Page 40 - The Insurance Times October 2025

3.5 Misalignment with Corporate Risk 4.4 Reducing Regulatory and Legal Escalation
Management Regarding an ineffective internal grievance process, many
Grievance data from ombudsman cases rarely integrates disputes get referred unnecessarily to lawsuits, regulators or
into insurers' enterprise risk management (ERM) systems. the media. An effective Independent Internal Ombudsman
Without a strong internal mechanism, firms miss early process can prevent the escalation of complaints through
warning signals for misconduct, agent fraud, or claims transparent disputes and remedies while saving a company
mismanagement. significant legal fees and preserving its reputation.

These constraints indicate a requirement for an additional 4.5 Supporting Product and Service Innovation
internal, yet independent, pathway to resolve issues before IIO complaint data may provide significant information to
escalation, thus supporting the proposition for an Internal product designers, actuaries, and customer experience teams.
Insurance Ombudsman. Trends of recurring complaints can reveal an underlying issue
with policy wording, exclusions, communications materials, or
4. Benefits of an Internal Insurance agent training. Thus, the IIO can assist departments with
continuously improving service quality.
Ombudsman

Establishing an Internal Insurance Ombudsman (IIO) brings 5. Implementation Challenges
several strategic, operational, and regulatory benefits for
insurers, consumers, and the financial system. These benefits The Internal Insurance Ombudsman model has great
potential, but challenges still exist for implementation.
extend beyond complaint resolution, contributing to a
culture of accountability, organisational learning, and ethical Successful implementation depends on institutional will,
regulatory support, and structural safeguards.
conduct.

4.1 Faster and More Accessible Resolution 5.1 Independence and Neutrality
Unlike external ombudsman services that may require long One of the considerations with an IIO is whether the IIO can
procedural steps and waiting periods, internal ombudsmen be independent in a for-profit organisation. Business
offer quick, informal resolution. For many consumers, pressures may call credibility into question unless there are
especially those in rural or underserved areas, the IIO offers clear reporting relationships, strict conflict of interest rules,
a cost-free, jargon-free alternative that is approachable and and protections against retaliation.
responsive. Reducing resolution timelines also improves
customer satisfaction and retention. 5.2 Role Confusion with Customer Care
It is important to differentiate the IIO from standard
4.2 Strengthening Consumer Trust customer service. The IIO should be viewed as a quasi-judicial,
Usually, consumers are more loyal to organisations that fair process, not just another escalation level. Achieving this
acknowledge and address a complaint. An internal will require definitive SOPs, awareness campaigns, and the
ombudsman enhances the organisation's transparency and education of policyholders on their responsibilities.
shows empathy, especially where a sensitive conversation
exists related to health, life, or disability claims. Speaking 5.3 Cost and Operational Feasibility
with a neutral officer of the organisation promotes For smaller insurers and insurtech start-ups, creating an
emotional trust and minimises the potential for public ombudsman office may prove too costly an option. A
dissatisfaction. workable option could be to share an ombudsman among
group companies or to hire the position externally, with
4.3 Early Warning and Risk Containment appropriate governance oversight.
IIOs are strategically important in identifying recurring
complaints like product mis-selling, delays in claims 5.4 Integration into Governance Framework

settlement, or agent impropriety, which indicate broader For the IIO to work well, it should be built into the company's
systemic risks. By connecting with compliance and audit compliance framework and report to the board's risk or audit
teams and maintaining feedback, the IIO can assist in committee. This may require many insurers to update their
limiting reputational harm, legal liability, or regulatory internal governance policies to make the integration
enforcement action. possible.

The Insurance Times October 2025 37