Page 32 - India Insurance Report 2023- BIMTECH

20 India Insurance Report - Series II

complaints of all personal lines of insurance, group insurance policies, and policies issued
to sole proprietorship and micro enterprises on the part of insurance companies and their
agents and intermediaries in a cost effective and impartial manner.

The present form of RPG Rules has certain anomalies, and it is necessary to convert the RPG
Rules into a dispute adjudication procedure that can be relied upon by the retail customers
and the insurers. An improved and fully empowered Ombudsman office should handle the
entire traffic of grievances as an adjudicative process, including the incorporation of an adequate
appeals process. The Ombudsman shall act as counsellor and mediator provided there is
written consent of the parties to the dispute. However, the following must be amended:

1. The framework of Rules does not make Ombudsman awards enforceable upon the
complainant;

2. The Rules do not provide for an appeal against the award of the Ombudsman, which
makes the adjudication procedure incomplete. The award of the Insurance Ombudsman
shall be binding on the insurers;

3. The Ombudsman shall not award any compensation in excess of the loss suffered by
the complainant as a direct consequence of the cause of action or not award
compensation exceeding rupees thirty lakhs (including relevant expenses, if any).

On the administrative side of reforms:

1. There should be at least one Ombudsman in every state and Union Territory of India;

2. The ombudsman so appointed should have either an insurance background or a judicial
background;

3. The administrative mechanism must ensure that there is proper succession planning
and that there are no posts that remain vacant.

The dispute resolution before consumer forums presents its own challenges, and these issues
have undermined the effectiveness of the forums as a dispute resolution mechanism. The
foremost is the delay caused due to capacity constraints. The other is the inconsistencies
between decisions rendered by different benches of the Commission. The Union Minister
for Consumer Affairs has expressed concern about the lack of infrastructure and poor
salaries, besides the non-transparent system of appointing members in the district forums
involving consumer forums in India.

Moreover, there are obvious conflicts in the Consumer Protection Act 2019:

The introduction of the term “unfair contract” and the powers given to the Consumer
Commissions to strike down any terms of a contract considered to be unfair to the Consumer
can have serious consequences for the Insurance Industry:

1. Section 2(46) “Unfair Contract” is defined to include a contract if it causes significant
change in the rights of the consumer, which includes the following: (i) requiring excessive