If you look at the insurance regulator’s website, you will notice that already this year the regulator has issued ten ‘warning’ letters to four non life insurers. Barring one, all of them refer to violations of the IRDA Protection of Policyholders’ Interests Regulations, 2002 (PPHI). Or to be more specific, they deal with issues such as failure to inform the policyholder about claim procedures, failure to attach policy terms and conditions along with the policy, delay in claim settlement, delay in grievance redress and failure to update the data on complaint resolution. Taking serious note of these, the regulator has warned the insurers that they should abide by the PPHI Regulations strictly.
The PPHI Regulations not only underscore the consumer’s right to complete information pertaining to the policy, but also specify time limits for claim settlement and impose a penalty (2 % above the prevalent bank rate) for delayed settlements. It mandates that every insurer should have in place a well documented and effective grievance redress mechanism and also stipulates a specific turnaround time for all services. For example, within three days of receipt of a complaint, the insurer has to acknowledge it and give a reference number. Within 15 days, the insurer has to resolve the complaint. You can get details of the turnaround time on the IRDA’s website for policy holders: policyholder.gov.in
Through its Integrated Grievance Management System, IRDA keeps track of insurers’ performance vis-à-vis consumer complaints and takes suitable regulatory action wherever necessary. On its policyholder education website, the regulator has put out data on the total number of consumer complaints received against each insurance company and the number of complaints resolved and pending. (You will get this information if you follow the icon-consumer complaints on the website) I will suggest that consumers take a hard look at this crucial data - it is a good indicator of the performance of various insurers and helps you make an informed decision when you are buying a policy.
In fact the regulator should also tell us how many insurers actually stick to the timelines prescribed under the PPHI, particularly in respect of claim settlement and resolution of consumer complaints. We also need to know how many insurers voluntarily pay the penalty for delays.
Talking of complaints, in the life insurance sector, the largest percentage of complaints - 32%- pertain to unfair business practices.
Sharat Trehan: In September 2002, I bought an insurance policy for a ten-year term that required payment of just one premium of Rs. 2 lakh. In accordance with the terms, the benefit payable on survival of the life insured was Rs. 4,30,500.
However, just a few months after purchase, the insurer brought down this amount to Rs. 399,500. After my protests in writing, the earlier amount was restored but in September 2012, when the policy matured, the company went back on the terms of the contract and paid me only Rs. 3,99,500. I have written several letters to them to remit the balance amount of Rs. 31,000, but without any success. Will it be worthwhile to take a legal recourse? Between the Insurance Ombudsman and the consumer court, which will you suggest?
I will suggest you file a complaint before the Insurance Ombudsman, for the simple reason that the process of resolution of dispute is much quicker and simpler than the consumer court. From what I have seen, insurers usually tend to prolong the process of adjudication before the consumer courts by filing appeals unnecessarily. So try the Ombudsman first. Also here the insurer has to comply with the award of the Ombudsman within 15 days of the receipt of the acceptance letter from the consumer and intimate the compliance to the Ombudsman.