“Insurance companies should have no role in the selection and administration of the insurance ombudsman… Because insurance companies are interested parties in disputes with the insured. An industry-led insurance ombudsman implies that insurance companies act as judges in their own cause,” stated the report.
The nine-member ECI has just two members from the Insurance Regulatory and Development Authority of India (IRDAI) and the Centre. Though the law was reformed in 2017 to have a separate selection committee for ombudsman, the ECI decides both selection criteria and shortlisting of eligible candidates for the said committee. The report noted that in contrast, the financial ombudsman in UK, for instance, does not include any financial service provider, including insurance companies, on its board.
Apart from the problem of independence, there are too few insurance ombudsmen, just17 for the entire country. In March 2018, all offices of insurance ombudsmen lay vacant, the report Fair Play In Health Insurance In India observed. Some lay vacant for two to three years in 2017 resulting in a large backlog of cases. The ombudsman post in Mumbai, for instance, lay vacant for two years, between 2016 and 2018. Nine of the 17 posts (Delhi, Ahmedabad, Bhubaneshwar, Ernakulam, Kolkata, Lucknow, Noida, Patna and Pune) are still vacant.
As per the report, IRDAI regulations have no procedure to settle claims or redress consumer grievances against rejection of claims. Regulations merely lay down the period within which a claim should be settled and the manner of submission of claim documents. “By leaving the detailed procedure for settlement to companies, every insurance company has developed its own procedure to redress consumer grievances. Consequently, health insurance disputes are not settled in accordance with the law but in an ad-hoc manner,” noted the report.
The report cited the case of Virender Dhiman to show insurance companies face no consequences for rejecting valid claims. Dhiman’s mother was hospitalised after taking a fall. The insurance company rejected his claim saying his mother did not need hospitalisation despite the insurerapproved hospital having certified that she did. In the consumer court, the insurer did not even appear to defend its rejection. While the claim amount rejected was Rs 80,461, the insurer was fined just Rs 5,000. With no penalties for rejecting valid claims, insurance companies seem to violate regulatory requirements without any repercussions, stated the report. “The fact that these violations are persistent shows that penalties do not act as deterrence... To act as deterrence, there is need to ensure the violator pays a fine higher than the gain made through the violation. The penalty should be a multiple of the illegitimate gain from the violation,” it said.