HC Pushes Irdai To Tighten Monitoring Of Insurers’ Compliance With Ombudsman Orders

The Bombay High Court has reprimanded Oriental Insurance Company Limited, imposing exemplary costs of Rs 1 lakh for its failure to comply with an Insurance Ombudsman’s order. This recent judgment underscores the critical need for greater accountability among insurers and has promised discussions on the enforcement of consumer rights in India.

The Court, in its statement, issued an order to the Insurance Regulatory and Development Authority of India (Irdai) and the Ministry of Finance to ensure that insurance companies comply with orders issued by the Insurance Ombudsman.

Bharat Dedhia vs Union of India

The case revolves around 68-year-old Bharat Dedhia, who underwent coronary artery disease (CAD) surgery at Breach Candy Hospital. During the procedure, Dedhia incurred medical expenses of Rs 21.87 lakhs. When he filed for a claim, Dedhia faced rejection wherein the insurer cited that the claimed amount was ‘excessive’. “The Insurance Company deals wit public monies and, therefore, could be expected to pay only reasonable and customary charges in terms of the insurance policies,” the insurance representative told the court.

Despite a directive from the Insurance Ombudsman on May 3, 2021, which instructed the insurer to pay Rs 27.13 lakhs as a full and final settlement, Oriental Insurance Company withled the payment raising objections over the claim amount.

After exhausting all other avenues, Dedhia approached the court for relief. The Bombay High Court dismissed the insurer’s arguments and ordered the company to pay the awarded amount with 7 per cent interest from July 2021. The court has further directed the insurer to investigate and hold accountable the officials responsible for the delay.

The division bench of Justices Mahesh Sonak and Jitendra Jain criticised the insurer’s conduct, noting the blatant disregard for the Ombudsman’s award and the undue hardship it caused Dedhia. The court in its final judgment mentioned that Bharat was forced to spend a considerable amount not only on medical expenses but also on legal expenses.

“The insurance company was not even sensitive to Bharat’s medical condition before and after his surgical procedures. The Insurance Company has virtually made Bharat, a senior citizen, run from pillar to post in the evening of his life to deprive him of his legitimate claims under the insurance policies for which he had paid full premia to the Insurance Company,” the court statement read.

Systematic Failures In Spotlight

In its strongly worded judgment, the court has highlighted the broader issue that plagues the insurance sector. The non-compliance with Ombudsman orders not only leads to suffering for policyholders but also burdens the judiciary with avoidable litigation.

“Insurance companies’ disobedience contributes to the harassment of citizens, particularly senior citizens,” the bench noted. The court further pointed out that Irdai’s April 2017 notification which provides for quick and easy settlement of health insurance claims, currently lacks adequate enforcement mechanisms.

“The Irdai must consider additional directives to ensure compliance, including a digital monitoring system to track Ombudsman awards and their execution,” the bench recommended in its judgment.

Key Takeaways From This Judgment

This case has highlighted the challenges faced by policyholders, especially the senior citizenry when it comes to accessing their rightful claims. The judgment pointed to the importance of enforcing regulatory mechanisms to protect policyholders as they navigate the claims process.

One of the key takeaways from this judgment is the matter of ‘accountability’. The court directed Oriental Insurance to conduct an inquiry to identify officials responsible for the delay and recover costs and interest from them.

“Unless officials who commit gross lapses are held personally accountable, the culture of delays and harassment will persist,” the bench stated.

Most importantly, the court has reignited the issue of strict compliance reporting by insurance companies and careful oversight by Irdai on the same. “Policyholders should not have to approach constitutional courts merely to enforce Ombudsman’s awards,” the court observed stressing the need for a better grievance redressal system.