Insurance Brokers Within Ombudsman Ambit

In News: The government has amended Insurance Ombudsman Rules, 2017, bringing insurance brokers within their ambit .

Key Highlights

• Policyholders will now be enabled for making complaints electronically to the ombudsman and a complaints management system will be created to enable policyholders to track the status of their complaints online.
• Insurance brokers have been brought within the ambit of the Ombudsman mechanism, by empowering the Ombudsman to pass awards against insurance brokers as well.
• Under the amended rules, the timeliness and cost-effectiveness of the mechanism has been substantially strengthened.
• It has also renamed the Executive Council of Insurers, which administers the ombudsman mechanism, as the Council for Insurance Ombudsman.

Rationale behind the step

• The government  notified comprehensive amendments to the Insurance Ombudsman Rules, 2017, with a view to improve the working of the insurance ombudsman mechanism to facilitate resolution of complaints regarding deficiencies in insurance services in a timely, cost-effective and impartial manner.
• It aims to build safeguards to secure the independence and impartiality of the appointed persons while serving as Ombudsmen.

What is an ombudsman?

• An ombudsman is an official, usually appointed by the government, who investigates complaints (usually lodged by private citizens) against businesses, financial institutions, universities, government departments, or other public entities.
• It attempts to resolve the conflicts or concerns raised, either by mediation or by making recommendations.

• Insurance Ombudsman: The institution of Insurance Ombudsman was created by a Government of India Notification dated 11th November, 1998 with the purpose of quick disposal of the grievances of the insured customers and to mitigate their problems involved in redressal of those grievances.
  •  The institution has helped to generate and sustain the faith and confidence amongst the consumers and insurers.
  • The Insurance Ombudsman scheme was created by the Government of India for individual policyholders to have their complaints settled out of the courts system in a cost-effective, efficient and impartial way.

• Appointment: The governing body of the insurance council issues orders of appointment of the insurance Ombudsman on the recommendations of the committee consisting of Chairman, IRDA, Chairman, LIC, Chairman, GIC and a representative of the Central Government.
  • • Insurance council comprises members of the Life Insurance council and general insurance council formed under Section 40 C of the Insurance Act, 1938.
    • The governing body of the insurance council consists of representatives of insurance companies.

• Eligibility: Ombudsman are drawn from the Insurance Industry, Civil Services and Judicial Services.

• Power of Ombudsman: The insurance Ombudsman is empowered to receive and consider complaints in respect of personal lines of insurance from any person who has any grievance against an insurer.
  • The complaint may relate to any grievance against the insurer i.e.
    • Any partial or total repudiation of claims by the insurance companies.
    • Dispute with regard to premium paid or payable in terms of the policy.
    • Dispute on the legal construction of the policy wordings in case such dispute relates to claims
    • Delay in settlement of claims .
    • Non-issuance of any insurance document to customers after receipt of premium.

Source :TH