New IRDA Proposal: Insurance Companies Must Appoint 'Ombudsman' for Claims up to ₹50 Lakh

In a significant move aimed at enhancing customer grievance redressal in the insurance sector, the Insurance Regulatory and Development Authority of India (IRDAI) has introduced a new draft proposal. According to this proposal, all insurance companies operating for more than three years will be required to appoint an “Internal Insurance Ombudsman” to resolve policyholder complaints related to claims up to ₹50 lakh.

What the New Proposal Entails

IRDAI’s draft introduces the Internal Insurance Ombudsman system, aimed at strengthening in-house grievance redressal mechanisms. The designated ombudsman will handle complaints and disputes involving insurance claims up to ₹50 lakh, helping resolve them quickly, fairly, and transparently.

Who Will This Apply To?

• The rule will only apply to insurance companies that have been operational for more than three years.

• Reinsurance companies are exempt from this regulation.

Objectives Behind the Move

IRDAI’s primary goal is to:

• Speed up the resolution process for customer grievances.

• Improve transparency and accountability within the insurance sector.

• Reinforce policyholder trust by making the complaint-handling process more structured and standardized.

How the Internal Ombudsman Will Work

IRDAI has clearly outlined:

• Eligibility criteria for who can be appointed as an ombudsman.

• The tenure and responsibilities of the ombudsman.

• Salary and reporting structure within the insurance company.

Reporting Structure:

• The ombudsman will report directly to the company’s Board of Directors or the committee responsible for policyholder protection and grievance monitoring.

• For administrative matters, the ombudsman will report to the company’s Managing Director or CEO.

Multiple Ombudsmen Allowed

IRDAI has also permitted companies to appoint more than one ombudsman, especially if they operate across various regions. This ensures:

• Better regional coverage,

• Timely resolution, and

• Higher responsiveness to customer issues.

Public Consultation Open Until 17 August 2025

IRDAI is currently seeking feedback from:

• General public

• Insurance companies

• Industry experts

Stakeholders are encouraged to submit their suggestions by 17 August 2025 to help refine the proposal further.

Why This Is a Game Changer

This proposal marks a pivotal shift toward decentralizing complaint resolution and reducing dependency on external consumer forums or courts. By enabling quicker decisions at the company level, customers can expect:

• Faster grievance handling

• Reduced legal hassle

• Enhanced customer service experience

This also encourages insurance companies to be more proactive in addressing disputes and strengthens the overall credibility of the insurance sector.

Conclusion

IRDAI’s push for mandatory internal ombudsmen in insurance companies dealing with claims up to ₹50 lakh is a progressive step. It reflects the regulator’s commitment to policyholder welfare, corporate governance, and efficient redressal mechanisms in the ever-expanding Indian insurance industry.

With rising insurance penetration in India, such measures will not only improve trust but also ensure smoother customer experiences. The final rules will be framed after reviewing all suggestions by the August 17 deadline.