Introduction:
An insurance policy protects a person from suffering financial loss or indemnifies the loss suffered by the person, in the events of financial losses. There a large number of participants in the insurance market moreover the general public or the policyholders find it difficult to understand and interpret the products and services offered by the insurance companies. One of the solid reasons for difficulty in interpretation is the legalistic nature of the services and products which are offered by the insurance companies. Thus, arise a need to regulate the insurance market and also to protect the interests of the consumer. The need for consumer protection arises from the imbalance of power, resources and information between the service providers and consumers, that keeps the service provider at a higher position or keeps the consumer at a disadvantaged position.
Issues Faced by Policyholders
A policyholder is expected to give an honest, complete, relevant and up-to-date information when he/she applies for an insurance, makes a claim or renews a policy. In the event, where there are any discrepancies found the insurer has the right to deny the policy claim.
Common Problems faced by the policyholders:
- Denial of claim or not giving the full claim amount:
The insurer may deny or not give the full claim amount in events were the insured haven’t paid the premiums, the insured hide or lied during the time of taking the insurance, if the loss suffered was intentional or if it wasn’t an accident and finally if the loss or damage is not covered within the policy terms.
- Not disclosing relevant details to the insurer:
All the necessary details which affect once insurance should be disclosed to the insurer.
- The actual worth versus the replacement value:
The sole purpose of insurance is to put the insured back to a position where he/she was before he suffered the loss or the position which he was before the claim was raised. And sometimes an insured can get less than that of the actual worth.
These are just some of the notable problems faced by the policyholders.
Insurance and Consumer Protection
The Consumer Protection Act, 1986 was enacted in the Parliament of India to ensure that the interests of the consumers are protected. Through this act, the consumer councils are established and also other authorities are established to settle disputes and to ensure that the interests of the consumer are protected. The consumer protection council are established at various levels to ensure an increase in awareness, that is at the national, state and district level.
While we interlink consumer protection and the insurance market of India, it can be seen that the disputes that arise can be litigated before a civil court or in a consumer forum. There are three levels of consumer courts the District Consumer Disputes Redressal Commissions, the State Consumer Disputes Redressal Commissions and the National Consumer Disputes Redressal Commission.
The dispute between the insured and the insurer may arise due to various reasons such as rejection of claim raised in part or fully, by the insurer and at the same time the insured will be of the belief that it is covered under the insurance policy. Similar to this there can be various other reasons due to which the insured may file a complaint against the insured. In India, under the Indian Limitation Act of 1963, the cause of action for the purpose of calculating the limitation for filing a suit against the insurer shall commence at the time from which the claim had been denied to the insured or the date of the occurrence causing the loss is. The limitation period which is prescribed for filing a claim for arbitration or in the civil court is three years and for filing a claim in the consumer court is two years.
The first step taken to file a complaint is to approach the GRO of the insurance company and to file a written complaint which is supported by the relevant documents. Further, the GRO is expected to reply within the period of 15 days and if there is no reply the consumer can file a complaint at the Integrated Grievance Management System (IGMS).
The Integrated Grievance Management System (IGMS) is an online consumer registration system which is created by IRDA. The policyholders or the insured can register their complaints online with their insurance company and can the progress of the complaint resolution can be tracked. This is monitored in real-time by The Insurance Regulatory and Development Authority (IRDA). And if the dispute is not yet settled, the insurer can further escalate the matter that is to the IRDA or the Ombudsman.
An ombudsman is an official who is usually appointed by the government, to investigate complaints that are usually lodged by citizens against a business, government departments or financial institutions or other public entities. Ombudsman attempts to resolve the conflicts that are raised or concerned, through the process of mediation or by making recommendations. An award of up to 30 lakhs which is inclusive of all the loss suffered by the complainant can be issued by the ombudsman. The territorial jurisdiction of an ombudsman will be mentioned by the Executive Council of Insurers from time to time.
Consumers should be protected from risks such as:
- Cases where unrealistic benefits are promised, proposed or illustrated.
- The insurer might hide or not disclosing the real cost that might be incurred by the insured.
- Misappropriating the needs of consumers through marketing techniques, for example, canvassing people to buy products which are not actually required by them or not selling products to identified needs.
- Delay in claim settlement or compensation to get or realize financial benefit out of it, these can be said as unfair claim settlement practices.
- One another common problem faced by most of the consumers, the problem of misleading advertisements.
Recommendations
There can be a large number of changes, alterations or additions made to the existing consumer protection laws related to the insurance sector. They are:
- A self-regulatory and voluntary consumer protection organization, there should be rules that encourage the same.
- There should be a clearer law or specific laws related to the insurance sector and to protect the interests of the consumer. These laws should be of supervisory and contractual nature.
- Similar to contract law (The Contract Act) there should be new and separate law specific to insurance contracts. Or else there should at least be a separate or specific section under the general law or contracts law that govern the insurance contracts.
Jurisdiction of Consumer Forum
- The Central Government has established the National Consumer Disputes Redressal Commission and it works as a national level court and has jurisdiction over cases where the value of the case is more than Rupees One Crore.
- The State Government established the State Consumer Disputes Redressal Commission and has jurisdiction over cases where the value of the case is less than Rupees One Crore and above Rupees Twenty Lakh.
- The District Consumer Disputes Redressal Forum was established in each district of a state by the State Government. It has jurisdiction over cases where the value of the case is above Rupees Twenty Lakh. The State Government can establish more than one District Forum in a district.
Reliefs Available to the Complaint
If the complaint is proved the Forum shall provide different orders such as:
- To remove the defect that has been pointed out
- To replace the goods with a new one with a similar description
- To return the price of the good or product
- To pay the charges paid by the complainant
- To pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to negligence of the opposite party or to remove the defect in goods or deficiency in the services in question
- To issue a corrective advertisement to neutralize the effect of misleading advertisements
- To stop the production of hazardous goods, to withdraw the sale of it and to discontinue unfair trade practices
Present rules and regulations
The Insurance Regulatory and Development Authority (IRDA) is the authority which governs the insurance industry in India. The Insurance Regulatory and Development Authority (IRDA) has been vested with many powers under the IRDAI Act,1999 for regulating the distributors of the insurance policy. While ensuring the growth of insurance industries, the Insurance Regulatory and Development Authority (IRDA) at the same time ensures the interests of the policyholders. IRDA has taken huge steps to ensure that awareness is increased amongst all the people regarding the benefits of insurance. And for the same purpose, there is even a separate website of the Insurance Regulatory and Development Authority (IRDA) for educating and to spread awareness about insurance.
The Insurance Regulatory and Development Authority (IRDA) has formulated schemes in order to address the grievances of the consumers, some of them are integrate grievance managements system and insurance ombudsman scheme.
Some of the acts and regulations governing this sector are as follows:
Acts-
- The Insurance Act, 1938
- The Insurance Regulatory and Development Authority (IRDA) Act, 1999
Regulations-
- The Insurance Regulatory and Development Authority (Protection of policy holders interests) regulation 2017
Schemes-
- The Insurance Ombudsman Scheme 2017
Further to this, an insured can also file a complaint under the consumer protection act 1986.
Conclusion
The idea of insurance developed and evolved from the simple idea of spreading the risk in order to mitigate the loss suffered by an individual party. This lays as a foundation for the modern-day insurance, which has become interwoven into all aspects of our lives, and due to this most of the people are able to ‘pool the risk’. The evolution of insurance has taken place at a dynamic rate and it has even reached an extent where people can buy insurance online. And thus, arise the need to regulate the insurance sector and in turn to protect the interests of the consumers. There have been various legislations and efforts made to ensure the interests of the consumers.
The Insurance Regulatory and Development Authority (IRDA) has been vested with many powers under the IRDAI Act,199 for regulating the distributors of the insurance policy. While ensuring the growth of insurance industries, the Insurance Regulatory and Development Authority (IRDA) at the same time ensures the interests of the policyholders. IRDA has taken huge steps to ensure that awareness is increased amongst all the people regarding the benefits of insurance. And for the same purpose, there is even a separate website of the Insurance Regulatory and Development Authority (IRDA) for educating and to spread awareness about insurance.
References:
- https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo107&flag=1
- https://www.lexology.com/library/detail.aspx?g=ca195bb7-cd38-4597-b226-3d37aa2dd8b3
- http://www.impactinsurance.org/topic/market-development/subtopic/consumer-protection
- https://www.consumerprotection.govt.nz/help-product-service/insurance/
- https://www.irdai.gov.in/MPH/CallCentre.html
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