We buy insurance to protect our finances against unforeseen life events such as hospitalisation or a death in the family. However, it’s a reality that insurers reject claims. Policyholders have the option to escalate the issue to the insurance ombudsman or approach consumer courts, which can be both expensive and long-drawn.
To ensure faster resolution, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed that insurers appoint an internal ombudsman who will look into complaints that have not been addressed within 30 days.
Industry stakeholders have until 17 August to send their comments and suggestions on the proposal to the regulator.
“The objective of the insurance company’s in-house mediation or ombudsman is to bring a prompt redressal mechanism in case of a dispute,” said Bejon Misra, a consumer policy expert and former member of IRDAI’s insurance ombudsman advisory committee.
The internal ombudsman will be a “neutral, unbiased and credible person of repute, reporting to the board”, Misra said.
Indian banks already follow this process, appointing an independent in-house authority to review and examine customer complaints.
“The system already exists in banks and is working satisfactorily. That said, the concept is lofty and deserves the required attention and implementation,” said R.M. Singh, a former insurance ombudsman of Madhya Pradesh and Chhattisgarh.
However, given that all insurers already have an internal grievance redressal officer (GRO) to handle and resolve customer complaints, how different will the role of an internal ombudsman be?
GRO vs internal ombudsman
If an insurance company rejects your claim, you have to follow a process to escalate the issue. The first step is to write to the insurer’s grievance redressal officer, who is expected to work independently and hear both sides.
Industry experts, however, say GROs are not influential enough to be unbiased in their decisions.
“The grievance department in most of the companies is weak, compliant to the management’s wishes, and manned by junior level officers whose recommendations are taken lightly,” said Singh. Also, such junior officers often do not have the experience and knowledge to deal with grievances in an appropriate manner, he added.
An internal ombudsman, on the other hand, will hold independent charge and be answerable to the insurer’s board and not to the managing director or chief executive officer.
“An independent internal ombudsman’s decision will be binding on the company,” said Singh. However, he added that for an in-house ombudsman to be impartial “his remuneration should be fair, satisfactory, and lucrative so that he does not get enchanted by market forces/operators”.
“Secondly, the reporting of the internal ombudsman should be to IRDAI, just like chief vigilance officers report to the Central Vigilance Commission. The internal ombudsman can make presentations to the CEO and the board, but should not be held accountable by these authorities in order to maintain impartiality and prioritise policyholders’ interest,” Singh added
What insurance ombudsman offices do
There are 17 insurance ombudsman offices in the country, according to the 2023-24 annual report of the Council of Insurance Ombudsman. But these offices are typically swamped with policyholder complaints. In FY24, they received 52,575 complaints, and had 4,332 complaints outstanding from the previous year. Of these, 49,705 complaints were resolved.
“Having an internal ombudsman will de-clog the grievance numbers (pending) with the independent ombudsman offices,” said Singh.
Shilpa Arora, co-founder, Insurance Samadhan, agreed.
“Policyholders have to wait for a long time to get a hearing date from the ombudsman. The delays are due to an overload on the ombudsman body. Complaints are getting resolved after over a year at some locations. We see cancer claims being rejected and policyholders have to fight for the entire year along with managing chemotherapy sessions,” Arora said.
Misra, the former member of IRDAI’s insurance ombudsman advisory committee, said it was time to do away with ombudsman offices.
“All employees in ombudsman offices are persons on deputation from life and non-life insurance companies. An in-house mediation facility by appointing a person of repute would be more efficient and effective, but the process has to be transparent,” Misra said.
What policyholders must know
If internal ombudsman regulations get implemented, all insurers will appoint one or multiple in-house ombudsman. Policyholders can write to them if they don’t hear from the insurance company within 30 days of filing a complaint.
If the insurer has already rejected your claim, you can directly reach out to the internal ombudsman.
The ombudsman will be required to record a “reasoned decision” in each case, which shall be binding on the insurer.
If you are aggrieved by the internal ombudsman’s decision, after 30 days you can appeal to the external insurance ombudsman.