Mudra Compass

The Insurance Ombudsman was created by the Government of India in November, 1998 with the purpose of quick disposal of the grievances of the insured customers and to mitigate their problems involved in redressal of those grievances. There are at present 17 Insurance Ombudsman in different locations and any person who has a grievance against an insurer, may himself or through his legal heirs, nominee or assignee, make a complaint in writing to the Insurance ombudsman within whose territorial jurisdiction the branch or office of the insurer complained against or the residential address or place of residence of the complainant is located.

Insurance Ombudsmen are appointed by The Executive Council of Insurers (ECI) and are empowered to entertain complaints against insurance companies, their agents and intermediaries in respect of personal life insurances, group insurance policies, and policies issued to sole proprietorship and micro enterprises. The Executive Council of Insurers (ECI), previously known as Governing Body of Insurance Council (GBIC) established under the Insurance Ombudsman Rules, 2017, facilitates the institution of insurance ombudsman in India. The duty of the Insurance Ombudsman is kind of mediator between customer and insurance company to sort out the grievances and give verdict in biasfree manner.  However, a recent response to an activist’s query under the Right to Information (RTI) has shown that one in five awards announced by the insurance ombudsman was pending at the end of FY 20.  A Mumbai based RTI activist Jeetendra Ghadge had filed an application with IRDAI seeking details about insurance ombudsman scheme and action taken. In response to this, IRDAI Shockingly admitted that in over 10 years, it has not taken any action against a single insurance company for non-compliance with the award issued by the insurance ombudsman. It shows how lightly insurers were treating the orders. 

Your complaint to the Ombudsman can be about:

(a)    Delay in settlement of claims, beyond the time specified in the regulations, framed under the IRDAI Act, 1999.

(b)    Any partial or total repudiation of claims by the Life insurer, General insurer or the Health insurer.

(c)     Any dispute about premium paid or payable in terms of insurance policy

(d)    Misrepresentation of policy terms and conditions at any time in the policy document or policy contract.

(e)    Legal construction of insurance policies in so far as the dispute relates to claim.

(f)     Policy servicing related grievances against insurers and their agents and intermediaries.

(g)    Issuance of life insurance policy, general insurance policy including health insurance policy which is not in conformity with the proposal form submitted by the proposer.

(h)    Non issuance of insurance policy after receipt of premium in life insurance and general insurance including health insurance and

(i)      Any other matter resulting from the violation of provisions of the Insurance Act, 1938 or the regulations, circulars, guidelines or instructions issued by the IRDAI from time to time or the terms and conditions of the policy contract, in so far as they relate to issues mentioned at clauses (a) to (f).

According to the annual report of ECI, at the beginning of FY19-20, there were 11,281 complaints, including life, non-life and health insurance, pending with the offices of the insurance ombudsman across the county. During the year, it received 27,257 complaints, taking the total number of complaints to 38,538. Out of this, it disposed of 29,816 complaints leaving 8,722 complaints as outstanding.

From 1^st April, 2019 to 31^st March, 2020, the 17 offices of the insurance ombudsman issued recommendations and awards in 15,239 cases, amounting to Rs13575.61 lakh. According to the response given in RTI, 9528 awards were issued by various ombudsmen across the country against insurance companies in the previous financial year. Of this, insurers had complied with 7,664 orders, but 1864 were pending at the end of the year. Public sector insurers Oriental, New India and National Insurance had the highest number of pending orders at 480, 303 and 289, followed by Bharti Axa Life at 198 and Star Heath at 142.

The ECI report highlights that in life insurance,

(1)   Maximum complaints received are pertaining to mis-selling and maximum number of cases pertains to private insurers. The other major chunk pertains to partial or total repudiations of death claim and the remaining pertains to non-receipt of policy bond, dispute regarding premium paid or payable in terms of the policy and other policy servicing related grievances etc. 

(2)   The number of cases of mis-selling are generally based on fraud and forged signatures of policy holders or life assured on the proposal form and benefit or sales illustration, the ECI report says, adding, “Mis-selling can be reduced by making consumers aware of insurance especially in the rural areas. The companies, IRDAI and the office of the insurance ombudsman should hold meetings involving panchayats, local administrators and non-government organizations (NGOs) to spread awareness about insurance.”

(3)   Many times a customer is not explained the features of the plan and he unknowingly signs the proposal form for insurance believing it to be a fixed deposit scheme or one-time payment of single premium. Agents should be trained to avoid mis-selling.

(4)   It was further observed that due to the lack of accountability of the agent/representative/intermediary to the insurer, the customer was left alone in the fight for justice against mis-sale.

(5)   In most cases of mis-selling it is observed that the financial underwriting rules have been disregarded by the underwriter. Therefore mis-selling which could have been arrested at the underwriting stage instead gets an impetus when the underwriter clears long premium paying term plans even though the proposer does not have the paying capacity to maintain the policy beyond the initial first payment.

(6)   Insurance Companies are denying complaints  of mis-selling simply because a satisfactory pre-login verification call had been made, even though experience over the last few years has shown that the brokers/agents have been tutoring the customers to accept all terms when verification calls are received. It is indeed a catch 22 situation where unscrupulous agents/brokers are continuing to derive undue benefit out of the greed of customers. However, insurance companies, regulation, redressal officers, as stakeholders of the industry should be able to devise controls to prevent this unchecked mis-selling and mis-guiding of customers.

(7)   Solicitation of business and insurance of premium receipts by unlicensed entities.

As we see here, ECI has also expressed its concern over insurance companies not complying with its awards and orders which are given by the Insurance Ombudsman. Insurers are bound to oblige the Insurance Ombudsman’s order “however, it is noticed that Insurer do not implement the orders or sometimes implementation is not done on time. This seems a serious concern which will lead to trust issues in the system.” Therefore, IRDAI has taken note of such lapses and has advised the insurers for timely compliance failing which will attract stern action.

However, as the reply received under the RTI Act shows, insurers are not too particular about following orders passed by the insurance ombudsman. In such a case, IRDAI must step in and take strict action against the insurers, who are not complying with the orders passed by the ombudsman. 

It seems that IRDAI should intervene in the case where the insurer does not comply with the order of the ombudsman and take some serious action against insurance companies who do not comply with the awards. If such practices of not complying or delaying in implementation are still going on at the insurer side, then IRDAI should shut the ombudsman and let the customer approach the consumer court or civil court instead.