Coming soon: Your insurance complaints may get resolved from inside the company; how will it help

In a significant move aimed at improving grievance resolution in the insurance sector, the Insurance Regulatory and Development Authority of India (IRDAI) has released a draft proposal for the introduction of an Internal Insurance Ombudsman within insurance companies. If implemented, this system could serve as an additional layer of dispute resolution, operating from within the insurer itself.

Currently, policyholders who are dissatisfied with an insurer’s response must go through multiple channels — first approaching the insurer’s Grievance Redressal Officer (GRO), then escalating to IRDAI via the Bima Bharosa portal, or finally appealing to the External Insurance Ombudsman, a quasi-judicial authority that handles insurance disputes.

The new draft framework proposes an in-house alternative: insurers that have been operational for three or more years may soon be mandated to appoint an Internal Insurance Ombudsman, offering policyholders a faster and potentially more efficient method to resolve disputes — especially those left unanswered for more than 30 days or claims that are denied or partially settled.

“The introduction of an Internal Ombudsman is a welcome move,” said Beshak.org Insurance, an independent insurance advisory platform. “It fills the current gap between internal grievance teams and the external ombudsman, which often leads to long wait times and unresolved issues. If implemented well, it could build greater trust and transparency within the insurance ecosystem.”

According to the draft, the internal ombudsman will have the authority to pass decisions on complaints involving claims up to ₹50 lakh. These decisions will be binding on the insurer — a move that reinforces accountability. Importantly, policyholders retain the right to approach the External Ombudsman within 30 days if they are dissatisfied with the internal ruling.

To ensure neutrality, the appointed internal ombudsman must be a seasoned professional with at least 20 years of experience in the insurance industry, have held a senior management position, and must not have any active association with the insurer or its group entities. Functionally, they will report to the company’s board of directors and administratively to the managing director or CEO.

Insurers will also be permitted to appoint more than one internal ombudsman depending on the volume of complaints or their branch footprint, with clearly defined jurisdictions to avoid conflict and delays.

Beshak.org added, “The structure seems thoughtfully designed to maintain independence, which is crucial for consumer confidence. However, much will depend on the actual implementation, transparency in decision-making, and how well companies separate this function from routine claims departments.”

The IRDAI has invited public comments on the draft until 5:00 PM on August 17, 2025. If finalised, the proposal could help unclog the current grievance redressal system by reducing pressure on external ombudsman offices and streamlining resolution timelines.

Overall, the move is seen as a step towards improving customer satisfaction in the insurance sector, where complaints around delay, denial, or inadequate claim settlements have been persistent issues.