Home
Legal Advice
Insurance
How does the law regulate the practices of insurance companies in relation to policyholder complaints?

How does the law regulate the practices of insurance companies in relation to policyholder complaints?

27-Nov-2024

Insurance

Answer By law4u team

In India, the law regulates the practices of insurance companies concerning policyholder complaints primarily through the Insurance Regulatory and Development Authority of India (IRDAI) and other statutory provisions. The key regulations and mechanisms for handling policyholder complaints are as follows: Insurance Regulatory and Development Authority of India (IRDAI): IRDAI is the primary body responsible for overseeing and regulating the insurance industry. It has issued various guidelines to protect the interests of policyholders, including those related to grievance redressal. Grievance Redressal Mechanism: Every insurance company is required to establish an in-house grievance redressal system to address complaints from policyholders. Insurance companies must appoint a Grievance Redressal Officer at every branch and also at the head office level to handle complaints. Companies must acknowledge the complaint within 3 days and resolve it within 15 days, as per the IRDAI (Protection of Policyholders' Interests) Regulations, 2017. Integrated Grievance Management System (IGMS): Policyholders can register complaints through IRDAI's IGMS, an online platform that monitors the complaint process. Complaints lodged through IGMS are automatically forwarded to the insurer for resolution, and IRDAI tracks the resolution progress. Ombudsman Scheme: If the policyholder is unsatisfied with the resolution provided by the insurer, they can approach the Insurance Ombudsman. This is a quasi-judicial body established to resolve complaints related to: Disputes about claims settlement. Disputes over policy terms and conditions. Delays in claim payments or services. The ombudsman aims to provide quick and cost-effective resolutions. Decisions of the ombudsman are binding on the insurance company, though the policyholder can appeal the decision in court if not satisfied. Consumer Protection Act, 2019: Policyholders also have the option to file complaints under the Consumer Protection Act, 2019 in consumer courts if they feel that the insurance company has engaged in unfair trade practices, provided deficient services, or denied legitimate claims. Consumer courts offer a legal avenue for policyholders to seek compensation or redress for grievances. Penalties and Actions by IRDAI: IRDAI has the authority to impose penalties on insurance companies if they fail to comply with regulations related to policyholder protection. Companies may face financial penalties, and IRDAI can also issue directions to insurers to improve their grievance redressal processes. These mechanisms ensure that policyholder complaints are addressed in a timely and fair manner, with multiple avenues available for redressal, ranging from internal company processes to ombudsman services and legal recourse.

Answer By Anik

Dear Client The law of India has a standardized structure which is constituted by IRDAI and various other legal provisions to regulate the practices of insurance companies relating to policyholder complaints. 1. Grievance Redressal Mechanism: It is imperative that insurance providers are equipped with a grievance redressal cell. A complaint has to be acknowledged within 3 working days, and the company is to settle it within 15 days. In case settlement becomes impossible, then the final response should be provided by the insurer within 2 weeks of receipt. 2. Insurance Ombudsman • Alternative Dispute Resolution: If the policyholder is not satisfied with the response by the insurer or it is taking too long to be resolved, then it goes to the Insurance Ombudsman. It is an independent body providing a free and efficient mechanism to settle complaints over denied or delayed claims or other issues. • Scope of Complaints: Issues such as delay in claim settlement, partial or full rejection of claims, mispresentation regarding the terms of a policy and other infractions under the Insurance Act or the rules of IRDAI can be dealt by an Ombudsman. 3. IRDAI Oversight: The IRDAI is responsible for monitoring whether insurance companies meet grievance redressal standards and penalising them where applicable. IRDAI also has grievance cells or cells to reach out to the insurer from policyholders. 4. Consumer Protection Act: Policyholders can also lodge complaints under the Consumer Protection Act, 2019, which considers services of insurance as consumer services. This allows policyholders to seek redressal at consumer forums for grievances regarding unfair trade practices, including delay in claim settlements. 5. Legal Recourse: If all other avenues fail, policyholders can file a civil suit against the insurance company for recovery of claims or damages due to unfair practices. Conclusion In essence, the law offers layers of protection to the policyholder through internal complaint mechanisms, the Insurance Ombudsman, oversight by IRDAI, and consumer protection laws. This framework will ensure that insurance companies are held accountable for their practices and that policyholders have accessible avenues for redressal of their complaints. Hope this answer helps you.

Answer By Ayantika Mondal

Dear Client, The law ensures that the activities of insurance firms concerning complaints by their policyholders are transparent, responsible, and fair. 1. Legal Framework: In India, the main governing regulations of the insurance companies are the IRDAI under the Insurance Act, 1938, and the IRDAI Act, 1999. The IRDAI issues guidelines, circulars, and regulations that mandate the insurer to handle the complaints promptly and efficiently. 2. Grievance Redressal Mechanisms Internal Grievance Mechanism • Grievance Redressal Officer (GRO): Every insurance company shall have an officer who would resolve the grievances. The complainant can directly approach the customer care of the insurer or the GRO. • Timelines: Insurance companies have to reply to grievances within 3 working days and resolve it within 15 days as per IRDAI. In case, grievance is not satisfied with the settlement, policyholder may raise this complaint also further. Escalation to IRDAI Grievance Cell (IGMS): If the insurance company is still unable to resolve the issue, the policyholder can lodge a complaint on the IGMS portal of IRDAI, and the authority will overlook these complaints, ensuring that things are in place and where necessary, act upon it. 3. Consumer Protection Laws: • Consumer Protection Act, 2019- Complaints can be filed in case of deficiency in service like undue delay, wrongful denial of claims or misrepresentation or misleading practice by the insurer. • Consumer forums at the district, state, or national levels: This is where consumers can approach for redressal. 4. Role of the Insurance Ombudsman Insurance Ombudsman Scheme, 2017: The policyholders would obtain quick and cost-free redressal of grievances from the Insurance Ombudsman's hand. This scheme is applicable for disputes involving: Claims up to ₹30 lakhs, Delays in settlement and any violation of IRDAI regulations or policy terms. Decisions by the Ombudsman are binding on the insurer but not on the policyholder, who retains the right to pursue other legal remedies. 5. IRDAI Monitoring and Penalties • Inspections and Audits: IRDAI frequently scrutinizes insurers to ensure they adhere to complaint-handling norms. • Penalties: A failure to have a grievance redressal mechanism would attract penalties, license suspension, or even cancellation 6. Alternative Dispute Resolution (ADR): Many of the disputes are resolved through mediation or arbitration, especially in case of complex claim disputes. 7. Key Legal Provisions • Unfair Trade Practices: The IRDAI Act and the Consumer Protection Act can lead to action against insurers who commit unfair trade practices or make misleading advertisements. • Prompt Settlement of Claims: The Protection of Policyholders' Interests Regulations, 2017 requires that claims be settled within 30 days from the date of receipt of all necessary documents. Conclusion The law provides a solid framework for regulating the practices of insurance companies concerning complaints from policyholders. There are various redressal options available, ranging from internal mechanisms to external regulators and courts. Policyholders are, therefore, enabled to hold insurers accountable and seek justice for deficiencies in service. Hope this answer helps you.