‘In­sur­ers have too much say in pick­ing om­buds­men’

Re­port: Lets Cos Get Away With Vi­o­la­tions

The Times of India (New Delhi edition) - - | POLITICS POLICY -

Of the nine-mem­ber body that su­per­vises and ad­min­is­ters the of­fice of the in­sur­ance om­buds­man, seven are rep­re­sen­ta­tives of in­sur­ance com­pa­nies. This means that the Ex­ec­u­tive Coun­cil of In­sur­ers (ECI) that plays a cru­cial role in the ap­point­ment of om­buds­man is not an “in­de­pen­dent and im­par­tial body” but one “led by the in­sur­ance in­dus­try”, pointed out Na­tional In­sti­tute of Pub­lic Fi­nance and Pol­icy in its re­port on the health in­sur­ance sec­tor. The re­port added that even the of­fice of the om­buds­man is funded by the in­sur­ance in­dus­try.

“In­sur­ance com­pa­nies should have no role in the se­lec­tion and ad­min­is­tra­tion of the in­sur­ance om­buds­man… Be­cause in­sur­ance com­pa­nies are in­ter­ested par­ties in dis­putes with the in­sured. An in­dus­try-led in­sur­ance om­buds­man im­plies that in­sur­ance com­pa­nies act as judges in their own cause,” stated the re­port.

The nine-mem­ber ECI has just two mem­bers from the In­sur­ance Reg­u­la­tory and De­vel­op­ment Au­thor­ity of In­dia (IRDAI) and the Cen­tre. Though the law was re­formed in 2017 to have a sep­a­rate se­lec­tion com­mit­tee for om­buds­man, the ECI de­cides both se­lec­tion cri­te­ria and short­list­ing of el­i­gi­ble can­di­dates for the said com­mit­tee. The re- port noted that in con­trast, the fi­nan­cial om­buds­man in UK, for in­stance, does not in­clude any fi­nan­cial ser­vice provider, in­clud­ing in­sur­ance com­pa­nies, on its board.

Apart from the prob­lem of in­de­pen­dence, there are too few in­sur­ance om­buds­men, just17 for the en­tire coun­try. In March 2018, all of­fices of in­sur­ance om­buds­men lay va­cant, the re­port Fair Play In Health In­sur­ance In In­dia ob­served. Some lay va­cant for two to three years in 2017 re­sult­ing in a large back­log of cases. The om­buds­man post in Mumbai, for in­stance, lay va­cant for two years, be­tween 2016 and 2018. Nine of the 17 posts (Delhi, Ahmed­abad, Bhubanesh­war, Er­naku­lam, Kolkata, Lucknow, Noida, Patna and Pune) are still va­cant.

As per the re­port, IRDAI reg­u­la­tions have no pro­ce­dure to set­tle claims or re­dress con­sumer griev­ances against re­jec­tion of claims. Reg­u­la­tions merely lay down the pe­riod within which a claim should be set­tled and the man­ner of sub­mis­sion of claim doc­u­ments. “By leav­ing the de­tailed pro­ce­dure for set­tle­ment to com­pa­nies, ev­ery in­sur­ance com­pany has de­vel­oped its own proce- dure to re­dress con­sumer griev­ances. Con­se­quently, health in­sur­ance dis­putes are not set­tled in ac­cor­dance with the law but in an ad-hoc man­ner,” noted the re­port.

The re­port cited the case of Viren­der Dhi­man to show in­sur­ance com­pa­nies face no con­se­quences for re­ject­ing valid claims. Dhi­man’s mother was hos­pi­talised af­ter tak­ing a fall. The in­sur­ance com­pany re­jected his claim say­ing his mother did not need hos­pi­tal­i­sa­tion de­spite the in­sur­erap­proved hos­pi­tal hav­ing cer­ti­fied that she did. In the con­sumer court, the in­surer did not even ap­pear to de­fend its re­jec­tion. While the claim amount re­jected was Rs 80,461, the in­surer was fined just Rs 5,000. With no penal­ties for re­ject­ing valid claims, in­sur­ance com­pa­nies seem to vi­o­late reg­u­la­tory re­quire­ments with­out any reper­cus­sions, stated the re­port. “The fact that these vi­o­la­tions are per­sis­tent shows that penal­ties do not act as deter­rence... To act as deter­rence, there is need to en­sure the vi­o­la­tor pays a fine higher than the gain made through the vi­o­la­tion. The penalty should be a mul­ti­ple of the il­le­git­i­mate gain from the vi­o­la­tion,” it said.

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