NEW DELHI: Claims disputes are a familiar part of the insurance industry. Policyholders routinely approach the insurance ombudsman seeking relief after insurers reject claims they believe are genuine. But navigating the process is rarely easy. Complainants must fill lengthy forms, compile extensive documentation and wait for hearings where they are expected to argue their case against large insurance companies with far greater legal and technical expertise.
The imbalance becomes sharper because many policyholders struggle to interpret insurance policy terms in the first place. Many are unaware the ombudsman mechanism even exists, let alone equipped to argue complex disputes in a legally sound manner.
Yet under the current framework, policyholders are generally required to represent themselves before the ombudsman. Family members may assist in some cases, but professional representatives such as lawyers, insurance agents and brokers are typically barred.
That imbalance is now under judicial scrutiny.
The Karnataka High Court, in Sri M.V. Narasimha Prasad vs Office of the Insurance Ombudsman (Karnataka), recently held that denying legal representation during the adjudicatory stage of Ombudsman proceedings violates principles of natural justice.
The court observed that once proceedings move beyond mediation and enter the adjudicatory stage under the Insurance Ombudsman Rules, 2017, a complainant cannot be denied the right to engage an advocate. The case involved a policyholder challenging the insurance ombudsman’s refusal to permit legal representation in a dispute over rejection of a medical insurance claim.
Rethinking the model
Consumer policy expert Bejon Misra, who was a member of the Insurance Ombudsman Advisory Committee, said the judgment exposes a longstanding imbalance between policyholders and insurers, though implementing it across the system may not be straightforward.
“The court has given a direction, but it is now for policymakers to amend the framework appropriately. Policyholders can certainly rely on this judgment as a precedent. However, allowing or disallowing lawyers may still remain at the discretion of the respective ombudsmans, and there are practical reasons why ombudsman offices have traditionally avoided permitting lawyers,” Misra said.
He noted that the ombudsman mechanism was originally designed to provide faster and cheaper grievance redressal than conventional courts.
“While the judgment correctly highlights the uneven playing field between policyholders and insurers, it also misses one important aspect. The legal justice delivery system is expensive and time-consuming. The ombudsman framework was introduced to ensure speedy and affordable resolution of insurance disputes,” he added.
The trade-off
India currently has 18 insurance ombudsman offices, which experts say are already dealing with heavy caseloads.
Avigyan Mitra, founder of Zenoa, a health insurance advisory firm, said rising awareness around grievance redressal could itself increase pressure on the system and require more Ombudsman offices.
On the question of legal representation, he said, “The institution of ombudsman is based on mediation and conciliation. The moment advocates formally enter the forum, they may bring the culture of traditional civil litigation with them, which could eventually dilute the very purpose of the arrangement.”
Misra believes the answer may lie somewhere in between.
“Ombudsman offices should create a support cell that provides free technical and legal assistance to policyholders. There is clearly no level playing field between insurers and consumers. Even if insurers do not formally engage lawyers in hearings, they still have access to teams of legal experts and technical professionals. Policyholders remain disadvantaged,” he said.
He suggested that the regulator should consider creating a neutral assistance body to help policyholders draft technically sound petitions and prepare effective counterarguments against insurance companies.
Mitra said that as awareness around insurance grievance redressal and the ombudsman mechanism grows, more claims-focused intermediaries and advisory services are likely to emerge, helping policyholders with technical support while still requiring them to remain the primary face during hearings.
