Insurance: Better resolution of policyholders’ complaints

The ombudsman acts as a counsellor and mediator and arrives at a fair recommendation based on the facts of the dispute.

In order to improve the working of the insurance ombudsman mechanism, the government has amended the Insurance Ombudsman Rules, 2017 to facilitate resolution of complaints regarding deficiencies in insurance services in a timely, cost-effective and impartial manner.

Policyholders can make complaints electronically and track their status online, insurance brokers have been brought within the ambit of the ombudsman and the scope of complaints to ombudsman widened from only disputes earlier to deficiencies in service on the part of insurers, agents, brokers and other intermediaries. The Ombudsman mechanism has been renamed as the Council for Insurance Ombudsmen.

Amendments have been made for securing the independence and integrity of the ombudsman selection process and securing impartiality of the appointed persons serving as ombudsmen. The selection committee will include an individual with a track record of promoting consumer rights or advancing the cause of consumer protection in the insurance sector.

Digital complaints
Under the amended rules, policyholders can make complaints electronically to the ombudsman and a complaints management system will be created to enable policyholders to track the status of their complaints online. Moreover, the ombudsman will use video-conferencing for hearings. Supporting documents have to be provided, the nature and extent of the loss caused and the relief sought from the ombudsman will have to be mentioned. The complainant will have to mention the name of the branch or office of the insurer against whom the complaint is made. The complaint will have to be filed within one year after the order of the insurer rejecting the representative’s claim is received. Also, the policyholder can file the complaint to the ombudsman after expiry of a period of one month from the date of sending the written representation to the insurer if the company fails to furnish a reply to the complainant.

The insurer has to comply with the decision of the ombudsman within 30 days from the date of receipt. If it does not accept the ombudsman’s decision, it can then approach the consumer forum. The ombudsman will provide both the parties reasonable opportunity of being heard before an award is passed.

Role of ombudsman
The ombudsman acts as a counsellor and mediator and arrives at a fair recommendation based on the facts of the dispute. If the policyholder accepts the decision of the ombudsman, then it will inform the company which will comply with the terms. Insurers will have to provide contact details of the insurance ombudsman in every policy document issued by them. The award passed by the insurance ombudsman is binding on the insurer.

However, there are instances where courts have allowed appeals by insurers on the orders passed by the ombudsman in exercise of their constitutional powers. Each ombudsman can redress customer grievances in respect of insurance contracts on personal lines where the compensation amount sought is less than `30 lakh. Currently, there are 17 insurance ombudsmen in the country.

According to the FY20 annual report of Insurance Regulatory and Development Authority (Irdai), though there is an increase in number of complaints against life insurers in 2019-20 compared to 2018-19, the share of complaints related to Unfair Business Practices (UFBP) dropped to 26.30% in 2019-20 from 30.36% in 2018-19. The number of UFBP complaints registered against private life insurers dropped to 39,450 in 2019-20 from 45,294 in 2018-19. The number of misspelling complaints have reduced from 47,503 in 2017-18 to 35,178 in 2019-20. Also, the incidence of mis-selling complaints per 10,000 policies sold has reduced over the years. Analysis of channel wise mis-selling complaints of private life insurers reveals that banks and broker channels received the maximum complaints.