Consumer rights

Insurers must simplify policy forms
Pushpa Girimaji

IF a recent conference organised by the insurance regulator in Hyderabad is any indication, insurers will now come under considerable pressure`A0to improve their consumer grievance redressal machinery.

The Insurance Regulatory and Development Authority’s (IRDA) Regulation on the Protection of Policy Holders’ Interests, 2002, mandate that insurers put in place an "effective" grievance redressal system. But the increasing number of complaints against insurers filed by consumers in different fora show that the system that the insurers offer is anything but effective.

Under the Consumer Protection Act, 2.7 million cases have been filed by consumers so far (from the time of constitution of the consumer courts till October 2006). Out of this, complaints against insurance companies form the biggest chunk.`A0Problems with insurance companies also dominate the calls received by the toll-free national consumer helpline (1800-11-4000) set up by the Union Ministry of Consumer Affairs.

During May 2005-May 2006, for example, the helpline got 1780 calls pertaining to insurance companies. In addition, the complaints before the Insurance Ombudsman and the Consumer Grievance Cell set up by the IRDA show clearly the consumer dissatisfaction with the grievance redress system provided by insurers in general and public sector non-life insurance companies in particular. And individual consumers are by far the worst affected — 87 per cent of the complaints received by the IRDA grievance cell are from individual policyholders (the rest are from companies). The maximum number of complaints pertain to health insurance — 48 per cent. Another 25 per cent relate to motor insurance.

For some time now, insurers have been under attack from various quarters for their failure to service policies effectively. The most vocal critics have been consumer courts. In fact, this issue dominated the conference of Presidents of State Consumer Disputes Redressal Commissions called by the apex consumer court earlier this year. The IRDA conference was also organised at the behest of the President of the Andhra Pradesh State Consumer Disputes Redressal Commission, Justice I. Venkatanarayana. And here, too, the need for an attitudinal change in the insurers was highlighted by several speakers,` including Justice Shah, President of the National Consumer Disputes Redressal Commission. "Put yourselves in the shoes of the consumer and half of the problems would be solved," Justice Shah advised the companies.

The conference, organised by the IRDA and the Institute of Insurance and Risk Management, put into perspective the steps that needed to be taken by insurance companies to effectively service policyholders. And these extended beyond the grievance redress machinery.

So what are these measures? First and foremost, insurance companies need to simplify policy forms. The terms and conditions should be written in a language that is easily understood. And they should be fair to both the contracting parties. Second, there is need for better training of insurance agents and greater compliance with IRDA regulations pertaining to agents. Third, the staff dealing with claims need to be trained so that there is professional competency. Fourth, there should be complete transparency in the entire transaction, including investigations into claims. The policyholder should get a copy of the surveyor’s report, and all decisions should be taken quickly and conveyed in writing.

Fifth, every insurance company should formulate a policyholder’s charter, committing itself to certain quality standards in respect of servicing of the policy. This should be strictly monitored and adhered to, whether it is about the time taken for sending the policy document or claim settlement or redressal of grievance.

Sixth, there should be independent grievance redressal committees and their working should be regularly audited at the board level. Seventh, insurance companies should review the orders of law courts to examine where the problem lies and rectify it. Eighth, insurers should strictly comply with court orders and desist from filing unnecessary appeals. Ninth, there should be a regular training for officials of insurance companies so as to bring about an attitudinal change vis-`E0-vis the policyholder. Tenth, there should be strict compliance of IRDA regulations on various issues pertaining to the protection of   consumers, including the marketing of policies. There was also a call for stringent enforcement of IRDA regulations on the protection of policyholders.

It was obvious from IRDA chairman C.S. Rao’s remarks that the regulator too was most unhappy with the increasing number of consumer complaints against insurers. The regulator has already constituted a committee to look into the existing grievance redressal system provided by insurers and suggest steps that are needed to make it more effective and review the regulation on the protection of policyholders’ interests and suggest modifications to make it more effective. Once the Committee will submit its report, the IRDA will tighten the regulation through an amendment and ensure its strict compliance.