Insurance Ombudsman, or Bima Lokpal, offers policyholders a cost-free and time-bound pathway to settle disputes over denied or delayed claims. While awards issued by the Ombudsman are legally binding on insurers and carry a hefty daily fine for non-compliance, experts caution that the system lacks a direct mechanism for enforcement. This critical flaw often forces winning policyholders to continue their fight in consumer courts. Furthermore, a disturbing trend sees some insurers filing criminal complaints against the policyholder—alleging fraud or forgery—even after a ruling in the insured’s favor.
Free Path to Dispute Resolution, with a Cap
Policyholders facing delayed, mishandled, or outright rejected claims from their life or general insurance companies can approach the Ombudsman as a first step. This remedy covers a wide range of issues, including total claim repudiation, disputes over premiums, and misrepresentation of policy terms.
However, the Ombudsman’s jurisdiction is strictly capped: the “quantum of loss payable” in the complaint cannot exceed ₹50 lakh. If a policyholder seeks compensation above this amount, the Bima Lokpal is of little help. Before a complaint can be lodged with the Ombudsman, the policyholder must first formally register a grievance with the insurance company itself and wait one month for a response. If the issue remains unresolved, the policyholder can approach the Ombudsman within one year of the claim’s rejection. The process does not require a lawyer and is free of charge.
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The Process and Timeline for an Award
Once a complaint is initiated, the disposition process typically takes between 60 to 90 days to complete. If the two parties agree to mediation, a recommendation is issued within 30 days. If mediation is unsuccessful or not pursued, the Ombudsman is mandated to issue a final monetary award within three months from receiving all necessary documentation.
Policyholders must be meticulous in their filing, including a copy of their policy, the insurer’s rejection letter, KYC documents, and all relevant medical records or evidence. In the fiscal year 2023–24, the Ombudsman received over 56,000 complaints, indicating its importance as a consumer protection avenue.
The Award’s Weight: Binding in Theory, Broken in Practice
Under the Insurance Ombudsman Rules, 2017, the final awards are binding on the insurer and must be implemented within 30 days. Failure to comply triggers a statutory penalty of ₹5,000 per day until the award is settled.
Despite this legal framework, policyholders face a significant hurdle: there is no forum they can directly approach if the insurer simply refuses to pay. Aditya Chopra, a Managing Partner at The Victorian Legalis, notes that the penalty accrues to the Policyholder Protection Fund and not to the policyholder directly.
Consequently, while the award is legally sound, its “realisable entitlement” relies on the supervisory authority of the IRDAI (the insurance regulator) or, more practically, the policyholder invoking the jurisdiction of the Consumer Commissions. In consumer court, the Ombudsman’s ruling serves as “persuasive evidence and strong equitable support,” transforming a theoretical win into a concrete payment.
Insurer’s Retaliation: Criminal Counter-Complaints
In a stark warning to policyholders, the article highlights that some insurers choose to initiate criminal proceedings against the policyholder, even after losing the case before the Ombudsman. Insurers file complaints under various sections of the Indian Penal Code (IPC), alleging offenses such as cheating (IPC 420), forgery (IPC 468/471), or conspiracy (IPC 120B).
The practice, while raising concerns about abuse of process, is legally permissible. The Supreme Court has held that civil and criminal proceedings may run in parallel if the underlying facts disclose prima facie criminality. This means a policyholder who successfully wins a claim at the Ombudsman still risks facing a police investigation initiated by the same insurer they sued, creating a severe deterrent to seeking justice.
