Report No. 190

Chapter IV

Grievance Redressal Mechanism

Consultation Paper

4.1.1 In the Consultation Paper, one of the grounds for revision was identified as the need to set up an effective grievance redressal machinery to deal with the numerous complaints of policyholders, which had hitherto not been satisfactorily dealt with. It was pointed out that notwithstanding the appointment of an Ombudsman under the Redressal of Public Grievances Rules, 1998 in exercise of powers under section 114 (1) of the Insurance Act, 1938 the existing machinery for addressing the grievances of policyholders had not been found to be satisfactory. The remedy under the Consumer Protection Act, 1986 did also not prove to be effective given the large number of cases pending decision. It was therefore suggested that there should be a composite, effective and independent grievance redressal mechanism modeled on the one set up under the Securities and Exchange Board of India Act, 1992 (SEBI Act).

4.1.2 The proposal of the Law Commission in the Consultation Paper was that:

(a) The present system of having Ombudsman under the 1998 Rules at the major metropolises be replaced by Grievance Redressal Authorities (GRA) constituted by appropriate amendments to the Insurance Act, 1938 itself. These would thus be statutory authorities exercising statutory functions.

(b) The GRA could be multi-member bodies comprising one judicial member and two technical members. A certain degree of transparency should be induced in the process of selection of such members.

(c) The GRAs should be dispersed as geographically widely as possible. For instance, there could be GRAs in each of the major cities in the country. This is necessary given the large number of policyholders at present and the prospect of this growing in the future.

(d) The powers and jurisdiction of the GRAs would include all the powers and functions presently performed by Ombudsman under the 1998 Rules.

(e) In addition to the above, it could be provided that all pending disputes arising under the Insurance Act, 1938 before the consumer fora would be transferred to the GRAs for disposal in accordance with the provisions of the Insurance Act, 1938. To this extent an amendment may have to be made in the Consumer Protection Act, 1986 to provide that disputes arising under the Insurance Act, 1938 will not be entertained under the Consumer Protection Act, 1986.

(f) IRDA will appoint Adjudicating Officers to inquire/adjudicate violations of the Act, Rules and Regulations by insurers, insurance intermediaries and insurance agents and levy penalties as provided for in the Insurance Act, 1938.

(g) An Insurance Appellate Tribunal (IAT) on the lines of the one under the SEBI Act should be constituted having its sitting at a principal Bench in New Delhi and by circuit in the four major metropolises. The IAT will hear appeals against decisions of the GRAs and the Adjudicating Officers. The decision of the IAT will be final. The IAT will also entertain appeals against the decisions/orders of the IRDA concerning insurers, insurance intermediaries and insurance agents including those pertaining to registration and licensing.

(h) There will lie a further statutory appeal to the Supreme Court from the decision of the IAT on the lines of section 15 Z of the SEBI Act. The appeal will have to be filed within 60 days of the decision of the IAT.

(i) There will be a clause expressly excluding the jurisdiction of civil courts in disputes arising under the Insurance Act, 1938. However, this will not include claims/ disputes arising under the Motor Vehicles Act, 1988 and the Marine Insurance Act 1963.

(j) On the lines of sections 41 and 42 of the LIC Act, 1956, the decision of the GRA may be made enforceable in any civil court within the local limits of whose jurisdiction the decree holder actually and voluntarily resides.

(k) With a view to encouraging alternative dispute resolution (ADR) mechanisms, it may be provided that a claimant may be first referred to an ADR mechanism, which would include mediation and/ or conciliation, and only if that fails, should the matter been placed before GRA. Further, the GRA may itself refer the pending dispute before it to an ADR process at any stage of the proceedings, with the consent of the parties.

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