India’s Front Line Against Insurance Mis-Selling Is Missing
Positions of 16 of the 17 ombudsmen are vacant.
India’s first defence against insurance mis-selling is almost missing when needed the most.
Positions of 16 of the 17 ombudsmen, the first arbiters of disputes, are vacant, according to the Office of the Executive Council of Insurers. Ajesh Kumar, the only serving officer, retires in January.
New appointments have been delayed after the government changed rules. That’s when customers require regulatory help more than ever as household savings shift from gold and real estate to insurance and mutual funds, encouraged by last year’s demonetisation. India’s insurance market is expected to quadruple to $280 billion in five years to 2020, government-backed think tank India Brand Equity Foundation said in a report citing the Reserve Bank of India and Aranca Research.
“Since a lot of growth is expected in the business, especially in health and life insurance, a large volume of cases will come to the ombudsman offices,” said Shashwat Sharma, partner and head of insurance at KPMG India. It’s important that the regulator and the Ministry of Finance work together to build a comprehensive and accountable framework, he said.
It’s not uncommon for some posts to remain vacant. That nearly all are unoccupied at the same time is unprecedented. The new rules notified in April are unclear on the selection criteria for ombudsmen, and the government hasn’t responded to the draft norms the regulator suggested nearly a year ago, an Insurance Regulatory and Development authority official told BloombergQuint requesting anonymity.
An ombudsman, appointed for three years, can award a compensation of up to Rs 30 lakh, according to the new rules. Each dispute has to be decided in three months. It’s an easy and less cumbersome framework as applicants aren’t required to hire lawyers, unlike consumer courts.
Buyers approach the ombudsmen when insurers fail to resolve complaints. “This is one of the fairest and speediest forms of justice available to them,” said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services LLP.
.png?auto=format%2Ccompress)
The number of outstanding complaints stood at 2,330 as of March. Most cases at ombudsmen offices are being resolved through mediation. The ones that require a hearing are piling up, said an executive council official. The last time when a bulk of the positions remained vacant was in 2013-14. The backlog then increased to 9,607, the official said.
“Even back then, the situation was not this bad,” said AK Dasgupta, former insurance ombudsman for the Mumbai Metropolitan Region. “When I joined in 2013-14, I found long queues outside our office. There was a backlog of more than 4,500 cases just in the Mumbai region, some pending since 2009.”
Dasgupta realised that some of the people who had filed complaints had died. “That was unacceptable.” The entire batch of ombudsmen appointed then, worked hard to clear the backlog, he said. When he retired in May 2016, no complaint was older than a year, according to the annual report.
The numbers though reflect only part of the problem. Nearly 60 percent of the complaints in the year to March were categorised “non-entertainable”, the annual report said. Majority of them were regarding mis-selling, health and motor covers.
“The grounds for categorising a case as non-entertainable are, on most occasions, never justified,” Dasgupta said.
Complaints are either sent to the council or are filed on the regulator’s complaints portal. On most occasions, customers are sent letters informing their case can’t be accepted or is resolved without attributing any reason, he said.
BloombergQuint’s emailed queries to the Ministry of Finance remained unanswered. The ministry advertised to fill ombudsmen positions in July.
IRDAI said in an emailed reply that 106 applications have been received for the ombudsmen posts till the last date of August 16, Since all the candidates can’t be interviewed, they need to be shortlisted, it said. Once the Ministry of Finance decides on the “basis for shortlisting”, interviews and selection will go ahead, the regulator said.
It also said that three writ petitions have been filed in high courts of Delhi, Punjab and Haryana, and Odisha challenging the upper age limit of 64 years in the notification seeking applications.
“The process should have begun in 2016 to ensure that all appointments were finalised by 2017,” said Dasgupta.
Also Read: Banks Reap A Windfall In Insurance Arm IPOs
(Updates an earlier version published on October 23 to add comments received from IRDAI on October 24)