Page 39 - The Insurance Times October 2025

External ombudsman schemes such as the Insurance Investigate matters in all areas of the company (claims,
Ombudsman in India, the Financial Ombudsman Service underwriting, sales),
(FOS) in the UK, and AFCA in Australia serve as important Deliver a written response (resolution or rejection with
safeguards. Despite this, these organisations usually act reasons).
after a conflict has progressed, with disagreements taking
months to resolve. They also have no visibility into the Nevertheless, internal grievance cells are seldom
insurance company's operations in real time to make
independent. Typically, these grievances are handled by
context-relevant, systemic recommendations. customer service or legal teams, creating questions of bias
and utility in dealing with systemic or ethical misconduct
The Reserve Bank of India (RBI) has already introduced an complaints. There is no formal guarantee of neutrality,
Internal Ombudsman Scheme for banks, requiring all banks confidentiality, or remedy tracking, making these
to designate an independent officer to address escalated mechanisms administrative rather than quasi-judicial.
consumer complaints. If appropriate, insurance regulators
may implement a similar model for the sector.
3. Limitations of Existing Frameworks
This article argues for an Internal Insurance Ombudsman While there are benefits in the consumer protection role of
(IIO) to be set up at insurance companies, as a neutral, external ombudsman schemes, several structural and
independent entity to process consumer complaints before operational limitations are apparent from both a preventive
they go into litigation. and structural point of view.

2. Insurance Grievance Redressal 3.1 Delayed Access to Justice
Most ombudsman schemes are invoked only once the user
Mechanisms has completed an internal complaint process or waited 30-
Grievance redressal mechanisms in the insurance industry 60 days. This can be discouraging for low-income customers
can be broadly classified into two types: statutory external or those living in rural areas, especially in developing
ombudsman systems and internal complaints resolution countries with inconsistent digital access.
procedures operated by the insurer.
3.2 Limited Jurisdiction
2.1 External Ombudsman Systems External Ombudsman schemes typically have monetary or
The most well-known external grievance redressal subject-matter limits. For example,
mechanisms are statutory insurance ombudsman schemes,
in India, the limit is only up to Rs. 50 lakh. Further, many
which aim to provide accessible and affordable justice to
complaints relating to service quality, dishonest agents or
policyholders.
the complexity of the product fall outside of these schemes'
more traditional limits, especially those that are not
India's Insurance Ombudsman Scheme: Following its quantifiable in monetary terms.
establishment in 1998 and revision in 2017, this scheme is
operated under the Council for Insurance Ombudsmen (CIO) 3.3 Inaccessibility and Awareness Gaps
within IRDAI. It allows policyholders to lodge complaints
Very few rural and semi-urban policyholders in India know
regarding delays in claim decisions, denial of claims, or mis- about the Insurance Ombudsman Scheme. Digital-only
selling if the claim amount is less than Rs. 50 lakh. The system access, jargon, and delays also render it non-attractive
is free, informal, and regionally decentralised across multiple compared to informal options like lodging complaints on
cities.
social media or escalating them to media organisations.
2.2 Internal Complaint Resolution Mechanisms 3.4 Inadequate Feedback Loops
Most insurance companies have an internal Customer Ombudsman systems operate outside the insurer's formal
Grievance Redressal Cell as mandated by the regulator organisational structure, which limits their ability to provide
IRDAI. This cell is expected to: actionable feedback to product designers, claims managers,
Receive and log complaints, or compliance officers. This can result in repeated systemic
Acknowledge the grievance within a specified period failures, unresolved root causes, and loss of reputational
(approximately 3-5 working days), capital.

36 October 2025 The Insurance Times