New insurance ombudsman reforms set to speed up claims, believe experts

Stronger penalties, wider access and a digital system promise clearer, faster grievance resolution for policyholders

The government’s Draft Insurance Ombudsman (Amendment) Rules, 2025 aim to make grievance resolution faster, more transparent, and more accountable. The proposals, now open for public consultation, strengthen the Ombudsman system through tighter timelines, higher penalties, digital integration, and wider territorial reach. Experts say the changes could reshape how insurers handle complaints and how quickly consumers, especially those outside major cities, get relief.

 

A more structured and predictable process

One of the biggest changes is the move towards a more adjudicatory, documented approach to resolving disputes.

 

According to Rakesh Kumar, founder of Square Insurance, the new structure will make outcomes “more transparent and predictable”, especially for customers in smaller towns who often feel the process is unclear. 

Manish Goyal, chairman and managing director at Finkeda, said that the shift will make outcomes “more binding, enforceable, and time-bound”.

 

However, the conciliation-first approach remains in place.

 

Hari Radhakrishnan, insurance expert at the Insurance Brokers Association of India pointed out that “there is no shift” in the core mechanism, the Ombudsman will continue to attempt conciliation before issuing an award, and insurers will remain bound by that award.

 

Penalties expected to reshape insurer behaviour

 

The draft introduces steep financial consequences for unfair delays, non-compliance, or arbitrary actions. Penalties may go up to 100 per cent of the award amount for consequential losses. Kumar said such penalties will force insurers to tighten internal processes because repeated lapses “directly affect their balance sheet”.

 

Goyal agreed, saying these fines create a strong deterrent against delays or unjust denials.

 

Radhakrishnan added that penalties already exist under Policyholder Protection Regulations, but “what will actually change insurer behaviour will be how strictly the rules are implemented”.

 

Digital systems and appeals raise operational challenges

 

The rules mandate a fully digital, end-to-end complaint system.

 

Kumar said insurers and brokers will need stronger IT systems, trained staff and secure data handling. Goyal added that meticulous documentation will now be essential to avoid procedural lapses.

 

Radhakrishnan emphasised that digital integration will demand significant systems upgrades, including real-time tracking to prevent penalty-triggering delays.

 

More access for underserved consumers

 

Territorial expansion, requiring Ombudsman offices in every state capital, should particularly benefit rural and smaller-city policyholders. Kumar said these groups form nearly 65 per cent of India’s insurance base and often struggle to access grievance forums.

 

Goyal noted that rural, elderly and low-income policyholders stand to gain the most from shorter timelines.

 

However, Radhakrishnan cautioned that a fully digital system may risk excluding vulnerable groups unless assisted support channels are created.