THE MIDDLE class people get the insurance policies to ensure that the risks over their goods and life are taken care of well. They do so because they have very limited resources to rebuild things once they are destroyed. But in my short career as a Lawyer, I have seen that the insurance companies reject all big claims and honour only small claims. I would not object if anyone blames the judicial system for this practice by such insurance companies.

In India we do not have the practice of awarding penal damages and penal rate of interest over the wrongful denial of legal insurance claims or the case of “Bad-Faith”. So, it’s a win-win situation for the insurance companies in rejecting the claims because most of the claimants being poor prefer to settle their claims for a much lower cover, sometimes even to 20% of what they should legally get. But those who knock the doors of judicial systems get into the vicious circles of appeals after appeals.

Since the insurance companies have their own panel of lawyers, so filling an appeal is never a problem for them and they even file Special Leave Petitions before the Supreme Court for a sum as small one lakh rupees.

Approaching the lawyers in a system where the practice of taking a share in claim amount is not economically viable for the litigants because the share may some time go to as high as 50% of the claim amount. So, after decades of litigation and years of misery a claimant gets much less than the amount for which he was covered.

The courts even after finding and recording that the claim has been wrongfully denied by the insurance company are always reluctant to award any damages leave the issue of punitive damages. The cost of litigation, if awarded, is very meager and at the level of Supreme Court also it rarely goes beyond Rs. 10,000 whereas after decades of litigation the actual expenses incurred are much more.

The interest which is awarded by the courts for the insurance companies for wrongfully holding the money is only 6% per annum whereas the money held by in insurance companies generates much more funds for them because the commercial lending rate is much more than this. So, even if an insurance company loses a case of ‘Bad-Faith’ it is more than happy to pay whatever is directed by the courts because at the end of the day it has only benefited the company.

So, it’s nothing but a prudent, though unethical, business decision of the insurance companies to reject the big claims without any exception. In this competitive world it is highly professional and could not be curbed unless and until the courts start to award punitive damages over the insurance companies in ‘Bad-Faith’ cases.

This is being done in America and in European countries. If the courts do not want the enrichment of the claimants it may choose to direct insurance companies to deposit such money with the Legal Aid Committees so it would serve the dual purpose. On the one hand, it would penalise insurance companies. It would provide fund to the legal aid committees which would be able to provide better legal aids to the needy.

It’s the high time that the appropriate steps are taken and the might of the big corporations are challenged so as to protect the poor and ignorant people of the country from being robbed of their hard earned money and they are insured and protected against the rejection of their insurance claims.