If you have ever been caught in the loop of back-and-forth emails and long waiting periods after raising a complaint with your insurer, the Insurance Regulatory and Development Authority of India (Irdai) might finally be offering a way out.
In a new move aimed at making grievance redressal faster, more transparent and accountable, the insurance regulator has proposed the appointment of Internal Insurance Ombudsman within insurance companies. These ombudsmen would independently review complaints related to policy claims and services, specifically those involving amounts up to Rs 50 lakh, before they escalate to external legal or quasi-legal forums.
And what would this mean for policyholders?
As per the current rules, if a complaint raised by a policyholder gets rejected, ignored or remains unresolved, they can approach the Insurance Ombudsman or even consumer courts, but the process for this often takes a lot of time.
The new proposal aims to introduce a structure review mechanism within the insurance company itself, which would resolve such cases quickly.
What does the proposal draft stipulate?
If implemented, this would establish a mechanism wherein any claim-related complaint that is either ignored for 30 days or partially/fully rejected by the insurer can be appealed to this internal Ombudsman. The Ombudsman's decision would be binding on the insurer, and the company would be required to act on it within seven days. Failure to do so would result in interest penalties.
For policyholders dealing with health emergencies or families awaiting a term insurance payout, such a change will be significant as it would eliminate months of delays and uncertainty.
How will Irdai ensure 'Internal Ombudsman' service is fair for the claimant?
There is always a scope of conflict of interest if the Ombudsman is regulated by the insurance company itself. However, Irdai has laid out a detailed eligibility criterion that is supposed to keep the system fair and in the best interests of policyholders. Here's how:
The Ombudsman must be at least 55 years old, with over 20 years of insurance experience, and critically must not have worked for the same insurer or its group companies.
Though appointed by the company, the Ombudsman would functionally report to the insurer's board or a special committee focused on policyholder grievances, not just the MD or CEO of the company.
Any variable pay is prohibited, and the working tenure of the Ombudsman is fixed to maintain neutrality.
What would be the responsibilities of the Internal Ombudsman?
The Ombudsman won't just pass judgments; they will be expected to analyse complaint trends across product categories, geographies, intermediaries, and even policy features.
These insights would then feed into internal reviews and possibly trigger changes in the company's product or service design.
In that sense, the Ombudsman is not just a safety valve for aggrieved customers, but also a mechanism to fix systemic problems at the insurer level.
What if you are still not satisfied with the 'Internal Ombudsman's order?
Though the internal Ombudsman's decision would be binding on the insurer, it does not translate into the final word for the policyholder.
If you disagree or are unsatisfied with the outcome of their order, you can still appeal to the existing Insurance Ombudsman (under the 2017 rules). The insurer will include the internal Ombudsman's decision in the documents submitted to that forum, to ensure there is transparency throughout the escalation process.
Will it really help policyholders?
The proposal if executed per its design will be a much needed reform in the insurance sector that would remove one of the most frustrating bottlenecks of the industry, i.e., claim resolution.
For cases involving up to Rs 50 lakh, policyholders would have a formal and structured forum within the insurer itself that is required to respond, decide, and act, typically within 15 to 30 days.
However, there are valid doubts around how "independent" these appointments will truly be in practice. Will boards resist internal pressures and appoint credible, impartial experts? Will policyholders trust a resolution process funded and housed by the same company they are disputing with?
These questions will only be answered once the guidelines are finalised and implemented. For now, Irdai has invited stakeholder feedback on the draft guidelines until August 17, 2025.
