INSURANCE SALVAGE, PRACTICES AND FUTURE

What is Insurance salvage? From times immemorial, regarding salvage, what is the procedure followed by the insurers? When we talk of insurance salvage then it must be salvage belonging to nonlife insurance companies. Insurance salvage pertains to property insurance. The property can be a vehicle (insured under Motor Vehicles Act, 1988) goods, factories, cargo, ship, aviation, computers and the list are endless. Property includes everything that can be owned by an individual or a company. In our parlance & for our purposes, we use the term ‘property’ as that which is insured by nonlife insurance company. What is the present practice that the insurers are following with regard to salvage?

The word insurance salvage itself indicates that there was an accident and also denotes investigations conducted by concerned authorities to eliminate the possibility of fraud and to ascertain the veracity of the accident. Insurance salvage further means that there is a policy existing where the premiums are paid by policyholder and risk is covered by insurer. Insurance salvage also denotes that claim is paid subject to deduction of outstanding premiums, depreciation and other conditions. It also means the contract between the insurer and insured is honoured. Further, if there was a total loss, not partial loss the entire Sum Assured (SA) or the value of the property is paid or the insured amount is paid by the insurer to the insured.

As per the insurance law, the salvage after paying the claim, in totality, becomes insurer’s property. In other words, insurer will have full ownership rights on insurance salvage. The rights over the possible salvage are transferred from insured to insurer at the time of entering in to the insurance contract. Now having owned the salvage, what does the insurer do? Will he not sell the salvage to the highest bidder to reduce losses? Not only in India but also across globe this is the rule and this practice is being followed. In other words, both the parties of the contract, insurer and insured are satisfied to have honoured the contract and since fulfilled, come to an end.

Now the issue is - what are the lessons learnt by insurers? Insurers are in existence, not only to take risk in lieu of small premium but they are also existing to teach the public about safety and security. Billions of dollars across globe, including India, are paid towards claims by insurers. After paying billions in claims, the process comes to a dead end. The salvage is being sold to a scrap dealer or salvage dealer! Many a time, it is left at the accident site as transporting salvage is more expensive than the value of salvage.

If we were to take motor vehicles insurance as an example, according to Indian Motor Vehicles Act, 1988, third party insurance is compulsory. The law is strict and hence every vehicle needs to be insured. Whenever we travel on a national highway, we observe many accident vehicles abandoned next to the road. As there are no buyers of salvage, it is lying by the side of road for years together. Premium paid, claim settled, contract honoured; people forgot both the insurer and the insured. After spending a huge amount in claim settlement, no lessons are learnt on safety and security! The entire mechanism has come to a dead end, the wheel to a grinding halt.

It is our endeavour to buy salvage of abandoned vehicles from the insurers and use it to manufacture articles of utility to remind constantly not only to the public but also the insurers that safety in not a onetime lesson but a daily practice. The articles manufactured out of insurance salvage will help remind the necessity of following safety protocols during every step of life.

We are not claiming that by using these articles of utility there will not be any accidents or people learnt the lessons on safety. What, in fact, we are claiming is - by following safety procedures if we can save one life, the society becomes richer & the nation greater. We are taking the lessons of insurance to their logical end through the proposal of manufacturing articles of utility from insurance salvage.