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. The institution has helped to generate and sustain the faith and confidence amongst the insurers.

The ombudsman is policyholder-oriented. In financial year 2019-20, there were 8,849 awards favouring the complainants, 680 recommendations that typically favour policyholders, and 5,710 awards favouring insurers. That is a large policyholder bias. Only in two of 17 ombudsman offices was the number of decisions favouring insurers higher than those favouring policyholders. The ombudsman accepts complaints pertaining to individual or group insurance and can award up to ₹30 lakh. Most health insurance policies and many life, home and motor claims fall within these limits. The ombudsman will not accept complaints that have been previously filed with courts or consumer forums. Complaints can be made only if you have first escalated the issue within the insurance company itself and not heard back within a month or are dissatisfied with the outcome. There are 17 ombudsmen in different locations. You must write to the ombudsman responsible for the location where you live or where the insurer or branch against whom you are complaining is based. The hearings used to be in-person but are increasingly online. If you disagree with the ombudsman’s decision, you may go for other legal remedies, including consumer forums. Insurers must comply with the award within 30 days and delays are reported to their boards.

But unfortunately the ombudsman is under-utilized and misunderstood grievance redressal option for insurance. The number of cases coming to the ombudsman has not increased fast enough. In FY16, there were about 26,000 complaints; this increased to just about 27,000 complaints in FY20. Policyholders are unaware about the role, location and complaint process of approaching the ombudsman, despite all insurance policies carrying details.

Among the complaints evaluated by ombudsmen in FY20, over 40% were inadmissible. Of these grievances, 60% were rejected because the policyholder has not first escalated the matter to the insurer’s grievance officer. There is little value in approaching the ombudsman without following the escalation matrix listed in your insurance policy. There is therefore lack of knowledge within the insured regarding the procedures for approaching the ombudsman because of which most cases are forwarded to consumer forums and many are kept unapproached.