Will IRDAI's Internal Ombudsman Be a Game Changer or Just a Middleman

The Indian insurance sector is undergoing a major shift—and it’s not just about premiums or products. The IRDAI has proposed a bold move: asking insurers to appoint an Internal Ombudsman (IO) to handle unresolved grievances.
This blog explores what this means, the good it could do, and some serious doubts that demand answers.

What the IRDAI Proposal Says:
- All insurance companies must appoint an Internal Ombudsman (IO) who will independently review all grievances rejected by the insurer.
- The Internal Ombudsman will act after 30 days if the policyholder is not satisfied with the insurer's resolution.
- The IO will provide a second-level review before escalation to external forums like the Insurance Ombudsman or IRDAI.
Why This Matters:

The key objective is to build trust, improve turnaround time in grievance redressal, and reduce regulatory burden and litigation.
The Trust Question: Will the IO Truly Support the Insured?

This is the heart of the concern. The internal ombudsman is still appointed by the insurer. What ensures neutrality?
- Structural Bias Risk: Will the IO, as a company insider, lean in favor of their employer?

- Lack of Transparency: How will policyholders track the IO's decisions or escalate if not satisfied?

- Consumer Awareness: How will policyholders know about this mechanism and access it fairly?

- Checks and Balances Needed: Will there be audits, rotation, or public reporting of IO activity?

Additional Concerns and Unanswered Questions:

• What is the guarantee that the Internal Ombudsman will not be biased in favor of the insurer?

• Will IRDAI mandate qualifications, tenure, or independence criteria for the IO?

• What if the insurer delays or manipulates what cases are sent to the IO?

• Will policyholders be informed in writing before a rejection is finalized?

• Is there a time limit for the IO to give a decision?

• Will IOs be obligated to cite reasons and refer policy terms?

• How will IRDAI monitor the effectiveness of IOs?

• Can policyholders get a second opinion if they’re unhappy with the IO decision?

• What if the same company rejects at both levels (claims and IO)?

• Will there be a separate IO for life, health, and general lines of business?

• What if multiple insurers are involved in a single policy (co-insurance)?

• Can one ombudsman bind other insurers in a joint policy?

• Who will coordinate if different ombudsmen give conflicting decisions?

• What if the lead insurer agrees to pay but others don’t?

• Who will the policyholder approach in such a situation?

• Will co-insurance policies have a lead IO structure?

• Is there a chance of co-insurance in a ₹50 lakh claim? If yes, what happens in that scenario?

Final Thoughts

This reform by IRDAI has promise, but implementation is everything. If these doubts remain unaddressed, the Internal Ombudsman could become just another rubber stamp. But if done right, it could truly be a game-changer in how insurance grievances are handled in India.