Co-insurance is an important clause in office insurance policy which is defined as the ‘sharing of risk’ between multiple insurance companies. Usually, one insurance company lead the policy document, and that insurer would be responsible for different aspects of the policy document, including the claim. In such a case, the insurance company will levy a charge to do so.

Office Insurance

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It is essential for the office insurance company to give in writing what percentages of risks are to be carried out by the lead insurer and other co-insurance companies. Further, the risk allocation between different insurance companies can’t be altered during the policy term without the written consent of all the co-insurers. Moreover, the lead insurer would be responsible for negotiating the premium, collecting the premium and accounting for any tax that needs to be paid concerning the premium. It is necessary to send the co-insurers net share of the premium within 21 days of receipt, after deducting policy administration charges that the lead insurance company would be entitled to deduct.

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Once the claim arises, it is the responsibility of the policyholder to inform the lead insurer who would be responsible for handling claims, including their investigation settlement and payment. Any expenses related to claim would be first paid by the lead insurance company which it can later recover from co-insurers, as per their share of risk. If the claim amount is low, the lead insurer can settle it on its own. There is no requirement for the lead insurance company to notify co-insurers about claims, except in case of large claims. However, in those cases, where the claim is large, the lead insurer needs to inform co-insurers immediately and advise them of the progress.

If you have taken the policy from a corporate insurance advisor, you can inform them about the claim who would inform the lead insurer on your behalf.

In all the cases, it is essential for the lead insurer to handle the claims strictly in accordance with the policy terms and conditions. The lead insurer can’t agree to pay any ex-gratia settlement without taking the consent of the other co-insurers.

Further, the lead insurer has to decide the subrogation as well. In the insurance field, subrogation gives rights to the insurance company to recover their claim amount from a third-party who is at fault. It means, the insurer settles the claim and then approaches the third-party who is at fault to recover the money. However, it is a must for co-insurers to contribute their shares to any shortfall, in a case where recovery is not possible.

In those cases, where the lead insurer rejects a claim, the policyholder can defend itself. In this case, the lead insurer would have first to bear the defending costs, if any, which would be later recovered from these co-insurance companies.

All the co-insurers have to abide by rules, and in case of any conflict or dispute between insurers, the matter will be handled by a three-member committee of the Indian General Insurance Council (GIC).

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Case

Since, 2000, K.S Builder has carved a niche for itself in the real estate sector. In 2013, the company got a contract of constructing the residential project in Noida. For the complete safety of the project, the company went up to purchase property insurance policy. The company approached the Insurer X to get Rs 50 crore coverage. Considering the high coverage amount, the Insurer X decided to involve Insurer Y and Insurer Z as well. Here, the total Rs 50 lakh coverage was divided among three insurers. Moreover, Insurer X was the leading insurer who would decide the premium and take care of paper and other documents. Here, Insurer X would charge costs for this.

At the time of loss, K.S Builder would only need to inform Insurer X who would inform other insurers accordingly.