When businessman Mukesh Garg’s two claims were rejected, he represented himself before the insurance ombudsman, a statutory body for out-of-court settlements, but sought third-party help with the paperwork-a decision he later regretted.
“Two of my claims got rejected in a year. The ombudsman issued an award in my favour in the first one, but when he found out that a company helped me out, he did not hear my case and passed an award against me in the second one.”
Garg’s situation highlights a significant challenge in the system. While the policyholder and insurance company get a chance to present their cases, neither can engage a lawyer or third party.
For most policyholders, navigating this process can be daunting. After an insurer rejects a claim, a policyholder’s first step is approaching the insurer’s grievance handling department. If the issue is not resolved, they can reach out to the ombudsman. The hearing date is fixed and both sides present their arguments either online or physically.
No level-playing field
One does not have to pay any fee to lodge a complaint with the ombudsman. It is a cost-effective system where claims up to Rs. 50 lakh can be resolved. However, people unaware of its existence or those who do not understand the process may reach out to third parties seeking support. Ombudsman officers can’t learn about it, but if they do, they may view it in a negative light.
A couple of complainants told Mint they were asked to write a letter stating they would not pay money to any third party. Mint has seen one such copy.
“I was told my case is genuine but I still would not get my claim because I sought an agency’s help in filing my case with the ombudsman. I am in a full-time job. My husband has health issues. I don’t understand insurance. If I sought somebody’s help in doing the paperwork to ease my burden, why is it wrong?” said a person seeking anonymity as her case is sub-judice.
Consumer policy expert and former member of the insurance ombudsman advisory committee Bejon Misra said: “Insurers may not be sending lawyers to the ombudsman’s office, but those representing them before the ombudsman has a rich insurance background and access to lawyers in the firm or has a legal background. It’s a fight between a common man and a large entity. You cannot question complainants if they seek support from insurance experts. Irdai (Insurance Regulatory and Development Authority of India) must allow representation if complainants want.”
The ombudsman’s view
Ombudsman officers fear it will hurt the free-of-cost nature of the system. “Ombudsman officers are impartial and understand that policyholders cannot present their case as structurally as an insurer will,” said R.M. Singh, a former insurance ombudsman of Madhya Pradesh and Chhattisgarh. “People should rely on them. Most complaints go in the complainants’ favour. Lately, it is seen that small agencies have mushroomed to assist policyholders for a fee. It must not be encouraged because otherwise it would become part of the process and gullible policyholders may be taken for a ride by unscrupulous players.”
Policyholder Arjun Singh trusted the system and approached the ombudsman. But he was disappointed. “It was apparent that the ombudsman officer was biased towards the representative of the insurer. The ombudsman chief insulted me and did not let me speak, and I had to go back and forth for the paperwork with the insurance firm and ombudsman to get my claim.”
Milind A. Kharat, who worked as an insurance ombudsman in Mumbai and Goa said the objective is quick resolution of complaints where complainants do not have to bear any expenses. Consumer courts involve legal costs such as advocate fees and stamp duty and it still leads to delayed resolution. A case for non-legal assistance Sumit Bohra, president, Insurance Brokers Association of India, said at least brokers should be allowed to represent their clients. “We brought up the matter with the regulator as our clients reach out to us when they face issues in claims settlement. If we want to ensure that illegal players do not dupe policyholders, the regulator should recognise a few entities who can offer such a support if they seek it,” said Bohra.
There are 17 ombudsman offices in India. In FY24, they resolved 49,705 complaints, out of which 16% were in favour of complainants, 15% in favour of companies, 6% complaints were withdrawn, 23% were not entertained and 27% were mediations, data showed.
“An ombudsman makes fair recommendations to the complainant. If he accepts it, it is forwarded to the insurer for compliance. In such cases, hearings with the complainant and insurance company is not needed, so it leads to faster resolution. It could either be in favour of the complaint or insurance company or a mid-way out,” said Kharat. In FY24, 67.40% of the complaints, including awards and mediation, favoured complainants.
Analysis showed Mumbai, Bengaluru and Jaipur were top states where awards favoured the complainants. Delhi ranked the lowest with only 53 awards in favour of complainants versus 612 in favour of the insurer.
Ombudsman offices spend an average Rs. 12,000 to process a complaint, far lower than what it was. The Insurance Ombudsman Council receives funds from insurance companies based on their turnover. Misra suggests the cost of disposing complaints must be recovered directly from insurers against whom the complaint is registered. “It would nudge insurers to resolve complaints at their end and policyholders won’t have to reach out to the ombudsman in the first place,” said Misra.
Ajit Kumar from Kerala faced a different challenge. He filed a complaint against an online broking firm at the ombudsman, but they did not accept it. “They told me that they need a record of my communication with the grievance officer of the broking firm, but it didn’t have one. I have mails from the CEO, but the ombudsman is demanding my communication record with the grievance officer,” he said. To be sure, brokers were included in the ambit of ombudsman recently, but most of them do not have a designated grievance officer like insurance companies do.
“The ombudsman should entertain Kumar’s complaint and accept a claims denial statement by a claims executive of the broker. Irdai must make it mandatory for broking houses to have a grievance officer to bring symmetry in operation, otherwise decisions will be based on each ombudsman’s perceptions,” said R.M. Singh. (Source: Mint)
