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Until now we have been discussing the ‘whats’ of salvage management
and now let us get down in the field and learn the ‘hows’ of salvage
management, i.e., the methodology of salvage management. As we have
discussed earlier that the overall purpose of salvage management is to
maximize the salvage realization and, therefore, the whole methodology
of managing the salvage should be directed towards optimization /
maximization of salvage value. Accordingly, the methodology may be
discussed under the following heads:
1. At the site of loss;
2. At the office of salvage manager.
A. At the site of loss:
At the site of loss, the aim of salvage manager, as discussed earlier,
is to identify, segregate, protect the salvage and so on. A salvage
manager should ideally visit the site of loss immediately after the
occurrence of loss alongwith his team and should attend and facilitate
the activities like salvage identification, process of segregation,
protection of salvage and so on. Special care needs to be taken in
case of perishable and precious items. Detailed photography is a must
explaining the nature and extent of loss. Strategy as to how to
protect the salvage from further deterioration and what can be the
best possible way to get the salvage disposed of may be formulated in
coordination with the Insured and the Adjusters.
B. At the office of salvage manager:
Back at the office, salvage manager has to ensure that the salvage on
the basis of photographs and other details is being marketed in
relevant areas, a fair and genuine competition is generated between
interested buyers and finally salvage disposed of smoothly. Various
methods of salvage marketing may be as under:
1. Marketing the salvage:
a. Push Marketing:
Communicating with market through telecalling, emailing, physically
through post, with reference from internet, directories, journals,
etc. and informing them about the availability of salvage;
b. Pull Marketing:
Using a website portal: This is a very good method of salvage
marketing but requires a lot of time for the manager to develop a
portal and then popularize the same because once the salvage is
uploaded on the manager’s website then the response of buyers depends
on the popularity of the portal itself. For example: when an
interested salvage buyer searches for the word ‘salvage’ on a search
engine say google, then she should be able to visit the manager’s
website and reach the salvage of his interest. If achieved, this is
the best way to market salvage because of two reasons, first being
that the buyer is approaching the manager with an interest created
beforehand instead of the manager going to the buyer and the second is
that the portal itself acts as a catalogue for the various salvages
that manager may be marketing at a given point of time. It becomes
very easy for proposed buyers to understand the salvage, its nature
and extent of damage and other required information ;
2. Creating competition among interested proposed buyers:
This is the essence of selling salvage that may be achieved through
various methods such as calling for tenders, calling for sealed
quotes, openly negotiating with buyers and so on. All these methods of
creating competition have been in use by the Insurers and surveyors
ever since the concept of insurance came into existence. However, all
these methods are not scientific and Generally prove incapable of
creating a genuine and fair competition and as a result
buyers/intermediaries have been able to really suck money out of
Insurers’ funds by earning margins in the range of 10% to even 300%.
As a salvage manager, I have witnessed the power of selling through
online-auction. There is an old Chinese proverb which says ‘May you
live in interesting times’. We all are indeed witnessing interesting
times. In the last decade, the marketplace has interestingly
transitioned from place to space and this process shall continue in
the times to come. Today we can buy/sell almost anything anywhere at
our desktops or for that matter at palmtops. Most interesting of all
is the fact that how this transition has transformed the real physical
world to virtual for the benefit of all.
In traditional physical markets, the sellers could only sell their
products to a limited number of available buyers and had to depend
upon their needs, tastes and preferences. In current virtual markets,
they, however, are free to sell their products to anyone anywhere
taking full benefit out of competition so created. Similarly, buyers
take benefit of infinite supply and choice and at the same time the
satisfaction of procuring the commodity at a value nearest to their
desired value for the same.
Following two important points may be noted:
a. Use of online auction for creating competition and selling
salvage by forming an online marketplace: This is the best method
to create competition among various interested buyers in a safe and
transparent environment. Buyers can visit the website and participate
in online auction from various parts of the same country or even from
foreign countries. Even Insured can also participate in the auction if
she is interested in retaining the salvage. Therefore, the
geographical limitation which undermine the salvage realization would
no more be able to play its part and maximization of salvage
realization shall be taken care of by market dynamics;
b. Facilitating a fair, clean and transparent environment for the
buyers to transact: Buyers, in our present system of salvage
handling, are not being given much attention. They are normally not
treated well either by Adjuster or by the Insurers. An average buyer
gets frustrated while dealing in insurance salvage. However, if at all
we want to get succeeded in selling our product at optimum rates,
creating a good environment for the buyers is very important. (This
subject is dealt with in detail in the next chapter).
Various online marketplaces such as Ebay, Amazon etc. have already
proved to the world what an online auction platform can do in case of
retail sale. Then why not General Insurance / Industrial Salvage?
The best method till date being adopted by Indian General Insurers to
maximize the competition as regards salvage disposal is the calling of
sealed bids through open tender system in a newspaper. But, this
system in itself suffers from a lot of shortcomings such as cartelling,
pooling and so on. Insurers believe that they do negotiate with
highest bidders even after opening of tenders but it needs to be
appreciated that the moment we let two bidders meet in person, they
form a cartel. Its business tendency! Therefore, its time to switch to
more scientific methods to create competition such as online auction.
3. Accepting payments from buyers and facilitating lifting /
disposal of salvage:
The last but the most important step in the whole process of salvage
management is to accept payment from the buyer and facilitate salvage
disposal as per the terms and conditions settled before sale.
Conclusion:
In this world where at every step we can find technology and
advancement, then why let the process of salvage disposal be left
alone. We need to implement all the scientific methods that we can
think of to manage salvage and maximize salvage realization and at the
same time creating and maintaining a fair and transparent environment
to all concerned.
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