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‘Claim’ by an Insured is the ultimate reality for any Insurer and
when a disaster befalls their client there’s only so much they can do
to help. In any claim settlement activity, be it fire, earthquake or a
flood, there is always some property that is saved either in sound
condition or partially damaged condition. This saved property is
called ‘Salvage’. As
per dictionary, one of the meanings of the term ‘Salvage’ is
‘something saved from destruction or waste and put to further use’. Salvage
goods typically result from circumstances of accident, distress, or
theft and may be heavily discounted according to their condition.
Nevertheless, they are goods that retain some market value—usually
from 25% to 35% of the insurance claim value or 40-60% in the case of
theft recoveries. Salvage can take form of, say, water affected paper,
fire affected rubber, air-contaminated chemical, damaged steel
generated from a collapsed building and so on. Therefore, although
there is no exhaustive list, but salvage may include various
industrial or household goods (including motor vehicles) that have
incurred some kind of damage / depreciation in their market value due
to operation of some peril that was insured for under the subject
insurance policy.
Salvage, however, can practically be correlated to cash! It is hard
cash lying there at the site of loss that needs attention. Not only
attention, but also care. Just like we care for our cash, our
investment, bank balance, we need to take care of salvage, which
eventually is to get converted into cash one day. Its optimal disposal
can meet part of management expenses like salaries, can repay loans,
improve claims ratio and all other things that cash can take care of.
In the words of a learned person from our Indian General Insurance
Industry, ‘‘salvage is considered by an insurer as a ‘Credit’ against
what is owed under the policy to an insured. No matter how you look at
it, if the surviving property has some salvage that value will
directly apply to the claims loss adjustment”.
Over
ages the topic of salvage has not been able to get much attention from
the General Insurance Industry. It is merely considered one of the
parts of loss assessment and most of the people who actually love
their organizations and veterans of General Insurance Industry
unknowingly ignore the subject.
Today
the General Insurance Industry is losing millions each year just due
to lack of proper salvage management system. Right from the word go,
when a loss takes place, Insurers start losing money, sometimes by the
way of salvage deterioration, sometimes by the way of salvage
misappropriation and most of the times off course due to salvage
disposal / retention by Insureds at low prices.
Many
Insurers believe that the potential for better salvage realization is
minimal. However, the estimate is that less than 10 percent of
commercial salvage finds its way to the open market to fetch optimum
value.
To negate the
effect of today's volatile market and economic recession on our
business, we need to improve our operations on a continuous basis. To
stay competitive, we need to employ innovative methods and processes
so as to cut costs and maximize profits.
What
exactly is ‘Salvage Management’ and how it can be implemented in the
general insurance claims process? This is the question I had been
asking myself during my tenure as an independent surveyor and around a
year back in October 2007 when I decided to become a salvage manager
and approached various Insurers with the thought of managing salvage
professionally and scientifically. With my experience from various
salvage disposals assigned by Insurers, I have been able to understand
the basics of salvage management to start with. To actually know the
subject inside out might take many more years to come, especially
given the paucity of research done on the subject not only in India
where the concept has been totally missing but also all over the
world. But when in the very first assignment as salvage manager, we (SalvageSettlers-my
organization) were able to facilitate an increment of around 1 million
rupees over and above the salvage realization proposed by Adjusters, I
was overwhelmed by the results and decided to launch the concept
commercially. In its very first year of operation the organization
facilitated an increment of around 20 million rupees for the General
Insurance Industry of India over and above the proposed salvage
realization. That was what showed the potential of professional
salvage management to provide that much needed cash inflow and
commercial viability of the project.
The
sole purpose of writing this book is to record my thoughts and deeds
as a salvage manager and share my experience not only with the present
Insurance Industry as a whole but also the present and future
generations of insurance professionals ranging from surveyors to
claims executives at various levels and propagate the concept of
Salvage Management as a tool to reduce claims ratio. The interest
taken by insurance industry in the subject of salvage management in
itself shows the need for salvage management. Within a few months of
introduction of concept of non-motor Salvage Management in India, all
the operational private General insurers have started adopting salvage
management program.
Convinced by the sanctity and power of the concept, the public sector
companies as well have started adopting salvage management and in
February 2009 the India’s largest Public Sector Insurance Company
trusted the concept and actually adopted the same as a tool to create
genuine competition and maximize salvage realization. No wonder they
were proved right in due course.
In my opinion,
Salvage Management should be chosen as a profession by young insurance
professionals. It needs to be understood that managing salvage is a
full time job and it cannot be merely a part of so many things that an
adjuster needs to do as regards an insurance claim. For decades, the
Indian General Insurance Industry has not witnessed much innovation as
compared to other industries such as banking or telecommunication. I
believe we need to scrap old practices and methods of dealing salvage.
We cannot continue to term salvage as 'a sensitive issue' and at the
same time lose money due to its mismanagement.
‘Salvage
Management’ as a concept has become sacred to me over the small period
of time that I have spent trying injecting it into myself, my
work-family and the General Insurance Industry. But still there is a
lot more to do and as the title of this book suggests, this is just a
beginning! Beginning of a radical innovation in the Indian Insurance
Industry. I wish ‘Salvage Management’ is preached as a concept by all
general insurance professionals in the times to come, for its power to
control and minimize losses.
I am
a student of the subject of salvage management and do not have many
teachers to guide me as regards this subject in particular. So, it
would be my sincere request to all the readers to give their valuable
comments and suggestions on the subject and help propagate this much
needed concept.
With
Regards,
Anshul Gupta
email:
anshulmail@ymail.com
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