The continuing dominance of insurance cases before the consumer courts is a clear indicator of the deepening consumer dissatisfaction with the insurance service providers. While grievances against the banking, real estate and power sectors constitute 9.83 per cent, 8.18 per cent and 6.46 per cent of the total complaints filed before all consumer courts, respectively, insurance cases form a whopping 23.58 per cent, as per the government data.
This has been the trend for many years now, despite the Insurance Ombudsman Scheme that offers a much easier and simpler way of resolving consumer disputes with insurers.
The reason for this continuing consumer-insurer conflict obviously lies in the fact that the contract of insurance is between unequal parties and the insurance companies have been unashamedly exploiting their dominant position. This is reflected in the consumer grievances on a variety of issues, ranging from opaque policies, non-disclosure of exclusion clauses, mis-selling or deliberate misrepresentation at the point of sale, as well as blatant violations of regulations and guidelines framed by the Insurance Regulatory and Development Authority of India (IRDAI) for the protection of policy holders. Problems also include unfair interpretation of clauses during the claim process, repudiation on flimsy grounds or without assigning any valid reason, delayed settlement of claims, failure to pay interest on delayed payments, and to top it all, an ineffective internal grievance redressal mechanism.
In fact, before the Insurance Ombudsman too, the largest number of complaints filed in respect of life insurance policies pertained to mis-sale or misrepresentation of policy terms.
For several years now, the Union Ministry of Consumer Affairs has been expressing concern over this trend and asking insurers to improve their quality of service, including the internal grievance redressal machinery. In fact, with increased digitisation, unfair trade practices in the sale of insurance through online platforms is going up sharply, posing a big threat to consumer protection.
The use of dark patterns or user interfaces that manipulate consumers into buying unneeded or wrong policies or opting for premiums higher than intended, are all becoming too common, despite a clear prohibition on such dark patterns under the Central Consumer Protection Authority’s Guidelines for Prevention and Regulation of Dark Patterns.
A couple of recent developments, however, bring some hope for consumers. The first is the comprehensive improvement of the Insurance Ombudsman Scheme proposed by the Union Ministry of Finance through extensive amendments to the Insurance Ombudsman Rules. Released for public comments last November, the draft amendments vest with the Ombudsman more punitive powers and hold the insurers liable for any undue hardship caused to the complainant on account of their unjust, arbitrary or malafide action.
The Ombudsman can impose steep penalties in such cases, to be paid to the affected consumer. The Ombudsman can also recommend to the regulator imposition of penalty on the insurer for repeated acts that are arbitrary, unjust and tantamount to harassment of the policy holder, and for non-compliance of the recommendation or award passed by the Ombudsman.
The draft rules also propose a substantial increase in the number of Ombudsmen — one in each state capital and UT, thereby doubling the present number (18) and increasing their accessibility. The Rules also propose an appellate authority.
The other extremely important development is the proposal, made by the IRDAI, mandating all insurers to appoint an independent internal Ombudsman to resolve policyholder complaints up to Rs 50 lakh. The Exposure Draft on the topic issued by the regulator details the qualifications for such an internal Ombudsman and prescribes precise procedures and timelines for quick resolution of consumer complaints, as a step towards enhancing consumer trust and confidence in the industry.
Both these measures have the potential to rein in insurers and force them to be more respectful of consumer rights. This will also give consumers an additional forum for grievance redressal, besides strengthening the existing Ombudsman system. Having said that, I must point to another factor that is adding to the number of insurance-related complaints before the consumer courts — the interpretation of an exclusion clause in the Consumer Protection (CP) Act by the apex consumer court in the Harsolia Motors vs National Insurance Company case (2004).
This judgment of the apex consumer court opened the doors of the consumer courts to large businesses to settle their disputes with the insurance industry and their numbers are increasing, more so after this interpretation was upheld by the Supreme Court in 2023.
A look at the orders of the apex consumer court in the last one year in respect of insurance cases (between May 18, 2025, and May 18, 2026) shows the consequence of the rulings. Out of a total of 679 cases decided by the National Consumer Disputes Redressal Commission during this period, a large number constitute complaints filed by big businesses and pertain to destruction of stock, plant and machinery. Some of these have been filed as long back as 2008, 2009, 2015, and 2016.
Because of the nature of these cases, they take up considerable time of the courts, adding to the backlog. It’s time to stop these companies from cluttering the consumer courts, clearly meant for settling consumer complaints, through an amendment to the CP Act. And the consumer affairs ministry must do this without delay.
— The writer is a consumer affairs expert
