While insurance ombudsman amendments sharpen jurisdiction, questions linger on capacity

Insurers and intermediaries are currently in discussions with the Insurance Regulatory and Development Authority of India (IRDAI) on issues such as staffing, infrastructure expansion, and disposal timelines under the proposed changes.

Industry practitioners have raised concerns that the Centre’s draft amendments to the Insurance Ombudsman Rules, 2017, while clarifying scope and jurisdiction, fall short of addressing persistent structural issues such as delays, capacity constraints, and the lack of digital upgrades in the grievance redressal system.

Issued by the Department of Financial Services (DFS) on December 9 for public consultation, the draft seeks to remove long-standing ambiguities around the ombudsman’s jurisdiction, particularly by sharpening definitions and expanding coverage.

While the DFS has invited public comments on the proposals, stakeholders argue that meaningful reform will require a second layer of changes focused on operational efficiency, enforcement, and technology. Until then, they say, the amendments may improve clarity on paper but are unlikely to translate into faster or more effective grievance resolution for policyholders.

Insurers and intermediaries are currently in discussions with the Insurance Regulatory and Development Authority of India (IRDAI) on issues such as staffing, infrastructure expansion, and disposal timelines under the proposed changes.

At the heart of the draft that was recently released is an effort to clearly define who falls within the ombudsman’s jurisdiction. The proposals explicitly include insurance brokers alongside agents and other intermediaries, a move that practitioners say addresses a grey area that had often resulted in complaints being rejected on technical grounds.

“Earlier, there was confusion on whether complaints arising out of broker-led policies could be entertained by the ombudsman. This clarification is welcome because it closes a loophole that insurers and intermediaries could rely on,” said a senior insurance executive.

The draft also attempts to bring uniformity in interpretation by refining definitions related to admissibility of complaints and the scope of the ombudsman’s authority. According to industry executives, these changes could reduce jurisdictional disputes and ensure more grievances are at least admitted for consideration.

Despite these positives, practitioners point out that the amendments stop short of addressing one of the most persistent problems in the system, delays in grievance disposal. The draft does not propose any changes to existing time-bound disposal norms, nor does it introduce penalties or enforcement mechanisms for breaches.

“With complaint volumes rising every year, timelines are already stretched. Simply expanding coverage without revisiting disposal norms risks worsening delays,” said an executive at a large general insurance company.

Policyholders, according to executives, frequently complain that cases take months, and sometimes over a year, to be resolved. "Without tighter timelines or accountability measures, wider jurisdiction may not translate into quicker relief for consumers," they argue.

Another area of concern seems to be the absence of any revision to compensation caps or award limits. The draft amendments do not clarify whether the monetary limits applicable to ombudsman awards will be revisited in light of inflation, higher policy values, and more complex products.

“Many high-value disputes still fall outside the practical reach of the ombudsman due to existing caps. The draft misses an opportunity to modernise these thresholds,” said sources.

Executives note that this could limit the usefulness of the ombudsman mechanism for policyholders with larger life, health, or commercial insurance covers, pushing them instead towards courts or arbitration.

The amendments are also silent on technological upgrades to the grievance redressal process. There is no provision for mandatory online filing, real-time case tracking, or public dashboards showing disposal rates and timelines.

“In an era where most insurers have digitised customer interfaces, the ombudsman framework remains largely manual and opaque,” said an executive at an insurance brokerage firm.

Industry participants also argue that digital tools could significantly improve transparency, reduce administrative delays, and allow regulators to monitor performance more effectively.

Perhaps the most significant concern, according to the industry, is the lack of any roadmap to expand ombudsman capacity. With brokers explicitly included and admissibility rules clarified, complaint volumes are expected to rise. However, the draft does not mention additional benches, staffing, or infrastructure upgrades.

“Without parallel investment in capacity, the system risks being overwhelmed,” an executive said.