Consumer protection: damage inspection
Published on 25 November 2021
The analysis of complaints submitted to Hanfa by insurance services users has shown that the occurrence of an insured event processed pursuant to the Act on Compulsory Traffic Insurance is sometimes followed by a dispute between the insurance company and the claimant relating to the damage inspection report. Put simply, damage inspection relates to the process of determining the loss occurred as a result of a harmful event, that precedes the submission of a claim. In the case of motor vehicle liability insurance, this relates to the occurrence of a traffic accident. Damage inspection or damage assessment is carried out by loss adjusters.
Even though damage inspection is a necessary step within the framework of claim processing, it is not regulated by laws governing the insurance market, insurance companies’ obligations or relationships arising from insurance contracts (Civil Obligations Act, Insurance Act and Act on Compulsory Traffic Insurance). There are therefore no provisions on compulsory stages of that procedure, or any format and contents of the form drawn up following the process of determining the loss, nor is there any legal basis obliging insurance companies to submit information on this procedure to interested parties (mainly persons who have filed their claims). Irrespective of the above, as part of a common and established business practice, insurance companies in the territory of the Republic of Croatia usually submit a document called “Damage Inspection Report” during their communication with claimants. A damage inspection report may contain information on the location of damage inspection (e.g. the garage), type of damage on the vehicle, as well as other information (such as the number of hours required to repair the damage or acceptable unit repair costs). It should be noted that a damage inspection report is not the same as a decision of the insurance company on the merits of a claim. We would also like to emphasise that some insurance companies that submit damage inspection reports also use these documents to provide information on steps in the claim processing procedure, which is of use to claimants.
In spite of the lack of legal basis for the submission on information on damage inspection to claimants, Hanfa would like to point out that the Recommendation for insurance companies of 19 October 2020 states that: “Hanfa finds that claim processing procedures show the most room for improvement in communication with respect to the explanation, i.e. provision of information on the calculation and manner of calculating the amount of claims and the explanation of reasons for the rejection (denial) of a claim.”
Hanfa therefore believes that insurance companies should be as transparent as possible in their communication with claimants as regards the provision of information relating to the damage inspection procedure. Hanfa is also of the opinion that “a reasoned offer” submitted within the framework of compulsory traffic insurance in the case where liability and the amount of damages are not contested needs to contain, among other things, the amount of damages determined, with an explanation as to how and based on which documentation this amount has been determined (similar is the case with the submission of a reasoned reply where the amount of damages is partially contested). Such approach should enable insurance companies to reduce the possibility of a dispute with claimants, at the same time also reducing the possibility of suspicions relating to fair claim processing procedures. This is particularly the case where a harmful event leads to what insurance companies consider to be a total loss.
Even though Hanfa is not authorised to make decisions on the merits and amount of claims (which depend on insurance companies’ own decisions), it has received a significant number of complaints from claimants who expressed their suspicions with regard to fair claim processing procedures by insurance companies. The main reason behind these suspicions relates to the fact that damage inspections are usually not carried out by independent loss adjusters, but insurance company employees or persons hired by the insurance company, which may lead to a lack of confidence in the objectivity of these persons. Although Hanfa is not authorised to provide legal advice, we would like to point out that there are no legal obstacles for claimants to seek for services of an independent adjuster (including a court expert) after the occurrence of a harmful event and prior to filing a claim, depending on their own wish and assessments. Before doing so, the claimant should check their insurance terms and conditions (in the case of comprehensive insurance) and preferably inform the insurance company (in particular as regards the costs of damage inspection/assessment and arrangements relating to operative details of the damage inspection/assessment process). In this case, the costs of hiring and independent loss adjuster would most probably be borne by the claimant; it is therefore advisable to inform the insurance company of this step.
