ALERT : Some bad elements have found some loop holes in salvage disposal by insurance companies and many cases have been highlighted by the law enforcing agencies in India wherein they allege that the salvage dealers after purchasing salvage from insurers had used the documents in stolen vehicles.
The insurers are ignoring the coming storm by ignoring the warning signs. The law enforcing agencies may suspect the working of insurance officials and can become cause for harassment of insurance officials ,which in turn will bring bad name and reputation for insurers. It is better to analyse the problem and discuss the same before the storm otherwise after the storm the decisions will be made in haste which will be more harming to insurers and may add salt to the injury.
See a possible headline which may appear as an eye catching headline.
Stolen car racket masterminded by xyz insurance company
New Delhi ..... Police authorities busted a gang of thieves engaged in stealing cars and is suspected to be engaged in more than 200 cases. They used to buy total loss cars from xyz insurance company and sell stolen cars with their documents....... The role of officials of insurance company and management is being investigated. Police is investigating how the vehicle documents were given to criminals instead of getting them cancelled from the RTO.......
Will insurers wake up after such an event. Already in some cases law enforcing agencies had caused similar headlines in actual also and arrested senior insurance surveyor.
Will insurers wait for some similar events which may cause un-repairable loss to the image of their organisation.
The Double Loss Theory
Events as reported in media and solved by law enforcing agencies need to be taken seriously and one of the perception that catches the eye is that insurers have one loss by way of total loss and get it doubled when thieves steal another car and adjust the same with salvage of first car.
SECTION 55 M.V.Act
As per provisions of section 55 MV act the owner of vehicle is required to get registration cancelled for motor vehicle which has been destroyed or has been rendered permanently incapable of use.
Every insurers will contest that section 55 provisions are not applicable in all the cases which are settled on total loss basis/ constructive total loss basis.
CATEGORIZATION OF SALVAGE VEHICLES
Insurers at present in India have no guidelines for categorizing the salvage vehicles into different categories. Insurers in almost all cases selling the salvage with vehicle documents and thereby ignoring the sec 55 of MVact. Some insurers placing the onus of compliance on to the owner of vehicles and obsolving themselves.
It is suggested that insurers make categories of salvage vehicles before disposal and should make common mechanism among all the insurers. They may consult such arrangement in place by insurers in other countries and implement as best possible in Indian conditions. One such arrangement by British insurers can be consulted https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/Migrated/Motor/Code%20of%20practice%20for%20disposal%20of%20motor%20vehicle%20salvage.ashx
More Steps in Preventing Misuse of Salvage
Insurers should make the salvage disposal more transparent and open system and should encourage disposal by e-auctions. By using e auctions they will be displaying the photographs of vehicle, their identification details like registration number, engine number and chassis number. Such open details by e auctions will deter the criminals as there chances of getting traced and detected get increased multifold as details published in e auction can be searched by anyone at later stage.
Insurers can set additional terms and conditions for sale of salvage, which will make the total loss vehicle deals even more unattractive for thieves. One may consult our post http://isalvageauction.blogspot.in/2011/10/how-to-avoid-prevent-misuse-of-total.html
and make suitable arrangements in this regards.