Insurance is full of risks, but excluding the risks undertaken by the insured and the insurer, certain technicalities shall be covered in this due process by the insurance regulatory development authority of India (IRDAI). These technicalities include various problems or grievances faced by the insurer which shall be fixed. For this purpose, the authority of the Insurance ombudsman has been set up by IRDAI. Ombudsman works as a mediator between the insured and the insurer. Generally, an ombudsman is an official appointed by the government of India to investigate cases that are filed by individuals against some private or government financial institutions or public departments.

Ombudsman is responsible to look into the complaints or grievances filed by the individuals and either recommend solutions or resolve them through mediation as already mentioned. The authority of the ombudsman was created on 11th November 1998 by the government of India to build trust among the insured persons by helping them. This institution has generated faith among the policyholders and ensures that any grievances are subject to redressal. Some of the earlier rules for the institution of the ombudsman are discussed below.

INSURANCE OMBUDSMAN RULES, 2017

There were some modifications and add ons in the rules of 2017 regarding the institution of Ombudsman. These specify the regulations and the rules based on which IRDAI shall regulate the institution of the ombudsman.

1. Executive council of insurers

   There shall be 9 members in the executive council of insurers including the chairperson. It shall consist of 2 life insurers nominated by the LIC, 2 general insurers nominated by GIC, one stand-alone health insurer nominated by GIC, one representative of IRDAI, one a representative of central government working in the finance ministry and shall not be of a rank lower than that of the director and the chairman of LIC established under the insurance corporation act of 1956 or chairman of general insurers (public sector) association of India established under general insurance business (Nationalisation) Act, 1972 provided that they shall not be working as the chairperson of the executive council. Also, the chairperson of the executive council shall be either the chairman of LIC or the chairman of GIPSA by rotation[1]. The term of all the members including the Chairperson of the executive council of insurers shall be 3 years. Nominations to the executive council will also be revised after every 3 years or in case of a vacancy whichever would be earlier. The nominated members shall not be eligible for re-nomination except for the representative of IRDAI, representative of the central government, and chairman of LIC or GIPSA shall not be the chairperson of the executive council.
    

2. Functions of the executive council

   Rule 6 of the rules describes the functions of the executive council of insurers, the sub-rule 1 mentions that the executive council is responsible to issue guidelines related to the procedure of day to day administration, secretariat administrative infrastructure as well as staffing and other related aspects of the insurance ombudsman system. The sub-rule 2 of section 6 describes the procedure of appointing additional charge to an ombudsman of some other jurisdictional territory in case a vacancy arises due to resignation, retirement, or death of the ombudsman. The sub-rule 3 of section 6 directs the executive council to form committees and to get external expertise to issue guidelines mentioned in sub-rule 1 when necessary.
    

3. Office of the insurance ombudsman

   Section 7 of the insurance ombudsman rules, 2017 describes the appointment as well as the management of the office of the insurance ombudsman who shall be selected by the selection committee and shall be eligible if the person has experience of insurance industry, civil or administrative services, or judicial services. According to the sub-rule 3 of this section the selection committee shall comprise of the chairperson of IRDAI who shall be the chairman of the executive council, one representative both from LIC and GIC who is a member of the executive council, a representative of the government of India not below the rank of joint secretary and shall be a member of the executive council and part of the department of finance under Ministry of finance as mentioned in section 5. Sub rule 4 of section 7 describes that a panel shall be prepared by the executive council by inviting applications of eligible candidates and candidates shall be selected based on the eligibility criteria that shall be decided by the executive council and be approved by the finance ministry in the government of India.
    

4. Term of office of an ombudsman

   According to the rules of 2017, an ombudsman shall be appointed for 3 years as it was earlier but the reform brought in the 2017 rules are that, an ombudsman shall be eligible for re-appointment which was earlier not allowed, not only this but the age of retirement which was 65 years previously was changed to 70 years, which means that an ombudsman shall complete 3 years or shall pass the age of retirement, whichever is first.
    

5. Removal from office

   The removal of the insurance ombudsman has been laid in section 9 of the insurance ombudsman rules. This section describes the procedure which shall be followed to remove an ombudsman based on gross misconduct shown by him. According to the sub-rules of this section, the executive council shall hear the ombudsman and shall initiate an inquiry against the insurance ombudsman by appointing an individual to look into the misconduct shown by the ombudsman who shall forward the report after an inquiry to the executive council. After the inquiry the report shall be sent to the ombudsman by the executive council or the nominated person to comment on it within a specified time. After the receipt of the comments or expiry of the period the report shall be sent to IRDAI by the chairperson of the executive council, after which IRDAI shall take a decision and then send it back to the executive council to take further actions based on the decision taken by IRDAI. IRDAI may whenever it finds it necessary, initiates a suo moto inquiry against the insurance ombudsman through the executive council of insurers by the procedure described.
    

6. Remuneration of the Insurance ombudsman

   Section 10 of the rules describe the salary of an ombudsman which shall be 2 lakh 25 thousand and any pension which the ombudsman is entitled from central or state government shall be deducted from his salary. The sub-rule 2 of this section describes that the salary of an ombudsman shall be revised by the central government and any other payable allowances shall be decided by the executive council with prior approval of the central government.
    

7. Territorial jurisdiction

   The rules regarding territorial jurisdiction were not modified much. These rules describe that the executive council is responsible to describe the territorial jurisdiction of each ombudsman across the country from time to time. The ombudsman shall resolve disputes within his territory by holding sittings in places in his territory.
    

8. Offices of the executive council and the Insurance ombudsman

   This section describes the management of the executive council as well as the management of the office of the insurance ombudsman. The sub-rule 1 of this section directs the executive council to provide secretarial staff to the insurance ombudsman, whereas the sub-rule 2 of this section mentions the expenses that shall be handled by various institutions. According to it the salary, allowances and other expenses of the staff of ombudsman and the other expenses that include expenses that are borne by the executive council as mentioned already, fees of the professional experts as mentioned in the sub-rule of 3 of the section of 15 and other expences such as advisory committee which is mentioned in section 19 which shall be discussed further in this article shall be borne by the LIC and GIC. The sub-rule 3 of this section describes the allocation of funds to the offices of insurance ombudsman annually by the executive council of India through LIC and GIC. The whole procedure of allocation of funds is that the insurance ombudsman shall submit the annual budget requirements for his office every year by 31st January to the executive insurance council which shall further send it to the LIC and the GIC and ask it to allocate the funds including funds for the expenses that of the executive council of insurers which shall further allocate the funds to the insurance ombudsman and his staff. The decision was taken by the executive council shall be final.
    

9. Duties and functions of an Insurance ombudsman

   This rule describes various functions of an insurance ombudsman. The primary function of the insurance ombudsman is to settle disputes which are described in sub-rule 1 of this rule. Clause 1(a) mentions the condition where a dispute is not settled in a stipulated time mentioned in IRDA act, 1999, the ombudsman shall take the hold of such dispute to resolve it. Similarly, clause 1(b) describes a case where any partial or total repudiation of claims is committed by life insurers or general insurers. Some other conditions that are mentioned are- disputes over premium paid misrepresentation of terms and conditions of the policy, legal construction of the policy in context to the claims of the policyholder, policy servicing disputes against the insurers or their agents, issuance of the life insurance, general insurance including health insurance not conforming the proposal signed by the proposer, non-insurance of insurance policy after a premium is paid and any other violation of provisions of Insurance act of 1938 or the violation of guidelines of IRDAI. There shall be written consent of the parties involved in a dispute for an ombudsman to resolve it. Also if the ombudsman is a party in the contract or has a conflict of interest in the dispute, then he/she shall be secluded from resolving that dispute. Also, the central government or the IRDAI shall time to time refer a dispute to the ombudsman and he/she shall entertain it in a manner explained in rule 14.
    

10. Manner in which complaints shall be filed

    This rule explains that how can the complainant file a complaint to the insurance ombudsman. The sub-rule 1 mentions that any person who has a complaint against the insurer has been acknowledged as the complainant. The complainant shall complain about the grievance that he or she has faced to the insurance ombudsman himself/herself or by his or her legal heir, nominee, or assignee who shall file the complaint to the insurance ombudsman within whose jurisdiction the office of the insurer complained, against the residential address of the complainant. Whereas the sub-rule 2 explains the procedure and required details that should be present in the complaint such as name and residential address of the complainant along with the location where the insurer�s office shall be located with the details of the complaint along with the facts, documents, nature, and extent of the loss incurred with the relief that the complainant wants to seek from the ombudsman. Clause (a) of sub-rule 3 describes that the complaint shall only be acceptable if a written representation has been made to the insurer and the insurer rejected it or the insurer did not reply to it within a specific period of 1 month after receiving the complaint or the complainant is not satisfied with the reply of the insurer, whereas clause (b) describes that the time period within which a complaint shall be filed is 1 year from the date when the order of the insurer rejecting the complaint is received or when the complainant receives the receipt of the insurer�s decision which is not satisfactory to the complainant or when the period of 1 month expires from the date when the insurer received the complaint. Sub-rule 4 describes the condonation of delay where the ombudsman shall be empowered to condone a delay where he may find it necessary after receiving the objections from the insurers and recording the reasons for the condonation, also states that the date of condonation of the delay if it takes place shall be the date of filing of the complaint. Sub-rule 5 of this section explains that no complaint shall be accepted on a subject matter which is already pending in any court, consumer forum, or front of an arbitrator.
     

11. The ombudsman must act fairly

    Rule 15 of the Insurance ombudsman rules, 2017 directs the ombudsman to work legally. The sub-rule 1 of this rule explains that the ombudsman shall allow the complainant to file the complaint under a different procedure than the one mentioned in the rule 14[2] after notifying the parties involved in the dispute. The ombudsman shall also ask for certain necessary documents from the parties in support of their respective contentions and may also ask for the factual information of the dispute from the insurer and may make the respective information available to the parties concerned[3]. The ombudsman may also take the opinion of the professional experts when needed[4]. The ombudsman shall dispose of the complaint after giving the parties, reasonable opportunity of being heard[5].
     

12. Recommendations made by an Insurance ombudsman

    This rule establishes a procedure that describes the resolution of the contentions through mediation. In other words, it directs the ombudsman to send his recommendation in cases of mediation upon the receipt of the mutual written consent from the parties involved in the dispute. A copy of the recommendation shall be sent to the complainant.
    Sub-rule 2 of rule 16 also mentions that upon the receipt of the recommendations from the ombudsman, the complainant shall send his acceptance of the recommendation to the ombudsman within 15 days clearly stating that he or she accepts the settlement which shall be final. Similarly, the sub-rule 3 states that the ombudsman shall then send the copy of the recommendations to the insurer along with the acceptance of the complainant and then the insurer shall comply with the terms and conditions within 15 days of receiving the recommendations and the acceptance of the complainant by communicating his acceptance to the ombudsman.
     

13. Award

    This rule describes the procedure that shall be followed in case the dispute is not resolved through mediation. When the disputes are not resolved through mediation then the ombudsman shall pass an award based on the available evidence and other documents[6]. The award shall be in writing along with the reasons stated. The sub-rule 3 mentions that in case the award is in favor of the complainant then the ombudsman shall provide compensation to the complainant stating the amount of the compensation provided after deducting the amount already paid if any. There are two major conditions specified in the sub-rule 3 regarding the award that shall be provided to the complainant in cases where the decision goes in his/her favor, these two conditions are:
    
    1. The Ombudsman shall not award any compensation in excess of what the losses complainant has suffered directly from the cause of action.
    2. The award shall not exceed the limit of Rs 30 lakhs including relevant expenses if any The ombudsman shall pass an award within 3 months of receiving the receipt of necessary documents and requirements from the complainant after finalizing the findings related to the award. Further, the ombudsman shall send a copy of the award to the insurer and the complainant and the insurer shall send his/her compliance to the award within 30 days of receiving the copy of the award. The sub-rule 5 describes that the award that shall be awarded to the complainant shall follow the rate of interest as mentioned in the IRDAI act, 1999, from the date of the settlement to the date of payment of the amount awarded by the insurance ombudsman to the complainant. Further, the award shall be binding on the insurers.
        

14. Review of activities of the insurance ombudsman

    This rule directs the ombudsman to prepare a document including all the work handled by the ombudsman in the previous financial year under his jurisdiction along with all the accounts handled by him during that year and submit it to the executive council of insurers and a copy to the IRDAI by 30th June every year, after which the executive council shall on the receipt of the reports prepare a report containing a general review of work done by all the insurance ombudsman in that particular financial year and shall send it to the central government and IRDAI by 30th September every year. These reports shall be reviewed by the IRDAI and necessary steps shall be taken.
     

15. Advisory Committee

    This rule provides a mechanism through which an ombudsman�s actions shall be reviewed. Accordingly, it mentions that an advisory committee shall be made exceeding not more than 5 members including one government nominee by IRDAI to review the actions of the ombudsman from time to time. It also mentions in sub-rule 2 that the time, date and quorum of the meeting is decided by IRDAI, whereas the sub-rule 3 directs the advisory committee to submit the report of its meeting to IRDAI for it to take further necessary actions.
     

16. Recommendations to the Central government

    This rule describes that the executive council along with the IRDAI may recommend the central government to bring out necessary reforms or to take actions to improve the functioning of the Insurance Ombudsman.
     

Conclusion:
The earlier rules were slightly different as there was an absence of certain important reforms and institutions to effectively make the institution of the Insurance ombudsman function. Thus, there were certain modification and addition needed to the older rules to bring effective reforms to the management of this institution making the insurance ombudsman rules of 2017 important.

End-Notes:

1. Rule 5, sub-rule 3, Insurance ombudsman rules, 2017
2. Rule 14, Sub-rule 1&2, Insurance ombudsman rules, 2017
3. Rule 15, Sub-rule 2, Insurance ombudsman rules, 2017
4. Rule 15, Sub-rule 3, Insurance ombudsman rules, 2017
5. Rule 15, Sub-rule 4, Insurance ombudsman rules, 2017
6. Rule 16, Sub-rule 1, Insurance ombudsman rules, 2017

Written By Brahm Sareen, BA.LLB�- University school of law and legal studies, Guru Gobind Singh Indraprasth University