Insurance ombudsman doesn’t allow third party help: A dilemma for policyholders
Insurance Ombudsman Doesn’t Allow Third-Party Help: A Dilemma for Policyholders
Navigating the complexities of insurance claims can often be a dauntinOperating Guidelines for Trading Supported by Blocked Amount in Secondary Market -NSEOperating Guidelines for Trading Supported by Blocked Amount in Secondary Market -NSEg task for policyholders. This challenge is amplified when policyholders encounter disputes with their insurance providers. In many countries, an Insurance Ombudsman exists as a mediator to resolve such conflicts. However, a significant point of contention lies in the fact that many Insurance Ombudsmen do not allow third-party help during the dispute resolution process. This exclusion can create a substantial dilemma for policyholders, who might need professional assistance to present their cases effectively. Let’s explore this issue in detail, highlighting the potential implications and challenges faced by policyholders.
The Role of the Insurance Ombudsman
Insurance Ombudsmen play a critical role in the financial ecosystem by providing an impartial platform for policyholders to resolve disputes with their insurance providers. They offer a cost-effective, efficient, and less adversarial option compared to traditional legal proceedings. However, the restriction on third-party help raises concerns about fairness and accessibility.
Key Points
1. Complexity of Insurance Terminology and Procedures
Insurance policies often contain complex legal and technical jargon that can be difficult for the average policyholder to understand. Without the ability to seek third-party assistance, such as from lawyers or professional claims advisers, policyholders may struggle to articulate their grievances or comprehend the nuances of the policies. This complexity can inadvertently disadvantage policyholders, leading to unfavorable outcomes.
2. Unequal Power Dynamics
Insurance companies typically have access to extensive legal and financial resources, including teams of experts who are well-versed in dispute resolution. On the other hand, policyholders usually stand alone, without the same level of expertise or resources. This imbalance of power can skew the fairness of the process, making it challenging for policyholders to contest decisions effectively.
3. Restriction on Expert Testimony and Guidance
In many cases, third-party experts can provide valuable insights and testimonies that are crucial for a fair resolution. For example, a medical expert’s opinion might be essential for a health insurance dispute. By disallowing third-party help, policyholders lose the opportunity to bolster their cases with expert opinions, which can be pivotal in swaying the Ombudsman’s decision.
4. Psychological and Emotional Toll
Dealing with insurance disputes can be a stressful and emotionally taxing experience. Policyholders, especially those dealing with significant health or property claims, may already be under considerable stress. The prohibition of third-party assistance forces them to navigate this stressful process alone, potentially exacerbating their emotional and psychological burdens.
5. Accessibility and Fairness
One of the primary intentions behind the Insurance Ombudsman system is to make dispute resolution accessible to all policyholders. However, the restriction on third-party help can inadvertently contradict this objective. Policyholders who might not have the confidence or ability to engage with the Ombudsman independently may find themselves marginalized in the process, undermining the system’s accessibility and fairness.
The Path Forward
To mitigate these dilemmas, there is a need for reassessment of the policies surrounding third-party assistance in the Insurance Ombudsman process. Several steps can be considered:
- Revisiting Regulations: Policymakers should consider revisiting regulations to allow the inclusion of third-party help, ensuring that policyholders are not unduly disadvantaged.
- Providing Legal Aid: Offering free or subsidized legal aid to policyholders can help balance the scales, giving them access to professional advice and support.
- Enhancing Awareness and Education: Improving awareness and education among policyholders about their rights and the Ombudsman process can empower them to navigate disputes more effectively.
In conclusion, while the Insurance Ombudsman serves as an essential mechanism for resolving insurance disputes, the prohibition of third-party help presents a significant dilemma for policyholders. Revisiting and potentially reforming these regulations could enhance the fairness and accessibility of the system, ensuring that all policyholders have the support they need to seek justice.
Insurance ombudsman doesn’t allow third party help: A dilemma for policyholders
Summary
Third-party representation is not allowed at ombudsman, but if policyholders consult an individual or a firm to be better prepared for it, they may face consequences
When businessman Mukesh Garg’s two insurance claims were rejected, he represented himself before the insurance ombudsman, a statutory body that helps in out-of-court settlement of insurance cases, but sought help from a third party for the required paperwork. This, however, was a mistake.
“My two claims got rejected in a span of one year. The ombudsman issued an award in my favour in the first one, but when they discovered that a company had helped me out in the first claim, they did not hear my case and passed the award against me in the second one,” said Garg.
Garg’s situation highlights a significant challenge in the system. While the policyholder and the insurance company get a chance to present their cases, neither can engage a lawyer or any other third party.
For most policyholders, navigating this process can be daunting. After an insurance company rejects a claim, the policyholder’s first step is approaching the insurer’s grievance handling department. If the issue remains unresolved, they can reach out to the ombudsman. The hearing date is fixed (online or physical), and both sides present their arguments.
No level-playing field
One does not have to pay any fee to lodge a complaint with the insurance ombudsman. It is a cost-effective system where claims up to ₹50 lakh can be resolved quicker. However, people unaware of its existence or who do not understand the process sometimes reach out to third parties to seek support. Ombudsman officers cannot generally 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 that 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 is going through health issues. I don’t understand insurance. If I sought somebody’s help in doing the paperwork to ease my mental burden, why is it wrong?” said a person on condition of anonymity because her case is sub-judice in the consumer court.
Consumer policy expert Bejon Misra, who was a member of the insurance ombudsman advisory committee, highlighted the lack of a level playing field between insurers and policyholders.
“Insurers may not be sending lawyers to the ombudsman’s office, but whoever represents them before the ombudsman has a rich insurance background and access to expert lawyers in the company or has a legal background. It is a fight between a common man and a large entity. You cannot question complainants if they seek support from insurance experts. In fact, Irdai (Insurance Regulatory and Development Authority of India) should allow representation if complainants so desire,” he said.
What the ombudsman says
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 insurance company will,” said R.M. Singh who retired as insurance ombudsman of Madhya Pradesh and Chhattisgarh in November.
“People should rely on them. Most complaints at ombudsman go in complainants’ favour. Lately, it has been observed that small agencies have mushroomed to charge policyholders to assist them. It should not be encouraged because otherwise it would become part of the process and gullible policyholders may be taken for a ride by unscrupulous players,” he said.
Policyholder Arjun Singh trusted the system and approached the ombudsman officer in his location. But he was disappointed.
“It was apparent that the ombudsman officer was biased towards the representative of the insurance company. The ombudsman chief insulted me and did not let me speak. Too much back and forth of the paperwork happened with the insurance company and ombudsman to get my claim,” said Singh.
Milind A. Kharat, who worked as insurance ombudsman for Mumbai and Goa says the objective of the insurance ombudsman is quick resolution of insurance complaints where complainants do not have to bear any expenses. Consumer courts involve legal costs such as advocate fees and stamp duty and still lead to delayed resolution.
What about 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. Data shows in FY2023-24, 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 non-entertainable and 27% were recommendations, also called mediation.
“In this, the ombudsman makesfair recommendations to the complainant. If he accepts it, it is forwarded to the insurance company for compliance. In such cases, actual hearing with the complainant and the insurance company is not needed, so it leads to even prompt resolution. It could either be in favour of the complaint or insurance company or a mid-way out,” said Kharat.
Data shows 67.40% of complaints, including awards and mediation, favoured complainants in FY24.
A detailed analysis showed Mumbai, Bengaluru and Jaipur were the top states where awards favoured the complainant. Delhi ranks the lowest in this regard with only 53 awards going in favour of complainants versus 612 in favour of the insurance company.
Looking into expenses, ombudsman offices spend an average ₹12,000 per complaint to process the complaints, which was earlier more than double. The Insurance Ombudsman Council receives funds from insurance companies based on their turnover. Misra suggests the cost of disposing complaints should be recovered directly from the insurance company against whom the complaint is registered. “It would nudge insurers to resolve complaints at their end and policyholders will not have to reach out to the ombudsman in the first place,” said Misra.
Kerala-based Ajit Kumar faced a different challenge. He filed a complaint against an online broking platform 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 platform. The broking platform does not have such an officer. I have mails from the CEO, but the ombudsman office has been demanding my communication record with the grievance officer,” he said.
To be sure, brokers have been included in the ambit of ombudsman only recently, but most of them do not have a designated grievance officer like insurance companies.
“The ombudsman should entertain Ajit Kumar’s complaint by accepting a claims denial statement by any claims executive of the concerned broker if they do not have a grievance officer. However, Irdai should make it mandatory for broking houses to have a designated grievance officer in order to bring symmetry in operations, otherwise the decisions will be based on perceptions of each ombudsman,” said R.M. Singh.
Disclaimer
The insights and information provided by Estabizz Fintech Private Limited are for general informational purposes only and should not be interpreted as financial, investment, or legal advice. While we strive for accuracy and relevance, we recommend consulting with our qualified professionals for advice tailored to your specific circumstances. Estabizz Fintech disclaims any liability for actions taken based on this content. For further guidance, please contact our team of experts.
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