These are some changes being proposed in the draft for Insurance Ombudsman (Amendment) rules proposed by the Finance Ministry.
Aggrieved policyholder may get up to ₹1 lakh for mental harassment and penalty up to ₹20 lakh from insurance company or insurance broker. Also, the insurance ombudsman will register every complaint within one working day from the receipt.
These are some changes being proposed in the draft for Insurance Ombudsman (Amendment) rules proposed by the Finance Ministry. Post stakeholder consultation, the draft will be notified by the Ministry. The original rules were first notified in 2017. Changes have been proposed in grievance redressal as well as appointment and functioning of the Insurance Ombudsman.
One such change is related with award of compensation. According to the draft, the Insurance Ombudsman shall not award compensation in excess of the loss suffered by the complainant as a direct consequence of the cause of action, subject to maximum sums payable under the policy including bonus, interest and so on, as per the policy terms and conditions.
“In case of any undue hardship faced by the complainant due to unjust, arbitrary or malafide action of the insurer/insurance broker, Insurance Ombudsman may also, for reasons to be recorded in writing, impose a penalty on such insurer/insurance broker, payable to the complainant, up to a sum of 100 per cent of the amount of award, subject to maximum of ₹20 lakh for consequential loss and/or ₹1 lakh for mental harassment,” the proposal said. Present provision says the Ombudsman cannot award compensation more than ₹50 lakh (including relevant expenses, if any).
It has also been proposed that the award of Insurance Ombudsman will be binding on the insurers or insurance broker, as the case may be, unless appealed against, and in case of non-compliance of award within the timeline, a penalty will be payable by insurer or insurance broker to the complainant, in addition to interest. As on date, there is provision of interest only.
Video conference
Draft has prescribed that the Office of Insurance Ombudsman will register each and every complaint immediately and within a period not exceeding one working day from the date of receipt of complaint the Insurance Ombudsman may allow the insurer (including its agents and intermediaries) or insurance broker to be heard through video conference.
Two new provisions have been proposed to be added. One of the them is about empowering the Insurance Ombudsman to consider complaints for settling through mediation or passing an award. The second new provision says, “The Insurance Ombudsman may recommend to the IRDAI , imposition of a penalty against insurer(s) or insurance broker(s), where he is of the opinion that the said insurer or insurance broker has repeatedly acted in a manner that is arbitrary, unjust or tantamount, to harassment of policyholder(s) or if the insurer or insurance broker is non-compliant of recommendation or awards passed by Insurance Ombudsman,” it said.
Another new provision is about setting up an Appellate Authority to be constituted by IRDAI. This one will be required to be set up within six months from the date of notification of rules. The Appellate Authority may entertain any appeal made against the award passed by Insurance Ombudsman and IRDAI may also set up multiple benches of the Appellate Authority.
Published on November 26, 2025
