Sucheta Dalal :Why the ceilings on liability? (14 January 2002)
Sucheta Dalal

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Why the ceilings on liability? (14 January 2002)  

The reluctance of Indian courts to award exemplary damages, is one of the factors that works against consumer/investor action in India. A consumer who fights a long drawn legal battle and wins, usually comes away with a niggardly award that barely covers costs and interest—this is true of civil courts as well as consumer courts. It was hoped that the independent regulatory authorities that were set up by government would be far more proactive in listening to investors. But so far this has not happened. The Sebi Act has no provision for deterrent damages, the telecom regulator is at least trying its best, but the consumer remains out in the cold. It is now reported that the newly formed Insurance Regulatory and Development Authority’s (IRDA) tariff committee has made a series of anti-consumer recommendations that aim to limit the liability of insurance companies and curtail consumer rights. For starters, it plans a Rs 7.5 lakh ceiling on liability for motor accidents, when consumer groups are still fighting to extend the liability for railway and airline mishaps. Secondly, it wants the top bracket of the no-claim bonus to be reduced from 65 per cent to 30 per cent—this only penalises safe drivers. Finally it says that the jurisdiction for settlement of claims should be the civil courts rather than the Motor Accidents Compensation Tribunal. This would merely add to the consumers’ woes by causing delays and increasing litigation costs. Consumer groups such as the Consumer Education and Research Centre (CERC) have taken strong objection to the IRDA’s anti-consumer attitude and said that insurance companies should reduce their burden by improving efficiency and getting rid of delays and eliminating corrupt practices in recovering the claims and not at the cost of consumers. Is IRDA listening.

Wipro’s harried subscribers

Subscribers to Wipro’s Internet Service Provider, Netkracker are furious. For the past 10 days the ISP is severely crippled and no mail can be sent through the Outlook Express. Wipro’s call centre acknowledges the problem and advises subscribers to log on to the Netkracker website in order to access their email. This advice is proffered only when a harried customer complains. Subscribers wonder why this savvy infotech company, which believes in good governance practices, could not inform them through bulk email that there was a terrible screw-up in their technology. Worse still, the call centres handling complaints still have no clue when the problem will be set right. This has led subscribers to another issue: no ISP gives any subscriber a clear document or agreement, which states their service obligations or limitations of liability. Often, there isn’t even a receipt issued for subscriptions and renewals.

PSUs become customer friendly

Clearly, consumer is not always king, but the big surprise is Life Insurance Corporation whose recent friendliness is startling its customers. Some of us have been pleasantly surprised to receive cheques under the money back scheme without a demand to inspect the original policy. Records have been updated, delayed payments are accepted without harassment and the staff is actually friendly and courteous even on the telephone. For those who preferred to avoid life insurance rather than face a lifetime of dealing with the obtuse insurance monopoly, the good news is that they may, for the first time end up feeling loyal to an erstwhile tormentor. In fact, the same goes for Indian Airlines. Right from the check-in staff to the cabin crew, the service culture at the airline has definitely changed for the better. And even those staffers who still find it difficult to smile can be relied upon to be efficient.

Predicting rates

For most banks, the continuous slide in interest rates has allowed them to book huge profits through treasury operations. All they did was to sell and buy back their portfolio and take credit in the form of higher profits and portfolio value. It now seems that the party is set to end. At the last meeting of the newly set up advisory group for the finance ministry, the babus at North Block solicited opinions on where interest rates were headed. The broad consensus was that interest rates were set to turn north towards the second quarter of the year. The Reserve Bank of India (RBI) seems to share this perception too. This is evident in its recent directive to hold back banks that have been rushing off to claim vastly improved bottom lines merely by booking profits on their debt portfolio, whose market value increased even as interest rates declined. The RBI has apparently directed banks to transfer most of their trading profits to an Investment Fluctuation Reserve. Although banks may chafe at the RBI move, investors will be grateful to the central bank for keeping things in perspective.

-- Sucheta Dalal