in the event of
losses it is advisable that such claims are processed as Engineering claims.
2. However, since some losses may be found to be appropriate to be dealt with in accordance
with the practices of Hull Department, like in the event of fixed Pontoon getting un-moored
accidentally, going adrift and ultimately sustaining damage or getting stranded/grounded,
such claims should be processed in line with practices of the Hull Department.
72

3. Situations which are not explicitly provided for here, should be handled in consultation with
the competent authority/Head Office.

(VIII) MOTOR OWN DAMAGE CLAIMS

General Documentation/matters to be verified for all Motor OD Claims:

The documents generally required/matters to be verified, for settlement of motor OD claims, are
given below. However, depending on the merits of a case, a particular document may not be
necessary or an alternate document could be used to serve the purpose of the company. If the
competent authority is satisfied that the loss is genuine, some documents may be waived and
all efforts made to expedite the settlement of the claim.
1. Claim Form duly completed
2. Registration certificate: The details usually verified from the RC can instead be obtained
from purchase details of the vehicle if the circumstances so warrant.
3. Driving licence:
a) As per policy condition the driver is required to hold an `effective driving licence both in
terms of the period of validity and the class of vehicle that is being driven at the time of
the accident.
b) The MV Act provides for a grace period of 30 days after expiry of a licence during which
period the licence may be accepted as effective, provided the holder has not been
disqualified from holding a licence.
c) If for any reason, to be specified, the driving licence can not be produced, the claim may
be considered only on non-standard basis. However, for settlement of such claims the
authority should be vested only with Regional Managers and above in the RO.
d) Where the driving licence is not endorsed for tourist taxis, since different practices
prevail in different states, it is necessary to check the local practice. The claim is to be
treated as standard or non-standard on the basis of the practice prevailing in the State
where the accident occurs and this will be decided by a Manager and above in the RO.
e) For loss sustained by parked vehicles, Driving Licence may not be relevant.
4. Load challan/Trip Sheet: To verify that the load carried was within the permissible limits and
the trip sheet giving the details of number of passengers carried in the vehicle.
5. Fitness certificate: The Fitness Certificate indicates the roadworthiness of a commercial
vehicle.
6. Report to Police: A copy of First Information Report and Panchanama is required wherever
third parties are involved in an accident.
7. Survey report:
a) Surveyor should ascertain the damage, assess the quantum of payable claim, verify
vehicular documents and confirm that the loss/damage being claimed for is in
conformity with the narration of the accident.
b) Where replacement of parts is allowed surveyors must physically verify serial nos. as
appearing on major parts which carry such numbers

8. Re-inspection Report: If re-inspection after repairs is considered necessary it may be
conducted by the same surveyor who has assessed the loss. In the case of commercial
vehicles, re-inspection is compulsory and to be done, preferably, by a different surveyor.

Own Damage Claims:

1. Immediately on receipt of intimation of loss, either in writing or over telephone, whether a
surveyor was appointed, based on the estimate of repairs.
2. In case of major accident, whether the insured was asked to arrange for photographs of the
vehicle at the spot of the accident, showing all the external damages and the Number Plate
of the vehicle.

73

3. The photo expenses is to be reimbursed upto Rs. 500/-. Alternatively, the insured may
inform the nearest office of the insurer to arrange for such photographs.

Partial Loss Claims:

1. Submission of bills/cash memos can be dispensed with for claims upto Rs. 50,000/- , in
respect of private cars and two wheelers only, subject to:
a) The survey report correctly indicating the cost of parts allowed for replacement.
b) Claims being settled on the basis of a report of reinspection after repairs by the surveyor,
certifying that the repairs and replacements have been carried out as per assessment.
c) For other classes of vehicles bills/cash memos have to be obtained and verified.
2. If surveyor confirms replacement of the engine and chassis if allowed for replacement and
indicates the new numbers, claims may be settled whilst simultaneously advising the
insured that:
a) As per the provisions of the Motor Vehicles Act, the new numbers have to be
incorporated in the RC book.
b) Insurance company be informed about the incorporation of the new numbers in the RC
book for endorsing on the policy document to facilitate settlement of future claims.

Total Loss Claims :

1. Where the vehicle is totally damaged or when the net cost of repairs is almost close to
the Market Value or the IDV the claim could be considered to be a total loss. Such total
loss claims should be encouraged on net of salvage basis i.e. salvage being retained by
the Insured and an appropriate amount towards salvage value as determined by the
surveyor in consultation with the company be deducted from the Total Loss amount.
2. However, if the insured refuses to retain the salvage, arrangements should be made for
the safe custody of the damaged vehicle to prevent further loss or damage.
3. The R.T.O should be informed by Registered A.D. Post .
4. An inventory of the major parts should be taken before taking possession of the vehicle.
5. Immediate steps thereafter should also be taken for its disposal as per the Company's
guidelines for disposal of salvage.

Theft Claims:

Verify that the following procedures have been followed, so that the interests of the Company
are safeguarded:

1. Partial Loss due to Theft: Theft of parts/accessories from a vehicle should be reported to
the police immediately by the insured. If parts are found missing or changed after
recovery of stolen vehicle this should be recorded in panchnama/recovery memo. Final
police Investigation report will also be required.

However, if the competent authority is satisfied about the genuineness of the loss, final
investigation report may be waived provided the insured sends a registered A/D letter to
the SP/ACP requesting that the Insurer should be informed of any recovery.
2. Total Loss due to Theft: Unless the claims settling authority is fully satisfied
investigation of the theft is to be arranged by an investigator who may be appointed with
specific terms of reference.

3. For both partial and total loss theft claims, the following documents should be collected
by the office, from the insured, in addition to a certified copy of the First Information
Report, for considering "on account" payment ( 75% ) of the admissible claim after
expiry of 90 days from the date of loss.

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a. Surrender of the Registration Book and the Tax Book to the insurer duly
transferred in the name of the insurers. The RTO is to be informed about the theft
of the vehicle and this should be entered in Tax book so that further tax will not
accrue.
b. Letter of Indemnity and Subrogation.
c. Ignition keys of the car.
d. Certificate of Insurance and the original insurance policy, if not stolen with the
vehicle.
e. Specially worded discharge voucher.
4. The balance payment may be released on receipt of the Final Police Investigation Report
or on expiry of a suitable waiting period from the date of the `on account' payment, after
obtaining the discharge voucher in full and final settlement of the claim.
5. The Police and the Registration authorities should be notified in writing about disposal of
the claim on `Total Loss' basis, following theft of the vehicle. They should be requested
to advise the Company if the vehicle is recovered subsequently. Immediately after receipt
of advice from the Police regarding recovery of the vehicle, necessary steps for taking
possession of the vehicle from the Police custody should be taken and, if necessary, an
advocate should be appointed for filing recovery application in the court.
6. Municipal Authorities, where applicable, and the R.T.O. should be advised by Registered
Letter with Acknowledgement Due to record `non use' of the vehicle on account of theft
and about the cancellation of the Insurance Certificate.
7. If the vehicle is recovered subsequently the Insured will have the option to repay the
claim amount already paid and retain the recovered vehicle. If the vehicle is found
damaged, the Insured will be indemnified against loss of or damage. The Insured
should be advised to obtain a recovery memo from the Police and to get the vehicle
surveyed at the Police Station before taking delivery, as mentioned under partial loss
theft claims.
8. In cases of criminal breach of trust each case should be dealt with on individual basis
depending upon facts of each case and subject to legal opinion.

(VIII) MOTOR THIRD PARTYCLAIMS

Third Party Bodily Injury Claims (Fatal and Non fatal):

The following points need to be considered while auditing such claims:
1. Intimation of claim: Intimation about an accident resulting into third party claim is received
through various sources :-
a) Insured:
(i) Directly
(ii) By mention in passing whilst lodging own damage claim
b) Claimant:
(i) MACT/Courts by notice.
(ii) Through accident report from police in Form 54 prescribed under Central Motor
Vehicles Rules 1989.

2. Investigation: Investigation about the accident to collect the relevant data to quantify
reasonable and just compensation as per the formats enclosed in respect of all Third Party
Claims is mandatory. The office should also ensure that this investigation helps the
Insurance Company in finalising out of court settlement at the earliest.
3. Appointment of advocate: On receipt of notice from the MACT, whether a competent
advocate from the panel was appointed.
4. Whether a draft written statement (w/s) was duly filed on behalf of the Company. Whether the
office has ensured that proper defence is taken in the w/s, where necessary, and no frivolous
statements are made.

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5. Policy copy: Whether duly certified true copy of the complete policy with the relevant
clauses and endorsements, as actually attached with the original, issued covering the
vehicle at the material time of accident, is available on record.
6. Driving licence: In case, it has been observed that driver was not duly licensed the
necessary intimation should be given to the advocate. Though under section 149(2) of the
M.V. act, 1988, Insurance company has no liability if the driver is not duly licensed, the onus
to prove that the driver was not holding a licence rests on insurance Company and this
obligation is required to be discharged fully to the satisfaction of the court.
7. Compliance of policy conditions: Whether there is any Breach of a specific policy condition,
and, if so, whether it has been brought to the notice of the Advocate to enable proper
defence, if possible.
8. Whether a written Statement on behalf of Insurance Company incorporating all defences
available as enumerated under Section 149 of M. V. Act, 1988 was promptly filed.
9. Wherever necessary when there is a collusion between the insured and the claimants or
when the insured fails to defend the claim, the office should have instructed the Companys
Advocate to obtain the MACTs permission under Section 170 of the Motor Vehicle Act to
defend the claim on merits. Whether this has been done.

Payment of no fault liability claims:

If liability under affected policy is established after taking into consideration the foregoing
defences, Company should take immediate steps to deposit No Fault Liability amount as per
Section 140 of the MV Act 1988.

Payment of fault liability claims:

1. Companies must initiate action to settle such claims either through:
a) Jald Rahat Yojana
b) Lok Adalats
c) Direct negotiation with the claimant through DICC & RICC
2. Unless conclusive proofs of defences are available which would satisfy the Courts there is
no point in prolonging the case.
3. Once an award is passed, verify whether it is satisfied immediately on its pronouncement
unless of course decision is taken by the competent authority to file an appeal against
judgement and award.
4. Examine the grounds on which such appeal can be filed to ensure that a substantial point of
law is involved and the Companys finances are not frittered away on pointless appeals.

Jald Rahat Yojana:

Section 152 of M.V. Act, 1988, authorizes Insurance Companies to settle Motor Third Party non-
fatal bodily injury claims, where claimant is an adult, without claimants taking recourse to
MACTs. The Industry launched the Scheme from 1991.

Guidelines for placing claims in Lok Adalats:

1. Whether there is maximum participation and disposal of large number of claims in Lok
adalat sessions should be examined.

2. Companies should place the claims normally falling within the following parameters
before Lok Adalat:

i. Where occurrence of the accident is within the policy period.
ii. Where estimated liability is not expected to be exceeding Rs. 5,00,000/- per application
for compensation.
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iii. Where no substantial point of law is involved.
iv. Where no defenses are available under Section 149 of the Motor Vehicles Act, 1988,
such as driver not holding effective driving licence and breach of policy condition
relating to limitations as to use.
v. Where Police Record shows that the driver was holding effective driving licence.
vi. Where despite concerted efforts on the part of the insurance companies, they are not in
a position to prove conclusively to the satisfaction of the Court that the vehicle was
driven by a person not duly licensed.
vii. Since there is a provision of automatic transfer of insurance in pursuance of Section
157 of Motor Vehicles Act, 1988, the companies cannot take defence of non-transfer of
insurance of the vehicle on their books. Hence such claims may be placed before Lok
Adalat for disposal.
viii. Where more than one vehicle insured with different insurance companies is involved in
an accident resulting into a third party claim, companies should agree for settlement on
50-50 basis to apportion the liability between them.
ix. As the present Motor Tariff covers liability in respect of owner of goods when traveling
in the goods carrying vehicle with his own goods without payment of additional
premium, the companies may place the claims for compensation in respect of such
owners before Lok Adalat.

3. Offices should not accept conditional settlement such as subject to verification of certain
documents, production of documents, etc.

4. On having reached the agreement for compromise settlement, the concerned MACT
issues a Consent Order, specifying inter-alia the period during which the agreed amount
should be deposited. On receipt of such Consent Order, whether the office has
deposited the amount, as agreed to with the MACT, within 30 days from the date of
award, as per statute.

5. In the event of a Lok Adalat for pending appeals before High Courts being organized,
such claims where quantum of compensation is in dispute may be considered for such
Adalats.

6. Verify that appeals which are filed to decide a point of law are not considered for placing
before Lok Adalat.

7. Applications for compensation filed by the paid employees may also be placed before
Lok Adalat, whether wider legal liability is covered or not. In case wider legal liability is
not covered under the Motor Policy, compromise settlement of such claims before Lok
adalat may be accepted provided the quantum of compensation is on par with the
compensation payable under the W.C. Act, and is acceptable to the claimant.

(IX) GUIDELINES FOR DISPOSAL OF SALVAGE

1. General guidelines

a) As far as possible salvage value should be deducted from the loss amount and net claim
amount paid to insured.

b) If circumstances so require, insurer may, after consultation dispose of salvage through a
surveyor, who is required to observe best practices of business for realizing maximum
value for the salvage. Such salvage disposal will be without prejudice to the rights of the
insurer as regards admissibility of the claim.

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c) Salvage disposal can be undertaken through auction or by inviting offers. However,
companies may take the help of reputed auctioneers or organizations specialized in such
activity.

d) Wherever absolutely necessary the salvage can be collected and disposed off in lots
periodically.

e) Whatever be the mode of disposal of salvage, the value realized should not be less than
the expected value of salvage indicated in the survey report.

f) The prime consideration before incurring expenditure in disposal of salvage should be
that the cost of disposing should be economical to the company vis-a-vis the realizable
value of salvage.

2. Procedure for disposal by the Insurer without advertisement:

a) Salvage of estimated value upto Rs. 5,000/- other than motor vehicles may be disposed
off by negotiations with local salvage buyers. In respect of motor vehicles the limits for
disposal of salvage by negotiation will be as under:

(i) Scooters/Motor cycles/3 wheelers Rs. 5000
(ii) Light Motor Vehicles Rs. 15,000
(iii) Heavy Commercial Vehicles - Rs. 25,000

b) Salvage exceeding the above limits but upto an amount of Rs. 50,000 except in case of
total loss of 2 wheelers shall be disposed of by inviting offers from prospective buyers
by issuing sale notices to all the salvage buyers. At least 3 offers must be received to
process the sale. The offers shall be received in writing before date to be specified in
advance.

3. Disposal through press advertisements:
Requirements:

a) In case of total loss of 2 wheelers and others where the expected value of salvage is
exceeding Rs. 50,000/- but upto Rs. 2 lacs shall be disposed by inserting a sale notice in
one widely circulated daily newspaper at the centre where the salvage is available for
inspection. The cost of disposing the salvage by means of advertisement should not be
beyond 40% of the salvage expected. If it is found that it exceeds 40% then the
procedure indicated under 7.2 may be adopted.

b) For all salvage where the expected value exceeds Rs. 2 lacs the concerned DO will place
a sale notice in more than one newspaper as may be necessary and which is most likely
to be read by the prospective buyers of the salvage to be disposed off.

Advertisement Procedure:

a) The sale notices inserted in the press should, inter alia, contain the following particulars :

b) A brief description of the items(s) offered for sale, indicating the approximate quantity
and condition thereof, as also the location where the same can be inspected by prior
arrangement with ___________ . The item(s) offered for sale must be strictly on an as is
where is basis with all faults.

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c) Offers will be received in sealed covers indicating brief particulars of the offer on top by
the concerned in-charge of Divisional Office/Department accompanied by Earnest Money
Deposit remitted by a Bank Draft/Pay Order (but not by cheque) drawn in favour of the
Company for an amount not less than 10% of the offer value so as to reach not later
than (date to be specified).

d) Offer received without the requisite Earnest Money Deposit by Bank Draft/Pay Order will
not be considered and will stand automatically rejected. The Earnest Money Deposit will
not attract any interest.

e) The right to reject any or all of the offers received, without assigning any reason
whatsoever, is to be reserved by the Company.

f) From the date of receipt of acceptance of the offer, the successful offerer must deposit,
within fifteen days, the balance of the amount offered (90% or installments as agreed
upon) and arrange immediate removal of the goods (the whole or part lots as agreed
upon) at his own expense, failing which revocation of the acceptance of his offer and
forfeiture of the Earnest Money Deposit should be communicated in writing to the offerer
concerned.

g) In the case of Motor Insurance claims, if the vehicles involved are under Superdari the
fact should be mentioned.

Office Procedure:

a) A Salvage Committee consisting of five or three members is to be constituted by HO
(with the concurrence of General Manager, HO, Technical Department) for each Regional
Office. A similar Committee is to be constituted by each Regional Office for each of its
Divisional Offices. Offers must be opened by at least three members of the Salvage
Committee where the Committee consists of five members or by two members where the
Committee consists of three members on the specified date and at the time and place
specified for the opening of the offers as indicated in the Press Advertisements inviting
offers.

b) No fresh offer is to be accepted in respect of any particular salvage after the last date for
submission of offers as advertised. All offers for the purchase of salvage must be opened
not later than the second working day subsequent to the last date specified for the
submission of offers, as advertised in the Press.

c) Before opening the covers members of the Committee shall ensure that the offers were
sealed. On opening the sealed covers the offer letters will be signed by all members of
the Committee.

d) A Note should be prepared immediately giving full details of all offers received and noting
the decision taken either for acceptance of an offer or rejection of all the offers received.

e) The highest offer found reasonable will be accepted. If not negotiations can be held only
with the highest offerer for a reasonable amount. The recommendation will then be sent
to the Competent Authority for approval. Professional integrity and secrecy should be
maintained while receiving offers.

f) If for any reason the committee suspects cartelization by the buyers or foul play in the
form of very low offers than indicated by the surveyor in his report then the committee
can reject the offers and choose the best method of disposal in the best interests of the
company.
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Modalities for disposal:

a) As soon as a offer is accepted and approved by the Competent Authority the concerned
Office should write to the offerer immediately advising them of the acceptance of the
offer, and showing therein the name of the offerer, the amount offered, the terms of
payment and lifting of the salvage etc.

b) The balance of 90%, or instalments as agreed upon, of the accepted offer must be
deposited by the offerer by a Bank Draft or Pay Order in favour of the Company within
fifteen days form the date of receipt of acceptance of the offer and the successful offerer
must thereafter arrange, at his own cost, for immediate removal of the entire salvage or in
parts/lots as may have been agreed upon. Sales tax, wherever applicable shall be borne
by the successful offerer.

c) It should, however, be borne in mind that, in case the successful offerer fails/refuses to
deposit the full amount as offered by him within the stipulated period or no response
whatsoever is received from him within fifteen days from the date of communication of
the acceptances of his offer, the Earnest Money deposited by him will stand forfeited and
the offerer submitting the second highest offer will be permitted to lift the salvage after
depositing the full amount offered by him or instalments as may be agreed upon, within
fifteen days from the date of communication of the acceptance of his offer, provided the
difference between the highest offer and the second highest offer is not more than 15% of
the highest offer and is not less than the expected value of the salvage indicated in the
SPR.

d) Since the realisable value of perishable commodities viz. Potatoes, fish, fruits or similar
stuff or other items deteriorates very fast, disposal of the salvage should be undertaken
on priority basis, for and on behalf of the concerned parties without waiting for the
liability to be established. However, the provision of the disposal of salvage guidelines
should be followed.

Discretionary power:

a) The CMD/HO Salvage Committee shall be empowered to exercise discretionary power to
vary the procedure outlined herein.

******************

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CHAPTER 4

AUDIT OF REGIONAL OFFICES

Regional Offices are the biggest controlling offices next to Corporate Office and it has to
perform some of the important functions like fixing of business of targets, variables for PIMS,
monitor progress of business accomplishments, personnel functions, salary preparations,
grievance, audit compliance and also form Support System for its offices under control.

Some of the important areas of audit are enumerated below:

GENERAL

1. Target fixation and monitoring of its realisation;
2. Preparation of PIMS Score cards;
3. Permanent claims Review Committee;
4. Allocation of Budget for controlling offices under its control;
5. Targets set for its offices under control for last 3 years;
6. Target achieved during last 3 years;
7. Analysis of performance vis--vis target;
8. Formation of various Committees.
9. Audit Compliance Committee for fixing responsibility and deductions from terminal dues.
10. Correctness of the calculation of various incentives paid to Employees.

HRM DEPARTMENT

1. Functional Chart.
2. Appointment, promotion, termination advices including settlement of dues.
3. Fixation of pay on first appointment and subsequent promotions and on revision of pay
scales.
4. Granting of various allowances, terms and conditions including granting of incentives.
5. Maintenance of attendance of Class I, Class III and Class IV.
6. Overtime sanction and control wherever applicable.
7. Leave records and advices with calculations of payments like encashment, sick leave,
L.W.P. cases and effect on date of increment, control on Special Leave etc.
8. Control on issuance of N.O.C. for foreign travel and for issue of Passport.
9. Housing loan to staff, record of applications, follow-up, payment of loan advances,
recoveries of advances and accounting of payments and recoveries including Registers
and schedules and maintenance of collateral securities.
10.Staff Quarters allotment procedure, rent deduction advices, Lease agreement, Inventory
control for the items provided in the quarters.
11.Co-ordination amongst Personnel, Salary and I.B.D.
12.Maintenance of records pertaining to Staff Mediclaim.
13.Sanctioning of vehicle loans, residential telephones, brief-case and control thereon
alongwith registers maintained for these items.

ACCOUNTS & SALARY DEPARTMENT

1. Consolidation of accounts and RO Unit Accounts and its statutory audit.

2. Monitoring monthly Bank Reconciliation of all Units under the RO.

3. Advances and their adjustments / recovery.
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4. Advices received from various Departments and action taken thereon. At least one
months action papers to be checked.

5. Deductions and their payments to the respective Departments (Income Tax, MBS, PF,
Housing Loan and other statutory / Government authorities).

6. Strike / walkout deductions.

7. Payment, if any, made to persons subsequent to retirement / resignation.

8. Verify payments made to Statutory Authorities.

9. Income Tax / e-Tax declarations from employees are received and the investments are
confirmed before final projection is run.

10. Coding in disbursement vouchers and checking of supporting papers like TE bills, bills
raised by employees, etc.

11. Reconciliation of co-insurance premium both outgoing and incoming.

IT DEPARTMENT

1. Checking the pending tickets raised.
2. List of computer peripherals locally purchased.
3. AMC of Computer hardware.
4. Training status of CWISS.

T.P.A.

1. Reconciliation of float amount.
2. Regular checking of paid files.
3. Control statistics of Mediclaim / Health Insurance Policies.
4. Control system for TPAs.

ESTATE DEPARTMENT :

1. Maintenance of Assets Register.

2. Verification of inventory items. (NIA numbers are given ; physical verification done
periodically and recorded).

3. Property-wise expenses register.

4. (i) Rent control chart to ensure regular payment. The chart should show a list of rented
accommodations including office and salvage storage arrangements, addresses, monthly
rents, date, and voucher number of payment of each month.
(ii) Control on deposits made and their subsequent recoveries along with interest. The
chart should also show the arrangement for taxes payable to local authorities and water;
electricity charges that at place may be shared with other tenants.
(iii) Storage of all Lease Agreements and their verification.

5. Register of premises given to staff members including lease premises showing name of
the person, designation, address of premises, area, monthly rent, taxes, other charges
and recoveries from the occupant from time to time.

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6. Register for telephones showing the details of telephone number, use & place. Pending
security amount in case of surrendered telephone cases.

7. Register for vehicles showing vehicle number, make, users name, designation, annual
premium, taxes and details of e3xpenses on petrol and repairs, tubes and tyres and
batteries.

8. Leave period treatment to be seen for checking running expenses and other relevant
benefits connected thereto.

9. Purchase and sanction of capital items (DO/Branch). Sanction register to be verified with
DO/Branch proposals and Budget provision.

10. Annual service maintenance contracts for various office equipments.

11. Guest House / Transit House. Allotment of Transit House, Income and expenses and
Inventory of Transit House.

PRINTING & STATIONERY :

1. To verify, in the light of Circular issued by the then GM, Mr. Y.D. Patil dated 30.8.1988,
whether proper procedures have been followed and expenditure is reasonable.

2. Stock register is to be maintained for the numbered stationery like Cover Note, Marine
Declaration Books, etc.

3. Placing of orders are as per Tender procedure. Comparative charts to be seen and
reasons for non-acceptance of lowest tenders and non-pooling of indents should be
studied.

TECHNICAL DEPARTMENT

1. Time lag study of R.O. level claim settlement.

2. Role of IRDA designated Underwriter, discounts in rates, marketing of File and Use
cases and registers for underwriting control as per H.O. guidelines.

3. Special contingency policies sanctioned.

ADDITIONAL THRUST AREAS

Performance figures of RO up to the period of Audit ( January to December & also April to
December )
Action taken in respect of comments / qualifications made / reported by Statutory Auditors
( Comment on the extent of compliance total / partial / pending along with reasons for
incomplete compliance / non-compliance ). Whether the queries raised by last years Audit
team have been properly addressed / totally rectified, if not, why and to what extent pending.
All instances of recovery from Employees still pending should be listed and reasons for
such pending cases to be elaborately explained by Region Incharge only.
Whether Audit of large policies has been carried out by the Internal Auditors? If not, reasons
thereof. If carried out, comments / compliance by the RO, on such reports.
ROs response to suggestions and issues pointed-out by the local Internal Audit teams.
Effectiveness and extent of action taken by Audit Compliance Cell at RO on IAD & CAG Audit
reports of ROs / DOs / BOs. Also comment on action taken by the RO where Competent
Authority had ordered disciplinary action based on audit observations.
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Whether Regional Incharge along with Compliance Cell / Committee, undertakes
Responsibility Fixing exercise for non-personal Audit queries during the time of any Officers
exit if not, why? Please apprise them the seriousness of this exercise. In case they need
any clarification they may be advised to contact Chief Managers / Managers of IAD, HO.
Whether important HO circulars have been effectively communicated by RO to operating
offices : dispatch system, as well as file movement systems to be examined.
Comment on the performance of Third party Administrators servicing the Branches / DOs
under the RO in detail including sample audit of claims settled under RO limits by TPA.
Comment on Audit of Claims Hub at RO, although regular audit of claims hub is to be carried
out by Regional Audit team.
Comment on correctness of incentive payments to Development Officers, including position
of recovery of excess payment, if any, from Development Officers / Ex-VRS Officers and
recovery of excess cost, if any. Comment on payment of non-core benefits to Development
Officers.
Comment on the level of business / claims ratio recorded in case of various Corporate
Agencies / Brokers, tie up arrangements with Auto Dealer/s and bancassurance Statistics are
sent to HO in time.
A thorough time-lag study of claims coming from DOs department-wise; i.e., when it has
reached RO and when has its approval / requirements for approval been conveyed to DO.
Comments on adherence to underwriting norms as prescribed by IRDA: such as Designated
Underwrites, Discount/s, Rules & Authority, Submissions of Rating sheets, Marketing of
File & Use products only, maintenance of suitable Register/s for underwriting control as
prescribed by HO.
Comments on Performance of AO(D)s / AM(D)s in detail what action has been taken against
non-performers.
Status of appeal from Employee / s in recovery cases related to audit observations and
cases of employee dues with held due to audit observations linked to such employees
should be furnished in detail.
Comment on cases involving Inter-RO / Inter-Office claims ( MACT/TP/WC ) arising due to
non-availability of policy details / relevant information from issuing office, leading to awards
against the Company.
Any major anomaly noted in Accounting transactions repeat lapses / mistakes.
Comment on functioning of RO TP Cell, if any, give details on manpower, work load and
Disposal ratio. Also comment properly on appeal cases that has still resulted in awards
going against the company.
Comment on ZTC / RTC functioning, if any.
Adherence to IS Audit Parameters( see earlier IS Audit Checklist ) areas for improvement.
Comments on the cleanliness of the RO premises, get-up, visitors sitting space and staff
facilities / conveniences.
Comments on submission of monthly returns of STR & CTR as per AML guidelines and other
instructions under AML guidelines from time to time. This matter is to be given due
importance.
Comment on employee recoveries pending beyond six months and steps taken by RO to sort
out such recoveries.
Any other point you find unique to the Region and is worth mentioning.

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CHAPTER 5

AUDIT OF HEAD OFFICE DEPARTMENTS

TECHNICAL DEPARTMENTS :-

Technical departments to be audited every half year and non-technical departments on yearly
basis.

Sl. No HO Department Sl. No HO Department
1 Motor OD. 18 IBD Class II Cell.
2 Motor TP. 19 Foreighn Business Dept.
3 Fire Technical Dept. 20 I.T.Dept.
4 Marine Cargo & Hull. 21 Publicity Dept.
5 Engineering. 22 Central Salary.
6 Aviation. 23 Estate & Establishment Dept.
7 MATD Department. 24 Property Cell.
8 Health Department. 25 Pension Cell.
9 Techno Marketing. 26 PF & Gratuity.
10 Re-insurance U/w & A/c. 27 Grievance Cell.
11 Credit Insurance. 28 MBS.
12 Central Accounts. 29 Hindi Cell.
13 HRM-Class I, III & IV. 30 IDD Cell.
14 CTC. 31 Brokers / Bancassurance / Corp Agency.
15 EWS, Gen. Admn. 32 APEP / Auto Tie-up.
16 HRD Training. 33 De-tariffing Business.
17 IBD Admn. 34 Hub / R & D / BPR.

The points to be observed in audit are :-

1. UNDERWRITING :-

1. The risks exceeding limits of acceptance of Regional Office which are referred to HO.

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2. Whether Approvals / Technical opinions are given promptly and whether registers are
maintained properly.

3. Fire, Engineering & Hull departments cases referred to HO for rating have been examined
adequately and matter pursued with the HO promptly.

2. CLAIMS :-

1. Claims exceeding sanctioning limits of Regional Office which are referred to HO.

2. Although the claims fall with ROs claims settling powers they have been referred to HO
for Technical guidance and whether in such cases the advice rendered is sound and
prompt.

3. HO for claims handled by HCC.

3. RECOVERIES AND MINIMISATION ( applicable to MCTD ) :-

The proposals referred to MCTD are examined by HO for loss minimisation suggesting
various measures. For recovery Agents, HO Department prepares panel of Agents /
Surveyors.

The performance of the Surveyors / Agents and pending recovery files should be reviewed.
Whether rotation of Surveyors / Agents is done is to be looked into.

4. Review flow control exercised by HO Department in receiving outstanding claims statements
from DOs through respective Regional Offices. The scrutiny of the statements is done to
examine the adequacy of the provisions made for outstanding claims by DOs and accounting
of the same at DO.

5. Maintaining flow chart of underwriting and claims returns and timely submission of such
statements and follow up with ROs. Cases of delays resulting in loss of reinsurance benefits
should be investigated in detail.

6. Scrutiny of reinsurance accounting of recoveries effected.

7. Review of statements received from RO regarding performance of Surveyors.

8. Examination and scrutiny of the loss control measures advised by HO.

Guidelines for audit of all departments can not be enumerated by way of manual since lot of
changes / amendments takes place as per the directives issued by various departments in the
form of circulars from time to time. However, we try to narrate some basic guidelines related to
few departments as under :-

PERSONNEL DEPARTMENT

1. Recruitment of Employees ( procedural aspects ), Salary Roll No., Promotion and
Increment, Transfers as per laid down procedure, Roaster checking etc.

2. Leave Records and Control :-

Sick leave, leave without pay and consequential effects on date of increment, leave
encashment debits, special leave, special cases referred to IRDA and adjustments of
leave salary is done wherever necessary.
86

3. Muster :-

Attendance marking, marking of PL / SL / CL. All SL applications to be supported with
Medical certificate.

4. Disciplinary Actions :-

Whether Industrial Disputes Tribunal / Court Awards are followed up and timely action
taken. Pending cases may be reviewed to see the reasons for delay in settlement.

5. Co-ordination between Personnel, Salary and Indian Business department.

6. Leave Travel Subsidy and Leave Encashment :-

To check whether procedures followed are as per laid down norms. Any undue delay in
recovery of advances and submission of adjustment bill may be commented upon.

7. Housing Loan :-

The control accounts, schedules, employee-wise register, vouchers ( disbursement ) and
JEs during the year should be checked. Whether pre-sanction / post-sanction
requirements are observed. Fund Position and Observance of laid down norms while
putting up the notes for sanction, whether timely deductions of Housing Loan recoveries
are effected or not should be checked. Calculation of Housing Loan payment should be
checked. In case of repayment by way of retirement, voluntary payment or termination
etc. adequacy of provisions should be verified.

8. Verify cases wherein second / additional Housing Loan is given.

9. Allotment and Deductions in respect of Staff Quarters, whether double occupancy /
sharing permitted, whether any staff quarters are remaining vacant / unalloted.

SALARY DEPARTMENT :-

The main points to be seen in audits are :-

1. Verify salary disbursement amount, number of employees and Cash drawn from Bank.

2. Unpaid cash salary is deposited back in Companys bank account.

3. Whether various deductions made are correct and are forwarded promptly to respective
Authorities such as Provident Fund, LIC, Income Tax, etc.

4. Verify advices received from IBD / Personnel Dept., and action taken by Salary
department.

5. Whether Increments ( Including stagnation increments ) are given correctly on due dates
only and in case of Loss of Pay cases verify shifting of Increment dates.

6. Verify whether the names of retired / resigned / Terminated employees are removed from
the Salary Register.

7. Whether Dearness Allowance has been released as per Companys advices.

8. Whether Travelling bills have been settled timely and as per rules in force.
87

9. Whether Travelling advance, Festival advance, Flood advance and other advances are
properly allowed and timely deduction is done.

10. In the case of Employees occupying a Companys owned / rented Flats / premises
whether correct deductions have been made and relevant register is kept upto date.

11. Whether Functional allowance, have been withdrawn in case of transfer of employees to
other assignments.

ACCOUNTS DEPARTMENT :-

The main points to be seen are :-

1. Checking of bank reconciliation statements. Whether funds transfer has been done
regularly from various collection accounts as per standing instructions.

2. Checking of TE bills.

3. Checking of conveyance register.

4. Verification of cash balance.

5. Opening of new Bank accounts and transfer of funds.

6. Remittance of Service tax penalty paid.

7. Remittance of Income tax in disputes whether paid after obtaining opinion from tax
lawyer.

8. JEs have to be checked.

9. Enforcement of financial year end instructions by HO Central accounts to be checked.

INDIAN BUSINESS DEPARTMENT :-

1. Perusal of correspondence on matters referred by ROs.

2. Termination / resignation / Retirement of Development Officers are kept in view and
proper advices are issued promptly.

ESTATE DEPARTMENT ( including Property Cell ) :-

1. Verification of proposals and sanctions given by HO / Board.

2. Verification of Lease Agreements.

3. Repairs, Renewals, Extensions ( whether proper procedure followed )

4. Register of all the properties for residential and office premises is maintained upto date
and no premises is vacant for long periods.

5. Payments as per deeds are made according to the provisions and interest recovery on
advance, if any, are made promptly.

6. Penalties paid, if any, on taxes to ascertain reasons and responsibility fixed.
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7. Maintenance and security of property ( Fire Fighting appliance, insurance in force ) are
ensured.

8. Litigation cases are followed up.

9. Billing and collection of rent, compensation and taxes in respect of premises leased to
outsiders are correct and prompt.

ESTABLISHMENT DEPARTMENT :-

1. Various service agreements / contracts such as cleaning, telephones, AC, fans etc.

2. Car expenses register.

3. Staff car expenses and log book.

4. Asset register and their numbering.

5. Expenses register and Vouchers.

6. Property wise expenses register including insurance.

7. Guest house / transit camp allotment register and expenses.

8. Control on Xerox machine.

9. HO Building expense register.

10. Budget provisions and variance, if any.

PRINTING OF FORMS, LETTER HEADS AND ENVELOPES :-

1. Implementation of instructions in the circular issued ( by Mr. Y.D.Patil, when he was
General Manager ) on 30.08.1988 and in particular constitution of costing committees and
tender Committee and acceptance of lowest offers should be checked.

2. Physical verification of stock with that of book stock.

3. Placing of orders tenders procedure comparative chart to be seen.

4. Bill register and payment register.

5. Indents received and supplies effected.

6. Assessment of annual requirements.

HINDI DEPARTMENT :-

1. Verify circulars / instructions received from Central Govt. / GIC and extent of their
implementation and prompt submission of returns prescribed.

2. Hindi programmes, like workshops and competitions conducted during the year and
review budget provisions against expenditure incurred.

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3. Translation work of circulars / forms / booklets etc. done by the department and cost of
jobs given to outsiders may be reviewed to see whether the jobs were carried out
promptly and economically.

4. Expenses register and vouchers.

5. Hindi Library.

TRAINING DEPARTMENT :-

1. Utilization of Budget.

2. Expenses on printing and stationery.

3. Extent of utilization of facilities and equipments.

4. Expenses incurred for catering services etc.

5. Whether absenteeism of participants is reported to the competent authority.

( This should be observed in the case of deputation of officers to NIA also )

AUDIT OF THIRD PARTY ADMINISTRATORS

THIRD PARTY ADMINISTRATORS otherwise known as TPAs have come into existence a few
years back and had established their identity in the insurance industry. As the TPAs have
become the claims servicing, processing and settling agents for all Mediclaim claims of the
company , it has become the duty of Audit to go into the operation of the TPA in so far as much
as it affects the Company financially and otherwise.

Audit of TPA involves identifying the operations of the TPA and then checking the various
aspects for the point already mentioned above.

The following are the various aspects of the TPA operations that concern Audit.

1. Float account and the periodical reimbursement including Bank Reconciliation.
2. Bank Guarantee for Float.
3. Policy copies being received from various operating offices and the data entry of the
same into the system of the TPA.
4. Issuance of Identity cards.
5. Empanelment of hospitals for the purpose of preauthorisation and tie up agreements.
6. Reciept of claim intimation for both pre-authorisation cases and also reimbursement
cases. Procedure followed for pre-authorisation.
7. Claims processing and settlement.
8. Helpline system provided for claim follow up.
9. Grievance redressal procedure followed.

1. Float Account

a. To check the Bank statement of float account for any transaction other than that
authorised for.
b. To check the Bank reconciliation for delay in Cheques being cleared which may imply
that cheques are prepared by the TPA but are not forwarded to the claimants.
c. To check for bank charges debited in the bank statement and whether the same has
been paid for by the TPA into the float.
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d. To confirm that all cheques that have become stale are adjusted in the next float and
that the respective dealing unit (D.O. or R.O.) have taken them to Stale Cheque
account.
e. To randomly check the cheques despatch register so as to confirm that cheques are
despatched immediately after preparation.
f. To cheque the monthly float reimbursement statement so as to identify whether any
claims are twice claimed as float reimbursement.
g. To check if any offices have been removed from the TPA and added to another TPA
from the point of view of float being adequate and not in excess.

2. TPA Agreement and Bank Guarantee :

To check the validity of the TPA Agreement and also the Bank Guarantee with regard to
its adequacy.

3. Policy copies Receipt and Data entry :

To check the periodicity of policies being given to TPA for uploading in their system.
Whether it is hard copy or soft copy? In case of soft copy whether any manual
endorsements are made in the policy copy relating to pre existing diseases and whether
the same is incorporated in the data base of the TPA.

Incase the Office has moved to this TPA in the current year from another TPA, to check if
claims data relevant and necessary has been obtained from the previous TPA and passed
on to the new TPA.

4. Issuance of Identity cards :

To verify the procedure followed in issuance of ID cards to all beneficiaries of the policy.
To random check whether the data used for ID card issuance is in order.

5. Hospital Empanelment:

a. To call for the list of all empanelled hospitals.
b. To random check the procedure of empanelment and also whether the companys
approval has been obtained before empanelling the hospital.
c. To random check all packages or arrangements made with hospital for
standardisation of claims particularly for package type treatments.
d. To verify whether the TPA has obtained the Charges schedule from all empannelled
hospitals in respect of Room tariff, Diagnostic charges and other non variable
charges. The TPA must also obtain the revised schedule as and when there are
changes made by the hospital.
e. The Audit must random check claims of particular hospitals for verifying whether the
charges declared in the rate schedule is the actual amount charged.

6. Claim intimation and Pre-authorization:

a. To check the procedure followed as and when claims are intimated.
b. Whether the TPA is random checking at the hospitals to see if the hospitalization is
for the person insured.
c. The process of pre-authorization also needs to be checked to see if it is in order and
provides the necessary service with out compromising on checks and balances.
d. Whether 64VB confirmation is obtained before claims settlement.
e. To verify whether the TPA has adequate doctors available for giving opinion on claim
files both at the time of Pre-authorisation as well as settlement.
91

7. Claims processing and settlement:

a. To audit settled claim folders keeping in view the policy conditions specific to the
policy in addition to other conditions.
b. To also audit some pending files including those pending for long time from the point
of customer service.
c. In case of claims repudiation whether the same has been done after obtaining the
necessary clearance of the operating offices must be checked.

8. Helpline of TPA: Every TPA is obliged by our TPA agreement to maintain helplines for
enabling claimants to have necessary follow up. The adequacy and efficacy of this
should be checked.

9. Grievance redressal: The procedure for grievance redressal at the TPA end must also be
gone through.

10. Repudiation of claims are to be test checked to find out that the grounds for repudiation
are properly documented by the TPA to avoid future legal battles.

TPAs are given license by IRDA to transact the claim settlement of the insurance
companies in the health sector. There are set norms and conditions attached to and
TPAs are required to comply with them before starting their business. The norms start
from the capital structure of the TPA and go extensively on their day to day function.

Practically every TPA after securing their license enter into an agreement with one or
many insurance companies to settle the health insurance claims on their behalf. After
that they include various hospital located at prime places throughout the country into a
network. For this they individually enter into an agreement with each hospital on the
procedure to be adopted for settlement of bills, etc., These agreement formats are as
designed by IRDA and they are to be strictly followed up.

Broadly speaking the functions of the TPAs are as follows :

a) Issuance of ID CARD for individual and group customers
b) Sanctioning of cashless with each hospital in their network.
c) Settlement of reimbursement claims.
d) Use of float judiciously.
e) Maintaining a bank account exclusively for each company.
f) Getting expert opinion on complicated claims.
g) Attending to grievances.
h) Maintaining secrecy of data.
i) Timely settlement of outstanding payments to hospital using float money.

The above are indicative and not exhaustive of the functioning of the TPA.

The following are the additional audit points on the functioning of the TPA.

1. Scrutiny of the sample claim folders that are settled for availability or otherwise of the
requisite documents. In this the TPAs normally take excuse in not filing the policy copy
as the same is available on line. Similarly 64 VB is also given a go by.

2. Check the claim file for the admissibility as per the policy issued. Usually individual
mediclaim policies never pose any problem. It is only the TAILOR MADE GROUP

92

3. MEDICLAIM POLICIES which require a study before auditing the claims files pertaining to
them. There are a lot of inclusions which are normally otherwise not available in them.
Moreover they change every year. These are to be borne in mind before auditing these
files.

4. Check the pre authorization form for the photo of the insured and confirm the same with
the copy of the ID card available in the file. This is mainly in CASHLESS settlements of
claims. The pre authorization forms must have the signature of the TPA authorized
doctor or person and the policy holder for having accepted the amount allowed by the
TPA.

5. Check for the arithmetical accuracy of the calculation. Similarly check for the bills and
prescriptions. In heart surgery where stents are used insist for the bills as there are
room for lot of malpractices and amount involved is very high.

6. Insist for the separate numbered bills for the doctor fees, if it is charged separately.

7. Coming to HOSPITALS IN THE NETWORK, call for the agreements of some of the hospital
entered with TPA and find out the terms of payments.

8. The TPAs are expected to maintain only one bank account for each customer. Check for
this. Ask for the bank reconciliation statement and bank statements. Find out the number
of cheques that are issued but not cashed in. If they are more than six months old, then
they are to be deducted from the next float reimbursement as the TPA had not spent this
money. Look for the interest, if any, credited by the bankers and this should go to the
account of the insurance company. Similarly the TPAs are expected to take care of bank
charges and they should not charge the insurance company.

9. TPAs, as per agreement, had to code each and every disease on each claim file. Find out
whether their software takes care of this.

10. Similarly test check of their software for correctness in arriving at the balance amount
after each and every claim for the same individual. That is when an insured receive more
than one claim find out how his balance money is arrived at.

11. In the ID card area, find out whether they dispatch all the cards in time and what is the
time taken by them in this regard. Similarly accuracy must be checked and if any
customer grievance had come to them find out their status.

12. Claims are to be repudiated properly. Most TPAs do this in a very haphazard way thereby
bringing more cases of OMBUDSMAN AND GRIEVANCES to the company. To avoid this
test check the repudiation made by them.

13. Normally under the revised individual mediclaim policies cumulative bonus is to be
recovered on renewal upon payment of a claim under the existing policy. In reality some
of the policies get renewed with CB even though a claim was paid in existing policy. Test
checks can be made after taking data from TPA with the respective underwriting offices
or with the renewal policies available with TPAs.

14. Similarly loading of premium with co payment clause is to be done due to adverse claim
ratio in the last two year policies. These areas can also be test checked.

The above are only a few areas of audit of TPAs.

93

AUDIT OF MOTOR THIRD PARTY CLAIMS

INTRODUCTION:

Most of the D.Os & R.Os are handling Motor TP claims and in some centers TP Hubs are
opened to improve upon the functioning & settlements. The Motor TP portfolio takes away major
chunk of the companys outgo. Hence, thorough audit of this Dept. is very important.

Audit of TP claims requires
- acquaintance of gamut of regulations - right from the provisioning of TP claim till
satisfaction of award
- the familiarity, expertise and experience of MV Act and
- Knowledge of legal decisions pronounced in MACTs, High Courts and Supreme Court.

(a) IMPORTANT SECTIONS UNDER MV Act 1988 :

Before entering into the area of Third Party claims audit, the internal auditors have to acquaint
themselves with regard to the following important sections of MV Act, which will have their role
in each and every TP claim fie.

Section 3 - Necessity of Driving Licence Sec. 4: Age Limit Sec. 181: Driving Vehicles In
contravention of Sec. 3 or 4:

No person shall drive motor vehicle in public place unless he holds an effective driving
license.
Wherever transport vehicle is involved , necessary endorsement is must
Age limit for driving Motor Vehicle is 18 Years.
For Motor cycle without gear & not exceeding 50 CC, the age limit is 16 years.

As per Section 3 (1)

The Transport vehicle endorsement is necessary to drive a transport vehicle
As per sec 10 (2) once the vehicle is registered as transport vehicle the TV endorsement
is required even after the 14.11.1994 amendment (removing HGV,HPV, MGV, MPV )
The driver must possess the required endorsement as held by the High Court of Madras /
SC in various cases

Classification of vehicles with respect to weight w.e.f. 14.11.1994 :
LMV - up to 7,500 K.gs.
MMV - Up to 12,000 K.gs
HMV - above 12,000 K.gs
W.e.f 14.11.1994 DL of various categories :

Sl.
No
Category of Vehicle Licence / endorsement required
1
Motor cycles / scooters with Gear MC With Gear
2
Motor cycles / scooters without gears MC without Gear
3 Invalid carriage designed for handicapped
persons
Invalid carriage
4
LMV cars and other light category vehicles of
non-transport category +
Tractor without trailer
LMV

94

Sl.
No
Category of Vehicle Licence / endorsement required
5 Public service vehicles / Light Category
Transport Vehicles -- such as
Tourist Taxi
Taxi.
Maxi cab
Contract carriage.
Stage carriage.
Auto rickshaw for hire.
Tractor with trailer
Educational institution vans /
buses
Any other Transport or non-
transport
Light motor vehicles used for hire
to carry goods or passengers
Private Service vehicles used to
carry employees in excess of 6
persons not for hire or reward.
Hazardous goods
LMV + Badge +
authorisation to drive Transport Vehicle

Hg Endorsement.
6.
Road roller Road Roller
7.
To drive a particular special type of vehicle
e.g. : Bull Dozers etc.
MVSD
( Motor Vehicle of Specific Description )

8. Any other transport or non-transport
vehicles of Medium or
Heavy category
used for hire or reward to carry
goods or passengers

LMV + Badge + authorisation to drive
Transport vehicles ( of Light motor
category ) (+)

authorisation to drive heavy category
i.e. HTV or Tpt. Veh
9. Misc. type of vehicles confined to a
particular places and not required to be
registered & also where public have no
access
No Licence is required

Every Driving license will be in force for 30 days after the date of expiry and would be renewed
without break. Renewal after 30 days will be with break.

Section 14 - Currency of DL:

A Learning Licence will be in force for 6 months
In the case of Transport vehicle, will be effective for 3 years
Hazardous goods will be effective for 1 year
other licence for 20 years or upto the age of 50 years
after 50, once in 5 years
Every licence notwithstanding its expiry under this section continue to be effective for a
period of 30 days from such expiry

95

Section 140 - No Fault Liability:

Present Sec 140 of M.V. Act was introduced on 01.10.1982. The liability is automatic. The
injured/claimant shall not be required to plead & prove the negligence/ wrongful act of the
owner of the IV / driver or any other person causing the accident. The legal defence of
contributory negligence is not available to insured / insurer.
The amount of compensation to be given under any other law shall be reduced from the
amount payable under this section or Sec 163 A.
Compensation for Death : Rs.50,000/-
Compensation for Permanent Disablement : Rs.25,000/-

Section 146 - Necessity of Insurance against third party risk:

There should be valid Third party insurance to claim under a MACT.
This excludes vehicles of Central and State Governments provided separate fund is
maintained to face any TP claim exigencies.
As per M.V. Act, Insurance of third party liability arising out of use of vehicle, at public
place is made compulsory. No motor vehicle can ply in a public place without third party
liability policy. Motor own damage insurance is not made compulsory

The list of beneficiaries of the contract of insurance who constitute third Party :

Paid driver of the vehicle irrespective of whether it is a private vehicle or public
service vehicle. ( Liability under WC Act 1923 )
The conductor or a ticket examiner in a public service vehicle
Workmen of insured vehicle being carried in the vehicle not exceeding 6 in addition to
driver.
In goods carrying vehicle, nobody is allowed to occupy the place meant to carry
goods and one can travel inside the cabin and that too to the extent of seating
capacity given in R.C. book.
The passengers carried in the public service vehicle for hire or reward.
Owner of the goods or his authorised representatives in the goods vehicle who
travels in the cabin only
Sec 147 does not require an insurance company to assume risk for any death or
bodily injury to the owner of the vehicle.
As per TAC circular dt. 01.06.1986, death or bodily injury to pillion riders of a Motor
cycle under Comprehensive / Package policy, is covered provided such person is not
carried for hire or reward.
Similarly, as per TAC circular dt. 13.02.1978, effective from 25.03.1977, death or bodily
injury to any occupants of a Private car under a Comprehensive / Package policy, are
covered provided such person is not carried for hire or reward.
Pillion riders of a motor cycle & occupants of Private car under Liability policy are not
covered and on payment of additional premium these risks are covered.
Pedestrians in the public road.
Damage caused to the property of any third party in the public place by use of the
insured vehicle.
Third party includes Government also.

Section 149 (2) - Statutory defence available for insurer:

Private vehicle used for hire or reward
Passengers carried in goods vehicle which is not allowed by permit
Driven by any person who is not duly licensed or disqualified
Races & speed testing
Injury arising out of conditions of war, civil war, riot or civil commotion
96

policy is void on ground that it was obtained by non-disclosure of material
fact.

Section 158 (6) :

This section gives mandatory provisions that the Police should provide Form No. 54
to the insurer/ MACT / injured .

Section 160 :

This section deals with the duty of the registering authority or the officer-in-charge of
a police station to furnish particulars of vehicle involved in accident as required by
the insurer against whom a Third Party claim has been lodged.

Section 161 - Hit & Run Motor Accident:

It is defined as an accident caused by motor vehicle, identity of which cannot be
ascertained.
Compensation known as solatium is payable from solatium fund established by
Central Government and administered by GIC w.e.f. 01.10.1982.
Compensation for : Death - Rs.25,000/- & Grievous injury - Rs.12,500/-

Section 163A - Special provisions as to payment of compensation on structured
formula basis:

The owner of the motor vehicle or the authorised insurer shall be liable to pay in the case
of death or permanent disablement
There is a income slab of Rs.40,000/- p.a.
It also gives vital advantage of not pleading or establishing any wrongful act or neglect or
default of the owner of the offending vehicle or vehicles.

Section 166:

It deals with the person entitled and the area of jurisdiction where MCOP claim petition
can be made.

Sec 170 - Taking over the rights/defences of the insured:

Where in the course of any inquiry, the tribunal is satisfied that there is a collusion
between the person making the claim & the person against whom the claim is made (
petitioner & insured ) or) The person against whom the claim is made has failed to
contest the claim (the insured / driver remains absent in MACT), the tribunal may direct
the insurer (who may be liable in respect of the claim) whom shall be impleaded as a
party to the proceedings, without prejudice to the provisions of Sec 149 (2), and the
insurer so impleaded shall have the right to contest the claim on all or any of the
grounds that are available to the person (insured) against whom the claim has been
made.
Filing of Section 170 petition in all cases even in No Policy cases- In simple words -
stepping into the shoes of the insured

Section 173 - Appeals against order of tribunals:

The time limit for appeal is 90 days from the date of issue of award copy less the time
lost in applying Certified Award by panel advocate. For WC & Consumer cases, the time
limit is 60 & 30 days respectively.
97

Appeal deposit to be made is 50% of the award amount or Rs.25,000/- which ever is less.
No appeal shall lie where the amount in dispute is less than Rs.10,000/-
In case of Delay in filing appeal, it has to be condoned under Section 5 of the Limitation
Act. Hence, delay in filing appeal should be avoided.

Section 174 - Recovery of money from insurer as arrear of land revenue:

EP must be avoided since the tribunals have vast powers for recovery of award amount
as arrears of land revenue.
If we have to satisfy, we must satisfy immediately. If there are chances of appeal, we
must prefer appeal spontaneously.

Section 185 Drunken driving by IV driver / TP driver Defence:

As per Sec 185 of MC Act 1988, there must be a breath analyser test / chemical analysis
test and it should be proved there was 30 mg of alcohol in 100cc of blood.
In law, unless there was proof, one can not be said to be under the influence of alcohol
and mere reference to smell of alcohol would not be sufficient. There is a clear
difference between smell of alcohol & under the influence of alcohol.

Section 192 (a) - Using vehicle without permit :

Requirement of Permit: It is an authorisation to use a motor vehicle as Transport vehicle. No
transport vehicle shall be used in public place without a permit.
Some of the grounds where Permit is not required:
Any goods vehicles gross Wt. less than 3000 K.gs. ( shown as NCP)
Owned by Govt. used for Govt. purpose not connected with commercial purpose
Owned by local authority solely used for road cleaning
Used for towing disabled vehicle
Used solely for Police, Fire Brigade, Ambulance or conveyance of Army
Used to carry any relief material to the places of natural calamities
Any transport vehicle temporarily registered while proceeding for the purpose of
registration / vehicle operated by electric battery or solar energy

Section 28:

This section deals with power of State Govt. to make rules in respect of Driving Licence
& sub sec (2) (d) deals with power of State Govt. to rules as regards the badge & Uniform
to be worn by drivers of Transport vehicle and the fees to be paid.
Absence of badge is absence of administrative formality only as it is granted based on :
- Knowledge of topography of the area
- Knowledge of First Aid
- Badge is issued both for the goods & Public service vehicles for driver and
conductor and

- The badge is a matter of State Govt. rules for organizing the dress code for
drivers of transport vehicles
In some States, TV endorsement may be made but the badge may not have been issued
separately. It is mere an administrative exercise to issue the badge.
As per rules, badge is issued on the above points and it has no correlation to the
competence of the driver or his driving skills.
In such circumstances, the absence of badge (even though TV endt. Is available) may
not be a valid ground for the insurer to avoid liability.

98

(b) TIME LIMIT TO FILE MCOP CLAIM:

The Tribunals were initially vested with the jurisdiction to condone delay in filing claim
petition on sufficient cause being shown.
Later sub section 3 of Sec. 166 of MV Act 1988 provided that claim petition had to be filed
within six months of the accident with a proviso to condone the delay for sufficient
cause provided the application is filed within 12 months from the date of occurrence.
However, w.e.f. 14-11-1994, under amended Act 54 of 1994, this sub section 3 of sec 166
had been removed. Therefore, there is no period of limitation under the MV Act 1988.
Limitation is not a defence available to the insurers and claims filed even after 50 years
or 100 years of the accident can be sustained technically.
The Tribunals are required to entertain petitions regardless of date on which accident
took place.

(c) WHO CAN FILE MCOP:

An application for compensation arising out of an accident may be made

o By the person who has sustained the injury (or)
o By the Owner of the property (or)
o Where death has resulted from the accident, by all or any of the legal
representatives of the deceased as the case may be (or)
o By any agent duly authorised by the person injured (or) all (or) any of the legal
representatives of the deceased, as the case may be;
o Provided if any of the legal representative have not so joined shall be impleaded
as respondents to the application

(d) JURISDICTION OF COURT TO ACCEPT MCOP CLAIM PETITION :

Local jurisdiction of MACT/Court

Where accident occurs / Place of accident (or)
Where the claimant / Petitioners resides (or)
Where the defendant/ insurer carries out business Jurisdiction for WC Claim: Petition
may be filed before WC commissioner having jurisdiction over area
Where claimants ordinarily resides or

Where the accident took place

(e) REGISTERS TO BE MAINTAINED:

The auditors should be aware of various records maintained by the motor third party claims
department and many of them are mandatory and provide ample source of information to them
to carry out his verification and attestation function. (Manual records should be maintained even
if soft copy is available.)

Summons Control Register
OP Index Control Register
Vehicle Index register
Advocate allotment register
Investigation allotment register
DFD / Exonerated / Not pressed / closed Register
Pay & Recovery cases Register
Awards Paid Register ( Paid claim Register ) / Payment receipts
99

Close proximity Approval register
R.O. / H.O. Approvals control Register
DCC / DICC / TP Claims Hub Committee - Approval Register
Appeal / SLP / CB CID & vigilance cases - control Register

Registers to be maintained at R.O. TP Cell:

H.C. advocates opinion register
RO Approval register
RCC Approval Register
RICC Approval Register
H.O. approvals Register
Close proximity Approval register
Appeal control register H.C.
Appeal control register for SLP at New Delhi
CB CID / CBI control Register
vigilance cases control Register

(f) LIST OF DOCUMENTS REQUIRED:

The auditors should verify whether the following documents are available in the file for effective
handling of TP claims.

Policy / R.C. / D.L. / Permit/ F.C. of both (Insured Vehicle)IV & (Third Party Vehicle) TP

FIR , Charge Sheet & Criminal court findings

Statement of witnesses ( Cr.P.C. 161 (3) Statements )

Spot sketch & Observation Mahazar

AIR / MVI report

Wound certificate / Accident Register / Hospital records / Discharge Summary from the
respective hospitals / nursing homes.

Xerox copies of medical bills, if exceeds Rs. 50,000/-, from the hospital by producing
necessary request letter from our office.

Inquest / P.M. Certificate

Death certificate

Legal heir certificate

Identification / Residence proof of claimant (Ration card / Voter I.D. / E.B. Card /
Telephone bill etc.)

Income proof - salary certificate of the victim verified from the employer, or if self-
employed, verification through other documents.

Age proof of the injured / deceased viz, school leaving certificate / hospital record / Post
Mortem Certificate / Voter I.D. Card / D.L./ Ration card etc.

100

Details of dependents in death cases like age, income, status and relationship of the
dependents / claimants with the victim.

The involvement of the IV / TP and the injured/deceased in the accident.

Drivers statement and owners statement on the cause of accident and the nature of loss
sustained by the victim / claimant in detail, if possible.

(g) PROVISIONING:

Appropriate provisioning is vital in the administration of Motor TP claims since it has bearing
on the Companys Profitability. It is an important area for verification for the auditors. The
following points will be of much use in this regard.

Gross pay / Net pay concept :

As far as the gross pay / Net pay controversy, it is now well settled in favour of the
claimants.

It has been clarified that deduction from gross salary can not be mechanically done as
many deductions may partake the character of savings/investments.

It is only IT, Professional Tax etc. which can be justifiably deducted.

Pecuniary Loss - Actual monetary loss :

Expense caused by the injuries.

Loss of earnings or profits from the date of accident till the date of trial

Prospective loss

Incidental expenses

Non -Pecuniary Loss

Pain & suffering / Mental Agony

Loss of amenities of life

Loss of expectation of life

Present day Quantum / Notional income / Disputes on monthly income :
Since the proceedings in MCOP are summary in nature statutorily strict rules of evidence
are not applicable for earnings / dependency. The present day awards are computed on
the basis of present day cost of living and there is power and jurisdiction for the tribunal
to do so.

The High Courts are already flooded with too many litigation and are not inclined to admit
such matters if the stakes are low, more so, where technical defences not
involved/raised.

As per various rulings of SC/High Court, in the absence of definite material about income,
monthly contribution after deduction to family is fixed at RS. 3,000/-.

101

How to make Provisioning of third party cases: Provisioning of various types of Injury cases (
differ from Place to Place).

Sl
No
Head of expenses Minimum Amount Maximum amount
1 Head Injury Rs. 15,000 Rs. 25,000
2 Fracture Rs. 10,000
or Rs. 15,000/- each
( Hip # - 20,000 or 25,000/-)
3 Grievous Injury Rs. 10,000
4 Simple injury Rs. 3,000 Rs. 5,000
5

Pain & Suffering ,
Mental Agony
Rs. 5,000

depending on the period of treatment
upto Rs. 30,000
6

Transportation
Extra Nourishment
Damages to
personal property
Rs. 500
Rs. 500
Rs. 500
Total of Rs. 5,000 (depending on
the period of treatment, transport &
nourishment can be considered)
7 Permanent disability
Rs. 1000/- for each %
But upto 2,000 for each
% for youngsters
When loss of future earning on
multiplier method is considered this
should not be paid,
9
Loss of earning
during treatment
For the Period of
hospitalisation
+ loss for considerable period of bed
rest also can be paid
10
Loss of future
earning capacity due
to permanent
disability
Income p.a. x
multiplier of his age x
% of disability
Seldom to be considered.

Provisioning of various age groups of Death cases :

Sl No Head of consideration Limits
1 Death of a married person As per multiplier applicable to his age
2
Death of a unmarried
person
As per multiplier applicable to the younger parent
normally the mother - sometimes average of both )
3 Loss of consortium Rs. 10,000 & in case of a young widow Rs. 20,000
4 Loss of Love & Affection Rs. 5,000/- per petitioner
5 Funeral Expenses
Rs. 2,000/- ( S.C & H.C considered upto 5,000/in
appeals )

Multiplier
As per Second
Schedule
As per
Sarala Varma
1
Upto 15 years ( Rs.15,000/- x M -15 = Rs.
2,25,000/- was considered. . But now SC
considers upto 3,75,000/-)
15
Silent but 15 is
taken
2 Above 15 yrs but not exceeding 20 years 16 18

102

12 Above 65 yrs 5 5

When compensation for loss of earning capacity during treatment & Permanent disability
on % or Loss of future earning capacity on multiplier method is paid -- alongwith Pain &
suffering, medical bill, Transport/Damage/Ext Nourish -- compensation for grievous /
simple injuries can not be paid.
When disability is compensated on % basis, multiplier method for future earning can not
be paid.
WC : Death - 50% of wages x Age Factor : Injury : 60% of wages x age factor x % of loss of
Earning capacity.
SC in most of the cases considers deduction of 1/3 only for bachelor towards personal
expenses and also applies multiplier as per second schedule only.

(h) DISPUTE OF LIABILITY:

The auditors must be aware of the following grounds where liability can be disputed :

No Policy

No insurance at all
The policy had already expired
The policy is obtained after the accident
The policy is a fake one
Where the premium cheque is dishonoured
TPPD cover is restricted to the statutory limit only (Rs. 6000)

Policy Violations:

Gratuitous passengers carried in a goods vehicle except the owner/ representative of
the goods carried for which he has hired the vehicle.
Kalashi /coolie/cleaner carried in a passenger vehicle
Private vehicle used for hire or reward
Used for Race & speed testing, unless policy allows specifically to do so
Policy is void on the ground that it was obtained by non-disclosure of material facts
Deceased / injured is the insured himself since he is not a third party and hence not
covered by statutory provisions
Gratuitous passengers under the pretext of cleaner or a coolie carried in an Agricultural
Tractor / Goods vehicle
Pillion rider of a 2 wheeler & occupants of private car covered under Liability only
policy - they are not third parties and we are not liable to pay any claim for them.

103

Commercial vehicles which are not covered by proper permit at the time of
commencement of policy (sec 149 (a) (i) (a) )
Any person carried in a tractor/trailer. The tractor can carry only the driver. The trailer is
supposed to carry goods only

DL Violations :

Driven by any person who is not duly licensed
Driven by a disqualified person
DL is a Fake one
No valid DL / DL expired and not renewed within 30 days
No endorsement to drive transport vehicles
DL valid but drunken driving

Violations of Permit & Fitness Certificate

The IV is plying without a valid permit
The permit has expired
Over loading / carrying more than what is permitted
The FC has expired.

In the above circumstances, mere disputing the claim in the counter statement is not
sufficient and insurer is required to mark relevant documents to establish the action taken,
besides, adducing evidence and marking policy.

Once driver is negligent and liable, owner of the vehicle becomes vicariously liable for
payment of compensation and the vicarious liability of owner/insured is indemnified by
insurance company.

(i) REQUIREMENTS FOR FILING APPEAL:

Any person aggrieved by an award of a Tribunal in MCOP cases may prefer an
appeal within 90 days from the date of award in the High court.
The time limit for appeal is 90 days from the date of issue of award copy less the
time lost in applying CA by panel advocate. For W.C. & Consumer cases, the time
limit is 60 & 30 days respectively.
No appeal is allowed if the amount in dispute is less than Rs. 10,000/-.
No appeal shall be entertained unless 50% of the award or Rs. 25,000/- whichever is
less, is deposited u/s 173 and the original deposit receipt is produced.
The certified copy of the Fair and final orders, 170 petition and all the depositions.
Sec 170 petition for taking over the defences of the insured in case of appeal on
quantum & negligence i.e. other than the grounds available u/s 149(2).

Documents required for filing appeal in High court :

Petition copy
Policy copy / Sec 64 VB confirmation
Investigation report with its enclosures
Counter Statement / Affidavit copies
Certified Xerox copy 170 petition with other depositions
Certified Xerox copy of Award / Decree
Appeal deposit Receipt - u/s 173
Opinion of our Panel advocate
Opinion of High court Advocate
104

Copy of the citations, if any
Special Claim Note duly recommended by the Divisional In-charge giving the
reasons as to why an Appeal is required
Postal covers in case of W.C. claims
Regional In-charges approval for appeal original approval note

Documents required for filing SLP in the Supreme Court :

Special claim note ( in the H.O. format ) with reasons for SLP
Copy of citations, if any, if desired by HC advocate / by the insurer
Order of H.C. with the H.C. Advocates opinion.
Xerox copy of deposit receipt - u/s 173
Opinion of our Panel advocate
English Translation of award / depositions / FIR / Charge Sheet etc, wherever available
in vernacular
Copy of Award / Decree
Copy of Sec 170 petition and other depositions
Copies of Counter Statement / Affidavit copies filed by us
Policy copy/ Sec 64 VB duly signed by the D.M ( to be countersigned by the Regional
In-charge while forwarding to H.O. )
Investigation report with its all enclosures
Petition copy

(j) AREAS OF CAREFUL SCRUTINY:

The auditors must check the following areas which need more careful scrutiny as to :

Whether Files are maintained properly by D.Os
Whether files are missing and not matching with the O/S statements
Whether Advocate allotment is done on rotation basis
Whether Petition copies and counter copies are available in each file
Whether 170 permission petition is filed
Whether adequate Provisions are given
Whether Policy copy, Sec 64 VB are available in the files
Whether claims are registered & claim notes are available in the files
Whether Proper Pleas are taken in the lower courts/ evidences are given
Whether awards are pending for satisfaction for longer duration
Whether files are pending for Appeal Recovery
Whether files are pending for Pay & recovery
Whether files are to be referred to RO for approval for filing appeal but pending at
D.O.

(k) COMMON LAPSES:

The auditors must be aware of the following common lapses observed in all offices:

Notices are not forwarded to the case handling offices in time and we are set ex-parte in
many cases.
Proper registers are not maintained.
Investigations are neither arranged nor sent in time / reports are received only after the
awards are passed.
Counters are not well-founded & sec 170 petitions are conveniently forgotten or not filed
even when policy confirmation is available. Unless a joint trial is ordered in batch cases,
170 petitions should be filed for all cases separately.

105

Evidences are not adduced properly and appropriate documents are not marked in the
court.
Performance of advocates are not monitored properly. Filing of copy applications for
awards/decree are delayed for months together and submission of certified copies are
also delayed for no valid reasons. Besides, copies of award, 170 petitions and
depositions are not obtained in one lot and we lose our right to file appeal due to
paucity of time.
Even in the cases of liability disputes or No policy / No DL " cases, RPAD Notice
u/s 149 (4) & 134 (c) to the insured & driver are not sent to protect our recovery rights.
Even if the awards are received in time, files are referred to R.O. consciously after expiry
of appeal time limit. Our guidelines are conveniently forgotten and TP claims are handled
in a haphazard manner.
Satisfaction of awards are delayed even where appeals are not required and hard earned
revenue drains out as accumulated interest.
Where appeals are disposed off with reduction in award, initiatives are not taken to
recover the excess deposit lying in the lower court.
Where appeals are pending, the petitioners conveniently are allowed to withdraw the
entire deposits by our panel advocates.
Close proximity approvals are sought from the respective R.O.s only after the awards are
received by the offices.
Claims are being closed without proper documents.

(l) KINDS OF FRAUDS:

The auditors must be aware of the following kinds of frauds which are often committed in TP
claims are :

Substitution of Driver in No DL cases.

Substitution of vehicles in No policy cases and in Hit & Run cases

Conversion of non-RTA cases into RTA cases

Addition of names of the persons not affected by the accident.

Inflated or bogus medical bills and bogus medical certificates.

Filing multiple cases for the same accident, but at different Tribunals at different
places, either simultaneously or at different points of time.

(m) CLOSE PROXIMITY CLAIMS:

As per the guidelines of HO, any accident occurring within 5 days from the date of
commencement of risk would fall under close proximity and such TP claims should
be referred to R.O. for clearance from the angle of close proximity by the competent
authority.

However, close proximity does not arise where :
The policy is issued for a brand new vehicle
The premium is collected in advance and policy is continuously renewed
without any break.

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(n) LOK ADALAT:

As required under Article 39-A of the Constitution, Government of India has constituted
Lok Adalats with the basic objective to provide expeditious, free and competent legal
services to the weaker sections of the society and also to ensure that opportunities for
securing justice are not denied to any citizen by reason of economic or other disabilities.

The quantum of compensation is determined by the Lok Adalat. As per Sec 21 of the
Legal Services Act 1987, every award of the Lok Adalat shall be deemed to be a decree of
a civil court and shall be final and binding on all the parties to the dispute and no appeal
shall lie to any court against the award.

(o) PAY AND RECOVER CASES:

The auditor has to see the circumstances where the insurer has a right to recovery and the
same needs to be followed legally by it or its lawyer. The grounds which are statutorily
provided under the foregoing section where circumstances admit also need to be taken care of
to deny liability and based on legal position as emerging from the decided case laws on the
issue and thus requiring no provisioning to be made except under no fault liability where
circumstances warrant.

Now the concept of Pay & Recover is prevalent everywhere and adopted by the High
Courts and even Tribunals. It is true that under Art.136 & 142, only the Supreme Court
has got authority to issue such pay & recover orders and even High Courts can not
exercise this power.
As of now, the insurers can deny liability outright only in such of those cases where
there was no insurance or the contract of insurance was availed upon suppression of
material fact or where the victim was not covered under the contract of insurance (
gratuitous passenger ). In rest of the cases, the rule is that the insurer has to pay and
recover ( DL).
Wherever the tribunal has pronounced judgement in a manner that no separate civil
proceedings is required for recover, Execution proceedings should be initiated
instantaneously
Necessary Investigation should be made and the financial standing of the owner of the
vehicle must be ascertained and wherever possible EP must be initiated.

(p) APPEAL RECOVERY EXCESS DEPOSIT OF AWARDS :

This is one important area where our companys huge funds are locked up because of the poor
attention given by the handling offices.
This kind of situation arises when:
The appeal award amount is reduced by the High Court
The rate of interest is reduced by the High Court and
Where we have been fully exonerated in the High Court
This should be worked out and recovered from the Courts/claimants as the case may
be immediately.
To get the refund from the tribunal we have to file :
Affidavit
Payment schedule
Full satisfaction memo
Stamped Receipt
Petition u/s151 of CPC & affidavit to receive Cheque application to issue Cheque
Petition under 163 & 165 of civil rules of practice requesting the court to order to
issue the cheque in favour of New India.
Memo of calculation to distribute the amount.
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(q) ROLE OF ADVOCATES:

The auditors should check the following points in respect of role of advocates.

Filing of vakalats in time on receipt of advice from our case handling offices.

Where petition copies are not enclosed with summons, petition copies should be
immediately provided to us for arranging investigation.

Where policy details are not provided in col. No. 16 in the petition, necessary memo
should be filed denying our liability in toto and a plea should be taken that the owner of
the offending vehicle alone is liable for the claim.

Where vehicular documents are not available, private notice may be issued to insured/
driver/ if required, to RTO for DL particulars, if not sent by the office who has received
summon.

When investigation report is available necessary counters should be filed.

Where Policy details are confirmed by us, & where we have to reserve our right to dispute
quantum & liability (other than the liability arising u/s 149(2)), Sec 170 petition should be
filed without fail. Where batch cases are filed, unless a joint trial is ordered, Sec 170
petition should be filed to each case.

Proper plea should be taken where claims are filed for pillion riders in a motor cycle or
occupants in a private car under liability only policy or gratuitous passengers in a goods
vehicle.

Wherever required, our officials must depose evidence and mark our policy & other
necessary documents.

Any violation in R.C./ permit / F.C / Cheque dishonoured / commencement of time of
policy / policy conditions, sec 149(2) must be properly defended.

Where involvement of 2 or more vehicles, chances of contributory negligence must be
explored.

Where medical bills are filed / available, genuineness of the same should be physically
verified to avoid various foul plays under this head.

Where bills are > Rs. 50,000/- the advocate must collect the Xerox copies of the bills and
send to the case handling office for verification & records.

Proper cross examination to unearth the frauds or to curtail excessive awards.

Wherever necessary, the advocate must mark relevant rulings of the Supreme Court /
H.C. and file written arguments.

The advocate must Co-ordinate with case handling offices in settling more no. of cases in
Lok Adalats and in DICC.

Where TP vehicles are involved and the TP vehicle is overloaded / passengers in goods
vehicle / No DL to TP driver / minor drivers / drunken driving by TP driver / 3 persons in
Motor cycles - should be vehemently fought atleast a contributory award should be
demanded.
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The advocate has to keep the company informed of all the important development in the
case and more specifically when the order is passed.

The advocate must ensure that all W.C. awards are sent to the case handling offices
immediately and awards are satisfied as per the order of WC court within 30 days to
protect the time limit for filing appeal and to avoid payments of penal interest by us in
case of delay beyond 30 days.

As of now, only S.C. has got authority under article 136 & 142 to issue orders to pay &
recover & our advocate should ensure that lower courts do not pass such orders.

Where pay & recover is ordered, withdrawal should be allowed only after furnishing
security by the 1st respondent.

To the extent possible, application of multiplier method for injury cases must be resisted.
Still if any award is passed, the multiplier should be lesser than the fatal cases and if
required appeal should be filed immediately.

Care should be taken in respect of documents produced for income & age proof.

Timely Intimation of passing of awards to us.

The advocate must apply CA of award / decree / Section 170 /deposition copies
immediately in one lot to avoid last minute hurry in filing appeal. In case of satisfaction
of award, the advocate must obtain certified Xerox copies of award & decree and submit
with your detailed opinion to avoid unnecessary interest accumulation.

As and when the award is satisfied the advocate has to obtain the deposit receipt / award
satisfaction memo and submit to our office within a couple of days.

The advocate must regularly follow up with the court and submit the above copies with
legal opinion within a couple of days to avoid losing appeal time.

(q) ROLE OF INVESTIGATORS:

The auditors should check the following points in respect of role of investigators.

Investigation work should be accepted/entrusted with our authorization letter to enable
the investigators to approach appropriate authorities.

Investigation should be done with a motive to assist the advocates & the company for a
smooth conduct of the case and it should not be mere collecting and compiling of
documents.

Investigation report should be submitted within 15 days / 30 days, depending upon the
volume of work involved, in the prescribed format. In case of any delay, an interim report
should be submitted informing the steps taken so far.

The investigator must meet the insured/driver and collect relevant documents and
ensure that the driver co-operate with us to give evidence, if required at a later stage.

The investigator must contact the injured person / claimants of the deceased and collect
necessary documents in respect of income proof, age proof, residence proof etc.

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The investigator must assist the case handling office to handover summons to RTO
office for their evidence, if required. Also, he must approach RTO to collect extract of RC
/ DL / Permit etc., if required by the D.O.

The investigator must ensure that the involvement of the IV and the driver are beyond
doubt.

If any delay in filing FIR is observed, the investigator must ascertain the correct reasons
for the delay.

The investigator must ascertain whether any manipulation is done in respect of insurance
policy/ vehicle no. / Driver name and if so, caution the office suitably.

Where evidence of the investigator is required, necessary co-operation should be
extended to our advocates.

The following documents have to be collected by the investigator :

Policy / R.C. / D.L. / Permit/ F.C. of both IV & TP
FIR , Charge Sheet & Criminal court findings
Statement of witnesses ( Cr.P.C. 161 Statements )
Spot sketch & Observation Mahazar
AIR / MVI report
Wound certificate / Accident Register / Hospital records / Discharge Summary
from the respective hospitals / nursing homes.
Xerox copies medical bills, if exceeds Rs. 50,000/-, from the hospital by producing
necessary request letter from our office.
Inquest / P.M. Certificate / Death certificate / Legal heir ship
Identification / Residence proof of claimant ( Ration card / Voter I.D. / E.B. Card /
Telephone bill etc. )
Income proof - salary certificate of the victim verified from the employer, or if self-
employed, verification through other documents.
Age proof of the injured / deceased viz, school leaving certificate / hospital record
/ P.M.C / Voter I.D. Card / D.L./ Ration card etc.
Details of dependents in death cases like age, income, status and relationship of
the dependents / claimants with the victim.
The involvement of the IV / TP and the injured/deceased in the accident.
Drivers statement and owners statement as to the cause of accident and the
nature of loss sustained by the victim / claimant in detail

CONCLUSION :

The auditors must be thorough of the above mentioned rules, regulations, procedures and
provisions for effective audit of this Dept. They should also periodically update their knowledge
in respect of various judgments pronounced in various courts.

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CHAPTER 6

AUDIT PROGRAMME, REPORTS AND COMPLIANCE

1. AUDIT PROGRAMME

I. Action Plan :-

At the beginning of each year, RO audit Incharge prepare an Action Plan for the entire
year for conducting the audits of offices of the region. These Action Plans are received at
HO and a consolidated Action Plan is prepared and submitted to CMD through Financial
Advisor. The Action Plan is prepared keeping the following objectives in view :-

a. Each Office should be audited at least once in a year. Audit of DO and all its branches
is to be carried out in one go. The average time for completing audit of a DO and its
branches is about 25 working days.

b. The audit should be conducted at least upto last completed quarter prior to the visit
do that the latest position is reported.

Monitoring of completion of Action Plan is done every month through Monthly
Activity report and Monthly Performance Flow Chart.

c. Second time Audit. ( As per Annexure - I )

The basic idea is to audit those offices which could not be audited for the current
financial year. Aspects related to banking, cheque dishonour, fund transfer, C-2 items,
Agency master, CD operation, leave record, management expenses, long pending
advances, LOP cases, negative salary, un-settled terminal dues and other relevant
items need to be checked with due attention.

The main focus of the Second time audit would thus be on :-

The timely rectification of irregularities already pointed out during the first visit.
Implementation of the suggestions already offered earlier.
Verifying where there has been any break down or deterioration of existing system,
for any reason whatsoever, since the last visit.
Whether the IT systems continue to be operated as per the guidelines and
instructions given by the RO IT department.
Whether all financial transactions are correctly accounted between the two visits.
Whether banking transactions and transfers carried out during the interim period are
in order.
Whether cash transactions carried out in the interim period are in order.
Whether premium has been properly and correctly accounted.

d. Surprise Inspection ( As per Annexure - II )

The purpose of surprise inspection is

Aid to regular audit
To enhance our visit to the office to keep the management better informed.
Early detection of lapses.

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How many Surprise Inspection to be conducted :-

20% of all Offices should be inspected every year.

By Whom :-

Inspection should be undertaken by the Audit Incharge only. In case of exigency,
next senior most audit officer may be deputed. Surprise inspection is to be
conducted in half a day only.
The inspection should have an air of confidentiality

Inspection Report :-

Copy of inspection report should be dispatched to IAD, HO within 3 days of
inspection.

II. Activity Report :-

The Activity Report is to be sent by all Audit Incharges by e-mail / fax / courier on the last
working day of the month or first day of next month so as to reach HO latest by 3
rd
of the
next month.

2. CONDUCTING OF AUDIT :-

Audit objections / observations noted may be advised to Officer Incharge ( auditee ) on a
daily basis for his scrutiny and clarification. This memo is named as POM ( Preliminary
Objection Memo ). Auditee on his part is expected to clarify his view point positively on daily
basis. This co-ordination will help in making audit report brief. Audit report is to be finalized,
based on observations during audit and clarification / compliance, if any, offered in the
discussion held on the last day of audit with the head of the office audited. If the head of
office is not available for unforeseen reason, discussion should be held with the senior most
officer available in that office. If the head of office has avoided discussion on some ground
or the other, the fact should be reported to the HO, Internal Audit department for bringing it
to the notice of the GM / DGM, Incharge of the region and the CMD where considered
necessary.

Quantum of checking :-

Minimum quantum of checking is to be done as per 4.11 of the Report of the GIC Committee
( Quantum of audit as given at the end of this chapter ). Top sheet contains details about
documents, claims and disbursements covered during the audit period and the number
called for audit and checked under each head. Audit teams are required to maintain a record
of the policies, claims and other documents which have been actually audited.

The Audit Incharge has to give a certificate in the Top Sheet that the minimum quantum of
checking has been carried out.

3. AUDIT REPORT :-

This is the culminating point of Audit. While preparing report, any clarifications / compliance
received within 15 days of completion of audit may also be taken into account provided the
report has not been finalized. The report should convey right impression to the reader. A
good audit objection may be lost if not properly drafted and presented.

The report should be released within 15 days from the date of completion of audit.
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PARTS OF REPORT :

An audit report is prepared in five parts as under :-

PART A : BOARD level Queries (Money Value above Rs. 6,00,000/- )

PART B-I : CMD Level Queries ( Money value above Rs. 2,00,000/- and upto Rs. 6,00,000/- )

PART B-II : CMD Level Queries ( Employee recoveries exceeding Rs. 10,000/- )

IMPORTANT : Audit queries reported under Part A or part B should be supported by full
information in the format DATA SHEET .

PART - C : System and Procedural lapses.

Only important system / procedural lapses should be reported. Distinction should be made
between transaction lapse and system lapse. The irregularities noticed should be suitably
grouped under four or five important system such as cash management, claims
management, underwriting procedures, customer service, MSD inadequacies etc., instead of
reporting in a stray manner without commenting and linking with the underlying system.
Claim queries should be reported under Part A, B, D and E and not under part C.

Compliance of AML guidelines should specifically reported.

PART D-I : CRM / DGM Level Queries
( Money value above Rs. 5,000/- and upto Rs. 2,00,000/- )

PART D-II : CRM / DGM Level Queries
(Employee recoveries upto Rs. 10,000/-)

PART E : Petty Objections up to Rs. 5,000/-

TOP SHEET :

Top Sheet is an integral part of Audit report and gives valuable information for assessing the
performance of the Auditee Office and also aids the management by pinpointing areas of
weaknesses. Top Sheet is to be prepared for the DO and each Branch under it separately.
Original of Top Sheet is to be handed over to the Branch. All copies of Audit Report sent to
DO / RO / HO should be accompanied by Top Sheet in the format revised as per Annexure.

DO Rating :-

DO rating has been amended vide our OFO No. 03, dated 06.04.2011, as per Annexure and
accordingly rating of all DOs is to be made in four different categories ( compared to earlier 3
categories ) and it should not be filled up as a mear formality. Due attention must be given to
various aspects specified in the top sheet and proper rating of the DO should be reported to
the management with due confirmation of the operating office Incharge.

DRAFTING OF AUDIT REPORT :

An Auditor should take proper note of following point while preparing the report :-

1. Only queries which can be substantiated should be reported. Gathering of information
which is vague and of ambiguous nature should be avoided.

113

2. Skillful treatment of sensitive issues is necessary to avoid causing of embarrassment.
Language of report should be polite and easily understandable.
3. Implementable recommendations may be made for remedial action wherever necessary.
4. All efforts should be made to procure records. Records not made available for audit
should clearly be reported.
5. Audit report is an instrument to display the visible results of audit. It should be readable
and in a presentable form.
6. Comments and / or opinions expressed in the report should be objective. Avoid
excessive generations.
7. Significant matters must be given prominence. Each para / objection should be serially
numbered.
8. Consolidated report for a DO and its branches signed by Audit Incharge should be
submitted to Division Incharge with copies to RO and HO.

In case serious irregularities are observed requiring immediate action, same should be
reported by a special note addressed to Regional Manager with a copy to Chief Manager of
Internal Audit Department at Head Office.

Flash report should be sent to HO by e-mail immediately without waiting for completion of
regular audit and release of report.

SUBMISSION OF AUDIT REPORT :

Only Parts A, B and C of Audit report along with Top Sheet are to be submitted to Head
Office.

Parts A, B, C And D of Audit Report along with Top Sheet are to be submitted to Regional
Office.

Parts A, B, C, D and E should be submitted to Divisional Office.

4. AUDIT COMPLIANCE :

As per the direction given by the Board of Directors, the auditee office is required to ensure
compliances to all the queries pointed out in the Audit Report with 1 month from the date of
receipt of the Audit report.

The responsibility for compliance in respect of all parts of the report is primarily that of the
head of the Divisional Office and the Regional Office.

Employee recovery revelaed during the course of audit should be resolved during the course
of audit and if this is not possible, the same should be resolved / recovered before the audit
report is finalized. as per Annexure - IV

Compliance Procedure :-

Branches should send compliances to DO which should consolidate them and send it to
Regional Audit Incharge with a copy to RO Audit Compliance Cell.

Compliances in respect of Part A and Part B queries should be sent to Head Office with
recommendations of the Regional Manager / Regional Incharge along with,
recommendations of Audit Incharge.

On receipt of Satisfactory compliances in respect of Part D queries, Regional AUDIT
INCHARGE and the CRM / DGM can close the queries.
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The following Board guidelines are useful while judging compliances :-

Audit objections can never be waived or dropped by any authority or any committee. They
can however, be treated as settled when Satisfactory compliance is received. Compliance
could be in the nature of recovery, action against the official at fault or even remedial
measures to set right the procedures or system .

From the above, the following emerge :-

i. Compliance by Recovery :

This is an obvious and straight way of complying to a query. The Audit Incharge should
verify the proof of recovery and he should send copies of such proof to HO in the case of
Part A or Part B queries.

ii. Compliance by way of rectification endorsements :

The flaws in the policies, wherever suitable, can be rectified by passing endorsements,
so that audit queries are complied with.

iii. Rectification of System / Procedure / Lapse at the time of renewal :

Compliance could also be in the nature of improvements effected in the system /
procedures which have given rise to audit queries. Charging proper rates at the time of
renewal could also come under this type of compliance.

iv. Action against the official at fault :

In a few cases, audit queries could be closed in this way also.

Management may settle any internal audit observation at its discretion, on any other
grounds also, provided they are duly recorded in writing and the responsibility s fixed on
the erring official as per the procedure narrated in Cir-05, dated 11.05.2010.

Petty Objections Register :

All Part E queries are to be entered in this register to be maintained by the DO / Branch. The
compliances should be noted and verified by the Audit Team.

Audit Workshops :

System of audit workshops has been proved to be very effective in speeding up compliances
to pending audit queries. Adequate preparation is necessary before conducting a workshop
for its success. Audit Incharge, in consultation with the CRM / DGM , should decide upon the
dates, offices to be covered etc.

While selecting the offices, those DOs where a large number of queries are pending for a
considerable length of time should be covered once in a year.

Participants of an Audit Workshop would include Branch Incharge / Division Incharge,
Officer from the DO / Audit Compliance Officer from RO / Regional Audit Incharge.

The Activity report of each month should give the number of workshops held.

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Detailed statement of Board / CMD / CRM level queries resolved during the workshop should
be sent to HO. Audit Incharge should send the data in the following Format :-

BOARD / CMD / CRM Level Queries

Sl.
No
Particulars No. of Cases
BL / CMD / CRM
Money Value
( Rs. )
1 Outstanding as on _________________________

2

Cases closed during workshops
held on ____________________ at______________

a). By way of actual recovery

b). By way of Satisfactory Compliance other than recovery.

c). Non-compliance / deviation cases recommended for
closure by DGM / CRM & Audit Incharge & agreed to by
Head Office Internal Audit Department representative.

3

Balance Outstanding

SETTLEMEMT PROCEDURE

Sl.
No
Type of Query Recovery type Note put up before
1 Board Level Queries Non-Compliance / Deviation Board
Satisfactory Compliance by way of
Approval, Sanction, Rectification etc.
CMD
Full Recovery FA
2 CMD Level Queries Non-Compliance / Deviation CMD
FA
Full Recovery FA
3 CRM Level Queries Non-Compliance / Deviation DGM / CRM at RO & HO
Audit Department.
CRM / DGM & Audit
Incharge
Full Recovery CRM / DGM & Audit
Incharge
4 Petty Objections
other than Staff
recoveries
Non-compliance / Deviation /
Satisfactory compliance / Recovery
Audit Incharge to settle
in consultation with
CRM / DGM.

As per the Board Directives, Competent Authority decided that employee recoveries should not
be put for waiver.

Cases involving Vigilance angle have to be referred to HO irrespective of the amount involved.

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QUANTUM OF AUDIT

AUDIT OF UNDERWRITING DOCUMENTS

1). Fire Department :- Documents to be checked.

a). All policies where risk has been inspected by our Engineer. In case number is more than
10, first 5 and the remaining 5 at random.

b). All policies where matter had been referred to TAC to ensure that additional premium, if
level is collected, not exceeding 10 in number.

c). All listed risks policies.

d). All Declaration policies.

e). All LOP policies.

f). All other policies / Renewal Endorsement will be checked on Sample basis depending on
premium involved as under :-
Over Rs. 5,000/- 10%
Below Rs. 5,000/- 5%
Minimum 25 policies under each category

g). Control on Underwriting, issue and accounting of Cover notes 25 Minimum 50.

2). Marine Cargo :-

a) 25% of the Open policies will be checked from drafting and rating point of view
maximum 25 in number

b) Special Declaration Policies 100 %.

c) Declarations on Open policies Any 3 of the Open policies ( preferably with more than
one rate ) will be checked with all declarations and only 5 % of the postings on the
remaining policies will be verified.

d) Specific policies and Certificates on Open Covers will be checked 10 % at random not
exceeding 50 in number.

e) Annual Transit Policies 100 %

f) Review of rates in case of policies with a premium of Rs. 50,000/- and over.

g) Cover notes control and scrutiny of individual documents 25% not exceeding 10

3. Marine Hull :-

a). Country Crafts and Fishing vessels upto S.I. Rs. 10 lacs 10%, minimum 10 maximum 25
b). Builders risk insurance 100 %.
c). All Installment clause collections and endorsements 100%.

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4. Motor Department :-

a) Policies with premium of over Rs. 4,000/- will be checked 10 % at random with minimum
of 25 and maximum of 100. In these cases refer the proposal forms only where premium
difference is more than Rs. 50/-.

b) Policies with premium below Rs. 4,000/- 5 % not exceeding 100. As far as possible
selection will be made of representative nature i.e., of different type of vehicles and
different type of risks.

c) All policies with S.I. exceeding Rs. 5 lacs.

d) All Schedule policies.

e) Cover note Control.

f) Certificate control.

5. Miscellaneous Department :-

a) In case of classification of policies like Burglary, PA, CIT, WC, etc will be checked at 20 %
and all others 0%.

b) All group policies like PA, FG and Health at 100 %.

c) Package and Multi-Perils 20 %.

d) RNT, Cattle Insurance policies 100%, but not more than 10 in number.

e) Agricultural Pumpset Policies, Janata Polices, Janata Personal Accident Policies etc.
10 % with a maximum of 20.

f) Special Contingency Bankers Indemnity and Contractors All Risks, Marine cum
Erection 100%.

g) Machinery Breakdown 20%

h) h). Machinery Breakdown combined with LOP 100%.

i) Burglary First Loss Policy 100 %

j) Carriers Legal Liability 100 %

k) Jewellers Block 100%.

l) Contractors liability 100 %

m) Guarantee Policies 100%

6). Extra Endorsements :-

a). Endorsements with annual premium 5%
b). All others 10%

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7. Refund Endorsements :-

a) 100% for those above Rs. 5,000/-
b) 5% of the rest with minimum 20 in number
c) All refunds under Marine Cargo other than No Claim refunds and refunds on undeclared
balance 100%.
d) No Claim refunds and refunds on uncleared balance at 5% Marine Cargo.

CHECK LIST FOR FINANCIAL AUDIT

Sr.
No
Particulars Extent of
checking
1 Verification of Cash Book, Receipts & Deposits
in Bank & Statement
One month
2 Dishonoured cheques
( including cancellation of policies, Advice to clients,
Collection of Ins. Certificate / Cover Note & Registered Notice
to RTO / Bank
100%
3 Bank Guarantee & Deposit Accounts Posting
Review of Balance & Collection
Verification of Original BGs.
One month
Full year
100%
4 Payments / Vouching All Cash books 1 month
5 Summary of Cash Receipts & Payments 1 month
6 Bank Transfer of Funds
Reconciliation Statement
Reconciliation as at 30.6 & 31.12
Latest reconciliation statement
100%
7 Commission payments
Motor & Misc.
Others
15 days
Test check
15 days
8 Agency Licence Expiry Register Test Check
9 Sundry Registers like TA, LTS advance Scrutiny of O/s
items
9A Vehicle loan to Employees to check RC book & recoveries
10 Inventory of Assets
Old items
New Assets

Test check
O/s items
11 Stationer Register Sundry items
Numbered documents
Stock on hand
Test check
One month
Test check
12 Inter Office A/cs
Remittance in Transit
Branch Office A/cs
Premuim Control A/cs
Iner-O=office Transfers
Iner-office claims
HO Account
Recovery A/cs ( IT, PF, Advance , etc )

Test check
Two months &
Scrutiny of
O/s items
13 Co-Insurance A/cs
Major Partys A/cs
Review of Balance

Test check
100 %
14 Budget Review 100 %

119

15 Physical verification of Imperest Balances
Cash, Policy Stamps, Revenue Stamps,
Postage Stamp, Agency Commission

100 %
16 Leave records General
Chronic & Lop cases
Test check
100 %
17 M.B.I.S. Claims Domiciliary claims
Hospitalisation claims
Test check
100 %
18 GL Scrutiny
JV Major entries & year end entries
Others
100 %
100%
Test check
19 Capital expenditure 100 %
20 Lease Deed / Rental payments 100 %
21 Incentive payment / Increments to Inspectors 100 %
22 Accounting of premium registers 100 %

EXPENSES OF MANAGEMENT

Sr.
No
Account Heads Extent of checking
1 Salary & Allowances 1 month
2 Contribution to MBIS 1 month
3 Bank Charges 1 month
4 Printing & Stationery 1 month
5 Postage & Telegrams 1 month
6 Telephone, Telex & Trunckcalls 1 month
7 Rent for Office building 1 month
8 Electricity charges 1 month
9 Policy stamps 1 month
10 Books & periodicals 1 month
11 Depreciation of Assets Year end
12 Revenue Stamps 1 month
13 Office upkeep & maintenance 1 month
14 Conveyance charges 1 month
15 Loss Minimisation expenses 1 month
16 Ear Tagging expenses 1 month
17 Vet. Surgeons fees & Pre-inspection expenses 1 month
18 Ex-gratia payment 100 %
19 Gratuity & Retirement Benefits 100 %
20 Encashment Leave 100 %
21 Over time 100 %
22 Incentive to Development Staff 100 %
23 LTS 100 %
24 Travelling expenses 100 %
25 Travelling expenses ( HO Training ) 100 %
26 Motor Vehicle expenses 100 %
27 Staff Amenities 100 %
28 Entertainment expenses 100 %
29 Audit fees & expenses 100 %
30 Legal charges 100 %

120

Sr.
No
Account Heads Extent of checking
31 Repairs & Renewals 100 %
32 Rent of Residential premises 100 %
33 Insurance of Companys properties 100 %
34 Meeting, Conference & Dev. Expenses 100 %
35 Training, Research & Recruitment Expenses 100 %
36 Guest House expenses 100 %
37 Miscellaneous expenses 100 %

AUDIT OF SETTLED CLAIMS

1. Fire Dept :-

a). Over Rs. 50,000/- 100 %
b). Below Rs. 50,000/- 20 %
c). Reinstatement clause and endorsement should be checked wherever applicable

2. Marine Cargo Dept. :-

a). Over Rs. 5,000/- 20 %
b). Below Rs. 5,000/- 10 % with a maximum total of 50 in number,
c). Marine Claims Recoveries Control checking of minimum 5 specific cases
d). Marine Hull : 20 %
All claims where accidents have occurred within 72 hours from the time of
assumption of risk should be examined 100 % and in detail.

3. Motor Dept :-

a) Over Rs. 30,000/- 25 %
b) Between Rs. 10,000/- and Rs. 30,000/- 15 %
c) Less than Rs. 10,000/- 10 %
d) Not exceeding 25 in number in each of the above three categories.
e) Third party claims control and processing minimum 5 in number
f) All Total Loss Claims including theft claims should be checked 100 % including
collection and disposal of salvage
g) Control on collection and disposal of salvage should also be checked.

4. Miscellaneous ( Other Accident ) :-

a) Over Rs. 10,000/- 20 %
b) Below Rs. 10,000/- 10 %
c) Group Health policies 5 individuals on every policy
d) All claims on Miscellaneous polices which are to be checked 100 % as explained under
item 5. f to m of Audit of Underwriting Documents

121

CHAPTER 7

SYSTEM AUDIT AN INRODUCTION

As Systems Audit forms an integral part of Internal Audit, let us briefly discuss internal audit
first.

Internal Audit is an appraisal activity carried out within an organization as an aid to the
Management. It helps Management by providing feed back information on all areas of
Companys operations, to enable the Management to take corrective action wherever necessary.
Its objective is to improve the functioning of our offices.

Internal Audit can be of various types as under :-

1. Routine Audit
( Quantum of checking, periodicity of checking )

2. Business Audit / Operations audit.
( Targets & Achievements, Performance & Profitability Analysis )

3. System Audit.

What is System Audit :-

A system is a series of inter-related procedures, processes and controls to operate together
to achieve a planned objective.

Need for System Audit :-

By conducting system audit, we come to know of the adequacy and effectiveness of a
particular system operating and suggest changes required for improving the system to make
it capable of achieving managements objective.

Essentially, it involves the following :-

a) Rules, procedures, instructions are properly followed or not.

b) Defects / deficiencies of the system.

c) Financial implications of defects / deficiencies.

d) Suggestions to overcome defects / deficiencies.

How to select for System Audit :-

While many areas are available, the following factors should guide for decision :-

I. The subject should be financial in nature so that management can derive immediate
benefits of the study. For example a subject such as Agency force in operation is
largely administrative nature and a systems study of the same would not lead to
immediate benefits. In Insurance, a subject to be financial in nature, should be capable of
bringing down the claims ratio or effecting reduction in expenses of Management or
increasing the premium production.
122

II. The subject should have strong possibilities of comparisons because systems audit
evolves out of comparisons only. For example, there should be study over more than one
office.

A few examples of Subjects suitable for Systems Audit :-

I. Motor Third Party Claims.

II. Marine Recoveries.

III. Provisioning for Outstanding claims.

IV. Cover Note control.`

After identifying a subject, the systems audit would involve the following steps :-

1. Collection of data regarding the operation of the system. This may require visiting a few
offices and meeting various people. The knowledge and experience of the people who are
presently operating the system should be collected. Here the auditor may face various types
of people such as :-

I. The inarticulate

II. The voluble

III. The traditionist or status quoist.

IV. The revolutionary.

At this stage, the auditors tact and abilities such as empathy etc are very useful. While
collecting data, a few persons themselves may make suggestions which should also be
noted and studied.

2. The second step is analyzing and interpreting the data. Here statistical techniques, PERT
and CPM also may be used.

3. Development of new ideas :-

Here one should be imaginative and intuitive. Lateral and divergent thinking are required. We
should go beyond the obvious line of thought. Grooved thinking may not give new ideas.
Absurd ideas also may be useful because they break the mould . They enforce a different
way of thinking and they counter tunnel vision.

4. Report :-

This is the end result of any audit including systems audit. While collecting data, a few
persons might have suggested solutions. These suggestions may be included if found
suitable. While submitting the report, the following types of resistance to the suggestions
are to be considered.

a. We have done alright so far without it.

b. It looks very good in theory, but cannot be put in practice.

123

c. We tried it before, it did not work then.

d. It will increase work load.

The report would normally contain :-

a. Introduction.

b. Summary of present system.

c. Presentation and interpretation of data pointing out the defects / deficiencies.

d. Financial implications of defects / deficiencies.

e. Conclusions and suggestions giving advantages, costs and savings.

Guidelines on checks and controls on cover notes.

Control on issuance and accounting of cover notes :-

It has been observed that a majority of our Branch Offices and Divisional Offices are either not
maintaining records of issue or are not accounting for the cover notes under various classes of
business. This has resulted not only in loss of premium income but also increased possibilities
of back dating of cover notes to accommodate irregular claims. Payment of MACT awards
without accounting of cover notes cannot also be ruled out.

Summary of existing instructions regarding accounting and control on cover notes.

1. Printing :-

1. Cover notes should be centrally printed by RO with separate series for each DO with
suitable identification prefix no. or alphabet.

2. Each cover note book should contain 25 cover notes sets only.

3. Each cover note should be a set of 5 copies i.e., original for insured, second for the
inspectors, 3
rd
for the office 4
th
for agent and 5
th
copy should be bound without
perforation. The third, fourth and fifth copies should be on blank paper with only the
Companys name, cover note, number and signature portion printed thereon.

4. In order to ensure that all copies are legible special type of carbonless paper providing
copies ( without use of carbon ) should be used. This will prevent misuse subsequently
by alteration or cancellation.

2. Control :-

1. A separate register should be maintained for entering, date wise and serially, all the
cover note books issued to the inspects / agents.

2. On each and every cover note the name of the inspector / agent to whom the book is
issued should be mentioned by the issuing office.

3. A new cover note book should not be issued unless previous book is fully used up and
accounted for.

124

4. Acknowledgement of Development Officer / Agent to whom the cover note book is issued
should be obtained and they should be filed serially by DO / Branch.

5. For ensuring that all cover notes are serially accounted for, a cover note register should
be maintained officer-wise.

6. Cover note control register should be periodically checked by the Branch Manager or
Divisional Manager personally who should issue certificate periodically to the controlling
Office as to whether he has checked the cover note control register and found in order.

7. All cover notes issued should indicate the time and date of their issue. Copies of cover
notes should be delivered to the concerned Branch / Divisional Office in person within 24
hours from the time of issue and acknowledgement of not less than two employees ( one
of them being an officer ) of the Branch indicating the date and time of the delivery
should be obtained. In case a cover note is issued after normal working hours,
particularly in case of mofaussil inspectors or agents, he should be required to send
advice immediately to the concerned controlling office so that some evidence of the
assumption of risk by the Company is available. In such cases, copies of the cover notes
may be sent to the concerned Branch / Divisional Offices by registered post on the same
or next working day.

8. All concerned should be given clear instruction that agents and motor dealers should not
be given pre-signed cover note books.

3. Points to be noted specifically by Development Officers :-

They will be held accountable for the cover note book issued to them and their agents.
They have to forward cover notes issued to the DO or Branch on a day to day basis and
such issue should be strictly in accordance with letter of authority given and also in
conformity with the rules, regulations, tariff and instructions. The intimation by registered
post / telegram regarding issue of cover notes should clearly indicate the cover note
number, date and time of issue, sum insured and the risk covered. It should be noted
clearly that no cover note should be issued unless the premium has been collected in
full. Issue of cover notes on Saturday, Sundays and holidays should be avoided, except
with the approval of the Branch Manager or Divisional Manager.

Cancelled or mutilated cover notes should not be used and all such copies should be
returned to the controlling office. it should be clearly understood that issue, cancellation,
endorsement / renewals in any manner not covered by the existing instructions and any
commitment for or on behalf of the company in any manner whatsoever done without
suitable authority would render disciplinary action.

125

STAMP DUTY

By Gazette of India Extraordinary Dated 28
th
January 2004, conveyed to all Operating Offices by
Mr. A.V.Murlidharan, AGM, vide his letter dated 29
th
April 2004. The same have been revised. The
same is shown below for all to follow in respective offices while affixing policy stamps. The
same has also been advised to I.T., as per his letter.

Applicable from 01
st
March 2004 as per above Gazette Notification
Department Particulars After
01.03.2004
FIRE 1. In respect of Original Policy :-
a. When sum insured does not exceed Rs. 5,000
b. In any other case
For Short period policies, insured has to bear the Stamp Fee

Rs. 0.25
Rs. 0.50

MARINE CARGO 1. For Sea Voyage and Transit by Country Craft, for every
Rs. 1500 or part thereof, on sum insured subject to the
Following :-
a. When the rate charged is 1/8% ( 0.125% ) or less,
regardless of sum Insured. Total premium charged under
the policy inclusive of premium for War & SRCC risks is
taken into account when determining whether the rate is
1/8% or less.
b. When Inland Transit ( Rail or Road ) is covered in
conjunction with a Sea Voyages, the p[olicy must be
stamped according to the scale for sea voyage.
2. For other than sea voyage ( Transit by Rail, Road or Air )
a. When sum insured is Rs. 5000 or less
b. When sum insured is over Rs. 5000.
3. For Postal Sendings :-
a. Scale as per (1) above, if involving sea voyage
b. Scale as per (2) above, for sendings by Rail, Road or
Air.
Rs. 0.05

Rs. 0.05

MARINE HULL a. Policy for over 6 months but not exceeding 12 months :
per Rs. 1000 or part thereof on sum insured.
b. Policy for 6 months or less on sum insured : per Rs. 1000
or part
c. Builders Risk : or Part thereof on sum insured per Rs. 1500
d. Voyage Risk : or Part thereof on sum insured Per Rs. 1500
e. Time & Voyage Risk : same as Time Risk (1) or (2) above
Rs. 0.10

Rs. 0.05
MOTOR 1. For Motor policies ( Fresh )
2. For Motor Policies ( Renewal )
In short period policies, insured has to bear the stamp fee.
Rs. 1
Rs. 0.50
PA & JPA CSI or Part thereof for every sum insured of Rs. 1000;
Where annual premium payable does not exceed Rs. 2.50 per
Rs. 1000
In case of group policies, stamp duty as above should be on
the highest CSI in the group.
Rs. 0.05
MEDICLAIM On all policies
WC For every Rs. 100 premium or part thereof
For all other miscellaneous policies / Covers
a. For fresh policies
b. On Renewals
Rs. 0.05

126

ANNEXURE - I
SECOND AUDIT VISIT

Name of the Regional Office / Code :
Auditee Office / Code :
DATE OF PREVIOUS AUDIT VISIT :
Period of current Audit :
Audited by :
Dates of audit visit :
Date of final Discussions :
Name/Design. Of official with whom discussed :

Sr.
No.
Area of focus Our Observations

(A) IMPREST ACCOUNTS
1 What is the date of verification of Imprest balances?
2 Do the book balances tally with the actual physical balances on
the date?

3 Are proper registers maintained for policy/postal/revenue
stamps? Is there proper utilization of the same?

4 Are all policy and revenue stamps defaced with the NIA round
stamp?

5 Whether any expense has been split to bypass Financial
Authority and the voucher passed at a lower level?

6 Whether Petty Cash disbursement is done through the system
only?

(B) BANK RECONCILIATION:
1 Month up to which BRS is checked
2 Whether the Bank Accounts are reconciled in time?
3 Whether BRS is strictly prepared on a month-to-month basis?
4 Whether the BRS is duly signed by the Accountant and the OIC?
5 Ensure that the preparation of the BRS is entrusted to person
other than the Cashier?

6 Are there any C2 (Cheques deposited but not credited) and C1
(Cheques not presented) items in the collection/Disbursement
A/cs? If so the number and amount of items pending beyond 30
days?

7 Are there any C2 items (Cheques deposited but not credited) in
the collection A/c? If so, the no. and amount of items pending
beyond > 30 days?

8 Whether all pending items are followed up on a regular and
priority basis?

(C) BANKING AND CASH MANAGEMENT:
1 How many bank accounts are being used? What are names of
the banks and the account numbers?

2 Whether cash collections are being scrolled? If so, whether the
entries are being squared of at the earliest?

127

3 Whether the OIC has authorized the scroll? Whether the cheque has
been duly banked?

4 Are receipts being prepared immediately on receipt of premium?
Whether cash/cheques are sent to the bank in time and on a day-to-
day basis?

5 Whether the amounts are correctly and clearly mentioned in the bank
pay-in-slips?

6 Does the cashier countersign the bank slip after cash and cheques
are sent to the Bank?

7 Whether the bank stamp and signature of the bank staff is obtained
on each slip?

8 Was there any un accounted cash lying with the Cashier at any point
of time? If so, what action was taken?

9 Is there any accumulation of cash with the collective cashier?
10 Whether all cancellations, especially of cash transactions, are
periodically verified/ checked by the OIC?

11 Ensure that permission is not given to the cashier for cancellations.
12 Is adequate attention paid to the safe keeping of the daily cash?
13 Verify stocks of unused cheque books. Are all cheques pre-stamped
with the legends A/c payee only and Amount not exceeding..? Is
there a practice of keeping signed blank cheques in stock?

14 Are third party premium cheques being accepted by the office?
15 Is proper control exercised over cheque dishonoured cases? Whether
the CD has been entered in the system?

16 Are all dishonoured cheques returned to the office properly by the
Bank? Is intimation being sent to the Insureds/RTO by Regd. Post?

17 Has any dishonoured cheque been represented? If so, please give
details.

18 Whether there are frequent cases of cheques dishonoured in any
particular Dev. Officers code?

19 Have any stale cheques been revalidated? Ensure that fresh cheques
are issued for all stale cheques.

20 Whether stale cheques JE is passed every six months?
(D) BANK TRANSFERS:
1 Whether proper standing orders are strictly followed?
2 Whether the instructions as per the standing orders are being
followed strictly?

3 Are all transfers made timely, as per laid down guidelines?
4 Whether the bank charges levied are as per agreement?
5 Were there idle funds lying in the collection account at any point of
time? If so, the amount and notional loss of interest?

6 Whether the bank accounts were overdrawn at any point of time? If
so, give details.

7 Whether the outstation cheques are credited within 21 days, as per
RBI guidelines? If not, what action has been initiated by the OIC?

(E) DISBURSEMENT VOUCHER CHECKING:
1 Month selected for test check
2 Are the limits of the Financial Authority, as per the Financial
Standing Orders of 1997 and 2005 are adhered to strictly?

3 Whether prior approval is obtained from the Competent Authority,
when the expense is of a capital nature?

128

4 Whether control of expenses is being exercised vis--vis budgetary
limits?

5 Whether proper accounting codes are used?
6 Whether due discharge from the payees is available with the
vouchers?

7 Whether all supporting papers are duly defaced with paid stamp?
8 Are all claims cheques dispatched by Regd. Post?
9 Have any bearer cheques been issued to
agents/clients/surveyors/advocates?

10 Whether fund position is certified on the vouchers and the entries
made in the fund register?

11 Are reversed carbons used for writing the cheques?
12 Whether proper registers are maintained for all advances? Is control
over the same adequate?

13 Whether the advances, like TA, etc., are drawn as per requirements
only?

14 Whether there is any TA pending for more than 30 days after
completion of tour?

15 Is there prompt payment of all statutory payments including
TDS?

16 Do the cheque signatories also initial the D.V.s as required?
(F) BG / CD CONTROL:
1 The number of BG and CD accounts in force as on date?
2 Whether all entries are being duly routed through the control codes
5075 and 5076?

3 Whether the revised formats of the BG accounts and the guarantees
is adopted?

4 Ensure that premiums of an Insured are debited to that Insureds
account only.

5 Is collection against BG being done before expiry of the BG?
6 No of cases in which BG rules were violated?
7 No of cases in which the BGs were invoked?
8 Whether the clients are being informed about their balance position
regularly?

9 Whether any of the CD accounts show a debit balance?
(G) GENISYS OPERATIONS:

(I) Hardware and infrastructure
1 Is the server under lock and key and in an A/c cabin?
2 Whether fire-fighting systems are installed for use in an emergency?
Whether the system is active and periodically refilled?

3 Is any other operation other than booting and shutting down allowed
on the server?

4
Is the UPS kept away from the server, in a well-ventilated space, with
separate circuits for every UPS and power from the mains to the
computer routed directly through the UPS?

5 Whether a Separate MCB is provided for each electrical point and no
other fittings are connected to the IT systems circuit, with a separate
line for A/cs?

129

6 Has proper earthing been ensured?
7 Is an up to date virus software installed and running?
(II) Administration and securities
1 Whether RO has issued any user manual/operational guidelines?
2 Whether the version loaded is the latest one?
3 Whether transactions related to the SA are assigned to/effected by SA
only?

4 Whether unauthorized persons are allowed access to the system?
5 Whether access to the system is restricted on holidays?
6 Whether password secrecy is being followed? Whether these user
passwords are being changed frequently?

7 Are any of the network computers also connected to the Internet?
8 Whether outside media is being used on the Genisys terminals?
9 Is any other software loaded in the Genisys terminals?
10 Are privileged users given work related to their own specific work
only?

11 Whether the User IDs of transferred/retired employees is disabled at
the end of his/her last working day?

12 Whether User ID is suspended if the employee proceeds on long
leave?

13 Whether day closing operations are done on a day to day basis?
14 Whether daily back up is taken? If so at what time?
15 Whether the back up is as per the instructions of RO? Describe the
procedure briefly.

16 Whether the back up is stored in a secure place and as per ROs
instructions?

17 Whether retention check is carried out on the back up tapes to check
for data integrity?

18 Is a log book maintained for vendor visits?
19 Whether the SA supervises the vendor during his trouble shooting?
20 Whether all equipments, including the server, adequately insured?
21 Whether AMC for these equipments is in force?

( AUDIT INCHARGE )
______________ R.O.

Dated: __________

130

ANNEXURE - II

SURPRISE INSPECTION FORMAT

RO :- _____________________________

DO :-____________________ Division Incharge :- __________________

Date of Inspection :-________________________

SURPRISE INSPECTION FORMAT
Sr.
No
Point to Consider Remarks
I Information Technology
1 Name of the System Administrator
2 Number of Privileged User/SU
3 Whether Password Guidelines are followed?
4 Day-Open and Day Close operation is done on day to day basis
5 Back Up
II Personnel & Administration
1 Office is opened at scheduled time
2
Name Board of Office along with office hours is displaced
correctly/Citizens Charter is displayed prominently

3
Cert. of Shop & Establishment Act is obtained and it is in force
and displayed in office

4
Lease Deed/Ownership Deed of Office premises The rent
payment and any advance rent/deposit paid to the landlord is
correct adjusted as per sanction

5 Assets Register is maintained and updated
6
Stock Register for printed Stationery /Table Stationery /
Computer Stationery

7 Attendance Register marking is done for all Class of employees
8 Leave Records are kept and updated
9
Salary Action papers are sent to Salary Section and action
confirmed

10 Inward/Outward Register is maintained
11
How many sets of office keys are there who are having them:
whether such possession is recorded

131

III Accounts
1
Collection/preparation of receipt RA-16 Banking of all the
collections(Cash/Cheques) is done at least on following day.

2
All Collections are having supporting papers like proposal
form, renewal notices, etc.

3 The Scrolling is done on day-to-day basis
4
All Cheque Dishonoured received from the Bank and acted
upon immediately and in case of motor policies TRA is
informed

5
Whether Bank Statement s are received and Bank
Reconciliation is done. The items under various codes are
properly followed up

6
Check all Imprest A/cs Confirm that the policy stamps are
purchased through treasury and are defaced as NIA

7
Indenting./Storage/Issuance/Dispatch of cheque is as per
AGMs Circulate dated 2.6.2003

8
All supporting disbursement vouchers are defaced with paid
stamp

IV Claims
1 All intimated claims are registered
2 All intimated claims are registered
3 Survey Allotment Register maintained
4 Salvage Register/Disposal of Salvage
V Customer Service
1 Whether Customers are properly attended
2 Grievance/Complaint Box kept at right place
Any other matter which needs immediate intervention of HO : IAD or other matters which
needs corrective steps by RO.

Signature:_______________

Designation : __________________________________

Name:______________________________ Date: _______________________

132

ANNEXURE - III

All Regional In Charges
All Departments at Head Office
IAD/ CTC / CIRO

Re : Non-Personal Audit queries - Fixation of Responsibility

At present, the authority for fixing of responsibility with regard to non-personal audit
queries rests with the Regional In charge. At the time of exit, personal responsibility is
being fixed on the Officer In-charge, for various non-personal audit queries, as a
consequence of which, at times, a substantial amount is adjusted from their terminal
dues.

It is however noted that, at times uniform practices are not adopted by ROs for fixation
of personal responsibility in non-personal audit queries even for queries of similar
nature. Moreover, although the financial implications are often quite high, there is no
provision for appeal by aggrieved employees.

The matter was examined in detail and accordingly, it has been decided by the
Competent Authority that for non-personal audit recoveries the procedure shall hence
forth be as follows :-

For HO Officials, GM In charge of the department will be the Authority for fixation
of responsibility for non-personal audit queries.

For queries involving Regional-in-charges, the fixation of responsibility shall be
done by the supervising GM of the RO.

For all officials under a Region, a committee comprising the Regional-In-charge
and two RMs / Managers of the Region shall be constituted to examine non-
personal audit queries and to communicate the findings to the concerned
employees.

Besides, on completion of audit for a particular period, the concerned employee
shall be informed officially immediately, the queries raised / recoveries against
their actions.

On receipt of reply from the resigned / retired / existing employee, it is suggested
that the committee shall take a final decision in the matter within one month and
the same shall be communicated back to him / her under advise to IAD and HRM
Depts, HO within 15 days of completion of the exercise.

RO shall complete the exercise of fixation of responsibility in respect of
recoveries arising out of audit queries, for retiring officials, at least 180 days
before the date of retirement of the officer and send the Data Sheet to HO for
release of Terminal Dues at least 30 days before the date of retirement.

133

For officers who have resigned / availed VRS, the above review exercise shall be
completed within one month of the date of relieving of the officer and RO shall
send the Data Sheet to HO within 15 days of the completion of the above exercise.

To redress the grievances of aggrieved retiring / retired / existing employees there
shall be an Appellate Authority who shall be the FA and the overseeing GM of the
Regional Office to which the audit query would pertain.

The decision of the Appellate Authority shall be final and binding.

The above guidelines, which come into force with immediate effect, have been put in
place to bring clarity, objectivity and uniform practices into the procedure for
implementation of fixation of responsibility for non-personal audit.

( A.R.Sekar )
DIRECTOR, GM, FA & CS

CORP.HRM/ADMN/LRM/2009 : IBD. ADMN:43

11.05.2009

P.S.

FORMAT FOR FIXATION OF RESPONSIBILITY IN NON-PERSONAL AUDIT QUERIES.

Sl.
No
Level
of
query
Name
of
Insured
Policy
/
Claim
No
Description
of Query
Amount Decision
of
Authority
Representation
of Employee
Remarks
of RO
Committee

134

Annexure - IV

HO/IAD/OFO-8 10.05.2011

To,
All Audit Incharges.

Re : Anti Money Laundering Submission of monthly CTRs & STRs.

We refer to our earlier OFO-16 of 2009, OFO-06 and OFO-09 of 2010, in the above regard.

Inspite of clear cut instructions to incorporate specific comments whether the Operating
Office is following AML Policy guidelines and whether they are filling monthly returns of
the same w.e.f. 01.04.2010, we regret to observe that such comments are made in a very
few audit reports and that too in very few cases.

It is being reiterated that hence forth you have to make specific comments in each and
every report regarding implementation of AML guidelines by the Operating Office. You
must ensure whether monthly returns regarding submission of CTRs and STRs are filled
or not. Your comments that there are no transactions falling under AML guidelines will
not serve our purpose.

We are once again enclosing herewith Anti Money Laundering policy 2009 with an
advice to go through it and incorporate a para in your report without fail commencing
from financial year 01.04.2011.

Report which will not cover this aspect will be sent back for amendments and will
require explanation on the part of Audit Incharges.

We are sure that you will not give us a chance for taking such action.

A.R.Sekar
Director, GM & FA

135

Annexure V

HO/MATD/2010/IBD. ADMN : 125
03
rd
August, 2010

TO ALL REGIONAL INCHARGES.

Re : Workmens Compensation Act 1923 Amendment 45 of 2009.

This has reference to Bill No. 45 of 2009 with respect to Workmen Compensation ( Amendment )
Act, 2009 which has been passed by the Houses of the Parliament, the Gazetted Notification
dated 22.12.2009 published by the Ministry of Law and Justice on 18.1.2010 and additional
notification on 31.5.2010 on the issue of monthly wages.

The main highlights of the amendments in the above Act, are as under :-

Workmens Compensation Amendment Act 1923 renamed as The Employers
Compensation ( Amendment ) Act, 2009 , wherever workman or workmen is
mentioned in the entire Act, the same need to be read as Employee .
Death Minimum compensation increased from Rs. 80,000/- to Rs. 1,20,000/-.
Permanent Disability Minimum compensation increased from Rs. 90,000/- to Rs. 1,40,000/-.
Funeral expenses increased from Rs. 2,500/- to Rs. 5,000/-.
Reimbursement of Actual Medical expenses arising out of accident during the course of
employment.
Death and Disability Compensation Monthly wages for computation of compensation
ceiling increased from Rs. 4,000/- to Rs. 8,000/-. Hence maximum liability for death and
disability under provision of the amended act stands at Rs. 9,14,160/- in case of Death and
Rs. 10,96,992/- in case of Disability. The multiplier table for arriving at the compensation
amount remains the same.

In view of the above, Competent Authority has approved the following changes :-

1. Wherever workman or workmen is mentioned in the entire policy, the same need to
be read as Employee .
2. Guide rates to be charged on the monthly wages / salary up to Rs. 8,000/- per person.
3. Over and above Rs. 8,000/- of wages / salary, rates as per GR No. 5 of erstwhile tariff is
applicable.
4. Premium loading for Medical Benefits extension ( for Accident Benefit policy only and
wordings as per Endt. No. 345 of our erstwhile tariff )

Sl. No Sum Insured up to Premium Loading
i Rs. 25,000/- 10 % of WC Premium
Ii Rs. 60,000/- 20 % of WC Premium
iii Rs. 1,00,000/- 40 % of WC Premium

5. No discounts to be given on Medical expenses Extension premium.

Regional Offices are advised to collect the premium difference w.e.f. 01
st
June 2010 on pro-rata
basis.

( S. Gopalakrishnan )
General Manager
136

Annexure VI

HO/CH/09-10
Date : 29
th
June 2009

All Regional In-Charge.

Re : Formation of Claims Hub Committee ( CHC ).

The Competent Authority has approved the formation of Claims Hub Committee i.e.,
CHC, at each claim hub with its Chairman being a scale IV officer from the Claim hub,
while the other two members of the committee may be from the claim hub or from
outside the claim hub. In hubs not having scale IV officer, an officer from RO in the scale
IV will head the committee as Chairman. Out of the other two members, one member will
be the Claim hub In-charge.

Further, it has been decided that the claims settling authorities of Claim Hub Committee
shall be the same as is of Divisional Claims Committee presently as per the Financial
Standing Order 2005 for all departments.

You are advised to implement the above instructions in your RO Claim Hub, and send
the names of CHC members for our records.

Asha Nair
General Manager

C.C. : All General Managers
C.C. : All Depts, at HO
C.C. : All Claim Hub In-charges.

137

HO:BPR:10-11:12

Dt : 28
th
March 2011.

Region In-charges ( except MRO-III )

Re : Authority for payment of Survey Fees in Claims Hubs.

At present the financial authority for settlement of survey fees is with OIC of BO / CRM /
CM / RM with maximum limit as Actuals .

The Competent Authority, HO, has vide note ref. HO/BPR/10-11/007 dt : 7
th
March 2011
approved that in Centralized Non-suit claims Hubs the authority for survey fees,
investigation fees and expenses related to claims should be given to all the Claim Hub
Officers as per their respective financial limits for settlement of claims.

( Z.F.Fakhri )
Chief Manager

cc : Claims Hub In-charges.
cc : Internal Audit Dept., HO.
cc : Central Accounts, HO.

138

Annexure VII

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