Analysis of Insurance Surveyors and Loss Assessors Regulations, 2000

An Analysis of the Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000 in India: A Legal Perspective

Introduction

The Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000 (hereinafter "the 2000 Regulations"), formulated by the Insurance Regulatory and Development Authority of India (IRDAI), represent a significant milestone in regulating the profession of insurance surveyors and loss assessors in India. These regulations were established under the powers conferred by Sections 42D, 64UM, and 114A of the Insurance Act, 1938, and Section 26 of the Insurance Regulatory and Development Authority Act, 1999.[18] Surveyors play a pivotal role in the insurance claim process, acting as a crucial link between the insurer and the insured when loss or damage occurs.[14] Their primary function involves investigating, managing, quantifying, validating, and dealing with losses.[14, 19] This article critically examines the licensing framework, professional mandates, and code of conduct stipulated by the 2000 Regulations, contextualized by the overarching provisions of the Insurance Act, 1938, and judicial pronouncements that have shaped their interpretation and application.

Statutory Framework: Section 64UM of the Insurance Act, 1938

Section 64UM of the Insurance Act, 1938, serves as the statutory bedrock for the regulation of insurance surveyors and loss assessors in India. It has undergone amendments, notably by the Insurance Laws (Amendment) Act, 2015, further professionalizing the field.

Mandate for Surveyor's Report

Sub-section (2) of Section 64UM mandates that no insurance claim in India amounting to or exceeding twenty thousand rupees can be admitted for payment or settled by an insurer unless a report on the loss is obtained from a licensed surveyor or loss assessor.[6, 7] This provision underscores the indispensability of surveyors in the assessment of significant insurance claims. However, the proviso to sub-section (2) grants the insurer the discretion to settle a claim for an amount different from that assessed by the surveyor, provided such a decision is not arbitrary and is based on valid reasons.[6, 2]

Licensing and Qualifications

Section 64UM outlines the requirements for obtaining a license to act as a surveyor or loss assessor, including prescribed academic qualifications.[7, 9] Prior to the more structured regime under IRDAI and the 2000 Regulations, while licensing was required, the profession lacked a comprehensive professional organization and a detailed code of ethics.[8] The 2000 Regulations, and subsequently the 2015 Regulations, significantly enhanced these aspects.

Post-2015 Amendment: Enhanced Professionalization

The Insurance Laws (Amendment) Act, 2015, amended Section 64UM(1), stipulating that a person cannot act as a surveyor unless they possess specified academic qualifications and are a member of a professional body, namely the Indian Institute of Insurance Surveyors and Loss Assessors (IIISLA).[9] This amendment aimed to elevate the professional standards and accountability of surveyors.

The Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000

The 2000 Regulations provide a detailed framework governing the licensing, professional conduct, and operational standards for insurance surveyors and loss assessors. These regulations stipulate that a surveyor must investigate, manage, quantify, validate, and deal with losses arising from any contingency and carry out the work with competence, objectivity, and professional integrity, strictly adhering to the Regulations.[14, 19]

A. Licensing of Surveyors

Chapter II of the 2000 Regulations deals with the application for, and matters relating to, the grant of licenses.[16]

1. Application and Grant of License

An application for a surveyor's license must be submitted in the prescribed form, detailing qualifications as mentioned in Section 64UM(1)(D) of the Insurance Act.[7] The Authority, while considering an application, evaluates the applicant's fitness and propriety, ensuring compliance with Section 64UM, Section 42D of the Act, Rule 56-A of the Insurance Rules, 1939, and the eligibility criteria in the Regulations.[16] Provisions exist for prescribed fees, period of validity, duplicate licenses, and renewal.[7]

2. Qualifications

The Regulations, read with Rule 56-A of the Insurance Rules, 1939, and subsequently the IRDAI (Insurance Surveyors and Loss Assessors) Regulations, 2015, specify academic, technical, and professional qualifications.[16] For instance, for 'Motor' category surveyors, qualifications such as B.E./B.Tech. in Mechanical/Automobile Engineering or a Diploma in Mechanical/Automobile Engineering of 3 years duration from a recognized institution are stipulated.[16] These requirements aim to ensure that surveyors possess the necessary expertise for their specialized areas. Historically, while high academic qualifications were prescribed, the level of professional organization and control was less stringent.[8]

3. Categorization of Surveyors

Chapter V of the 2000 Regulations introduced the categorization of surveyors based on criteria such as professional qualification, training, experience, and other factors specified by the IRDAI.[17, 18] Regulation 14(3) provided for allocation to specific departments of insurance business and categorization into A, B, and C, with defined financial limits for the losses they could assess.[17] For example, for motor claims, Category ‘C’ surveyors could assess losses up to Rs. 75,000, Category ‘B’ up to Rs. 1.5 lakhs, and Category ‘A’ above Rs. 1.5 lakhs (as per a 2001 circular, later revised).[17] This categorization, continued under the 2015 Regulations, is considered a policy decision to ensure expertise in particular fields and improve the quality of surveyors' work.[11] However, it has also been subject to legal challenges regarding its impact on surveyors' work allocation.[18]

B. Professional Requirements

1. Competence, Objectivity, and Integrity

A cornerstone of the 2000 Regulations is the emphasis on professional conduct. Surveyors are mandated to "investigate, manage, quantify, validate and deal with losses ... and carry out the work with competence, objectivity and professional integrity by strictly adhering to the Regulations."[14] This duty is frequently reiterated by courts when assessing the validity and weight of surveyor reports.[2, 19]

2. Duties and Responsibilities

The Regulations outline specific duties and responsibilities.[20] These include conducting inspections, re-inspections, verifying loss causation, assessing the extent of loss, advising the insurer on loss minimization, and commenting on policy franchise or excess. Surveyors must act impartially and not be influenced by any party. Any deviation from the prescribed code of conduct can constitute a deficiency in service.[2]

C. Code of Conduct

1. Adherence to Regulations

Every surveyor and loss assessor is required to comply with the code of conduct regarding their duties, responsibilities, and other professional requirements as specified by the IRDAI regulations.[7, 9 (citing Sec 64UM(2) of amended Act)] This ensures a standardized approach to professional ethics and practice across the industry.

2. Prohibition of Fraudulent Practices and Penalties

The Insurance Act, 1938, particularly Section 64UM(7) (as noted in older analyses), provided for the cancellation of a surveyor's license for wilfully making false statements or being party to fraudulent claim settlements.[8] The 2000 Regulations reinforce these principles, with stringent actions, including license cancellation, for breach of duties, wilful false statements, or fraudulent conduct.[7] Section 42D of the Insurance Act also provides for disqualification on grounds such as conviction for criminal misappropriation, breach of trust, cheating, or forgery.[8]

Judicial Interpretation of Surveyor's Role and Reports

The judiciary has played a crucial role in interpreting the provisions related to surveyors and their reports, balancing the insurer's reliance on these reports with the insured's right to a fair settlement.

A. Evidentiary Value of Surveyor Reports

1. Significant but Not Conclusive

The Supreme Court has consistently held that while a surveyor's report is an important piece of evidence and forms the basis for settlement of a claim, it is not the final word and is not sacrosanct.[3, 10, 13] It is not binding on either the insurer or the insured.[10, 13] The report can be departed from if there are legitimate reasons,[12] or if it is found to be perverse, arbitrary, or based on mere inferences or surmises.[10, 13]

2. Importance of Consideration

Failure by adjudicatory bodies to consider a surveyor's report can lead to a serious miscarriage of justice, potentially vitiating the judgment.[1] This underscores the expectation that these expert assessments will be duly examined in claim disputes.

B. Insurer's Discretion and Limitations

1. Right to Differ from Surveyor's Assessment

The proviso to Section 64UM(2) of the Insurance Act explicitly allows an insurer to settle a claim for an amount different from that assessed by the surveyor.[6, 3] This right, however, must be exercised judiciously and not arbitrarily.[2]

2. Prohibition on Arbitrary Rejection or Successive Appointments

While an insurer can obtain a second or further report if considered appropriate,[6] they cannot repeatedly appoint surveyors to procure a "tailor-made" report to their satisfaction.[12, 14] If an insurer rejects a surveyor's report, valid reasons must be provided.[12, 14] Arbitrary rejection of a report prepared in good faith and with due application of mind can be corrected by the courts.[12] The insurer must act in good faith and cannot rigidly adhere to survey reports without just cause, especially when the consumer can substantiate claims with proper documentation.[3, 5]

C. Deficiency in Service and Surveyor Conduct

1. Deviation from Code of Conduct as Deficiency

Any deviation by a surveyor from the code of conduct prescribed under Section 64UM(1A) of the Insurance Act (as referenced in *Khatema Fibres*) and the 2000 Regulations could constitute a deficiency in service.[2] This highlights the enforceability of the professional standards set for surveyors.

2. Scrutiny of Biased or "Tailor-Made" Reports

Courts are vigilant against biased or "tailor-made" reports. Where an investigator's assessment aligns too closely with the insurer's desired outcome, suggesting bias, the credibility of such reports is undermined.[5] Claim decisions must be based on robust, evidence-backed assessments rather than conjectural or procedurally flawed investigations.[5]

Evolution and Impact of the Regulatory Framework

A. Strengthening Professional Standards

The 2000 Regulations, along with the amendments to the Insurance Act and the subsequent 2015 Regulations, have significantly strengthened the professional standards for insurance surveyors in India. This is a marked improvement from the pre-regulatory era, which, despite licensing requirements, lacked a robust professional body and a detailed, enforceable code of conduct.[8] The mandatory appointment of a surveyor for claims above a certain threshold, coupled with the detailed duties and responsibilities under the regulations, aims to ensure fair and competent loss assessment.[15]

B. Role of IRDAI

The IRDAI plays a central role in the regulation of surveyors, from licensing and specifying qualifications to formulating and enforcing the code of conduct.[14] Section 64UM(3) and (4) also grant the IRDAI powers to call for independent reports from other surveyors and issue directions regarding claim settlements.[6, 14]

C. Challenges and Ongoing Developments

Despite the regulatory advancements, challenges persist. The categorization of surveyors, while intended to leverage specialized expertise, has led to litigation concerning its impact on work distribution and potential arbitrariness.[17, 18, 11] The ongoing judicial scrutiny of surveyor reports ensures that the system remains accountable, but disputes over the quantum of loss and the validity of surveyor assessments continue to be a significant area of insurance litigation.

Conclusion

The Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000, have fundamentally shaped the landscape for insurance surveyors in India. By establishing clear guidelines for licensing, mandating professional qualifications, and instituting a comprehensive code of conduct, these regulations have aimed to enhance the competence, objectivity, and integrity of surveyors. The judiciary, through consistent interpretation, has reinforced the importance of surveyor reports while clarifying that they are not infallible and must withstand scrutiny for fairness and adherence to professional standards. While the regulatory framework has evolved, particularly with the 2015 amendments and new regulations, the core principles established by the 2000 Regulations continue to underpin the critical role surveyors play in the Indian insurance sector, striving for a balance between the interests of insurers and the rights of the insured.

References