FEEDBACKTO SECP ON DRAFT INSURANCE ORDINANCE AMENDMENT BILL 2020 - DT.13-08-2020

Respected Sir,

This is with reference to your Subject Draft and would like to thank you very much for inviting us to submit our Comments / Feedback as one of those organizations directly affected by these Amendments.

I have been nominated by the Board of Directors to respond the same and submit our reply/ comments / feedback as under:-

First of all we assure you of our full support and cooperation, now and in future for making new laws, regulations or amendments in the existing ones which are for betterment of this Insurance Industry and all it’s stakeholders.

We believe that while Amending the existing insurance law, the regulator had kept all aspects of that community in mind especially viability for a person or body corporate affected by it.

The beneficiaries of such amendments should be a large number of population of that community but not a limited number of persons / organizations.

Any Laws / Rules or Amendments in the same should be designed to protect basic rights and freedom with no conflict of interest, and to treat everyone fairly.

The aim for introducing these amendments are to ensure alignment with “Insurance Core Principles” of “I.A.I.S.” and address the regulatory gaps in existing law as conveyed by your goodself.  

Given below, our Comments/Feedback on the basis of prevailing law , market practices , ICP of IAIS along with few supporting references/arguments (remaining will be submitted if required) for your consideration:-

1)     Instead of treating “Surveyors” as an “Insurance Intermediary” consider them as one of the Main Stake Holder of Insurance Industry (the functions of Loss adjusting & claims appraisal are excluded from the IAIS definition of Insurance intermediation).

2)     To protect & acknowledge the Basic Fundamental Rights of Policy Holder being a common citizen of Pakistan as described and assured in the constitution of Islamic Republic of Pakistan , the regulator should empower them by introducing new regulations through which assessment of insurance claim can be done by Policy Holder’s appointed licensed insurance surveyor.

3)     In the proposed Draft of Insurance Ordinance Amendment Bill 2020,  Insert contents of Section-44A(1) of repealed “Insurance Act, 1938” that “no insurer shall pay any claim in respect of general insurance business transacted by him in Pakistan unless the loss has been surveyed, assessed or adjusted, as the case may be, by an insurance surveyor holding an appropriate certificate of that particular class” 

4)     Insert the words “to protect the rights of share holders” as well in the existing law along with words “Rights of the policy holders” because all the Insurance Companies are “Public Limited Companies” and considered to be custodian of “Public Money” in form of share holding by Public at large.

5)     Reinstate the omitted sections related to “Surveyors / ASO” and by amending the existing rules under “Ease of doing Business” concept , try to address the “regulatory gaps”.

6)     Validity Period of Surveyor/ ASO Licence may kindly be extended upto 3 (Three) Years within existing Fee Structure.

7)     For Renewal of Insurance Surveyor’s / ASOs Licenses , simplify the renewal process under concept of  “Ease of doing Business” with minimum possible requisite information for the same.  

8)     Following should be the Classes of Insurance Surveying in our opinion. 

i)              Fire & Property Damage Business

ii)            Marine Aviation & Transport Business

iii)           Motor Business (including own damage & third party compulsory business)

iv)            Engineering Business ( Machinery Breakdown )

v)             Miscellaneous Business ( covering all the classes of Non-Life Insurance Business except “i” to “iv” )

9)     Regarding Annual Supervision Fee of the Commission , the “Surveyors / ASOs” may kindly be excluded from it as their role starts after occurrence of any loss while all other Intermediaries are direct beneficiaries of payment made by Policy Holder as a premium. Kindly reinstate (relevant rules) the Surveyor/ ASOs license fee ( new / renewal ) as per existing fee structure in the proposed amendments.

10)  Regarding “Power to Inspect Insurance Intermediaries”, it may kindly be restricted only for Insurer & Insurance Intermediaries excluding “Surveyor”.

For compliance of Post Licensed Scenario, surveyors only need to focus on survey and it’s reporting, for any possible issue, Section-85 stands to address the same.

11)  In our opinion , for “Index based Insurance” the words “after proper verification by a licensed insurance surveyor” should be inserted at the end of phrase “payments of claims against losses arising from weather and catastrophic events without assessment of each individual insurance claim”.

12)  For “Insurance Self-Network Platform” the scope of words “providing other related services” may kindly be specifically explained to avoid any possible conflict within stakeholders due to ambiguity as the same has been witnessed in last 15 Years on Self / In-house Surveys conducting by Insurance Companies with absolute “Conflict of Interest” on the grounds of “activities of the nature of insurance surveying” claimed to be allowed them under Section-111(2)(a) of Insurance Ordinance , 2000.

While as per our understanding this Section only allows them to carry out surveyor like activities to better understand the Risk Involved & Surveyor’s Report but not to settle the Claim on the basis of their employee’s findings.

We are thankful to your good office to respond the actual legal position regarding, who can survey / assess / adjust the insurance loss vide email dt.28-05-2020 as follows:-

“please be informed that as per Insurance Ordinance, 2000 only authorized person (i.e registered ASO) can conduct Insurance Surveys”

“No one should be judge in his own case” specially when there is public money involve in any matter.

All Insurance Companies are “Public Limited Companies” having shares owned by Public at large. There are not only “Rights of Policy Holders” involve but also Rights of Share Holders as they are supposed to pay dividend from the net profit earned by these companies.

Remarks:-

As per information provided to us that these Amendments were introduced to ensure alignment with “Insurance Core Principles” of “I.A.I.S.”

“The mission of the IAIS is to promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability”.

Formation of laws varies from regions to region depending on its market structure and development , observing capacity & acceptability of any new changes within stakeholders , viability of introducing modern technology on the prevailing market structure and user / operator of those services.    

The regulator sets and enforces requirements for the conduct of insurance intermediaries, in order that they conduct business in a professional and transparent manner.

As mentioned earlier that, the “Surveyor” should be considered as one of the main stakeholder of Insurance Industry because it’s an entity that plays vital role while Survey / Assess / Adjust an Insurance Claim and gives his Independent Opinion, directly related with “Rights of the Policy Holders”.

The source of income for Insurers (including intermediaries except surveyors) is the amount of premium paid by the Policy Holder while the Surveyor are independent entity which has no conflict of interest while conducting Insurance Survey.

We are of the opinion that , to maintain fair , safe and stable insurance market the Regulator needs to adopt some prerequisite measure prior to introduction of forthcoming rules / regulations.

·         To improve market condition , practice of Self/In-house Survey by the Insurer may be banned immediately.

·         Assure fair allocation of survey jobs by monitoring the assigned survey to the SECP Licensed surveyors with their methodology of appointment (if only few are beneficiary) in light of numbers of ASO they have.

·         Monitor total number of survey job each surveyor company is conducting in a year , in light of the number of ASO they have and number of declared offices / branches.

·         For “Motor Class of Business” the eligibility criteria of academic qualification may kindly be allowed as “Intermediate” instead of “Bachelors Degree” as it will provide an opportunity to numbers of Surveyor Company’s Employees to appear in Surveyor’s Licensing Exams and after passing the same starts working as an licensed entity (ASO).

Besides above mentioned measure, there are lots of more steps which can help in making good and feasible market condition to further move on the path of growth.

If the Regulator find it benefitted for making fair , safe and stable insurance market , we are here to join them for ensuring compliance of existing law and jointly make such a frame work which will create observing capacity & acceptability within all the stakeholders of this Insurance Industry (surveyors in particular).

For now , we are of the opinion that instead of amending existing law, we need regulator’s support for survival of surveying profession by ensuring compliance and some relaxation by reducing financial burden during this spread of Covid-19 crises which has badly affected the business activities globally.

Once again thank you very much for having our feedback and we assure you of our full support and co-operation for betterment of Insurance Industry in Pakistan while protecting “Rights of the Policy Holders”