In a frank comment that should put the insurance companies to shame, the Finance Secretary attacked the current insurance grievance redressal system as ‘inadequate’ and urged the industry not to betray the trust of the common man
Finance Secretary Rajiv Takru on Wednesday gave a candid speech at 16th CII Insurance Summit in Mumbai. Describing his speech as a talk from his heart, he spoke about the reality of mis-selling, grievance redressal being heavily against the common man and urging insurance companies to be fair in business practices, so that company performance comes from investments and not denial of claims. “Betrayal of trust should not happen in an industry that is based on customers buying products with trust”, he said.
Pointing to mis-selling he said that some agents may promise the moon to sell the policy. He remarked about Max Life TV ads wherein the devil unsuccessfully tries to persuade the agent to mis-sell. Mr Takru, added, “In real life, the devil always wins. There are fine prints in insurance policies and hence, we get so many complaints. Someone in the ICU of a hospital is not able to negotiate with health insurer or hospital and hence ends up paying the money. There may be claim denials or partial settlement. There is a need to rectify the system.”
According to Mr Takru, “The grievance redress system is not up to mark. I am the last man to think that having the Ombudsman in place or having grievance redressal instead of Ombudsman is going to reduce the problem. We are a poor, illiterate country and not such a country where the average common man would take recourse to legal option to resolve disputes. It is rare for a common man to stand up against corporate might. Grievance redressal is heavily built against the common man. There is a need to develop a system wherein the grievances do not arise, or if they do arise, then there is a very small percentage.”
Mr Takru gave his own example where he was mis-sold by a smooth talking Life Insurance Corporate of India (LIC) agent in 1992. He was told that the premium of Rs3,000 has to be paid for 15 years. In case of unfortunate death, his family will get Rs1 lakh. If not, then he can claim the maturity benefit of Rs1 lakh at the end of 15 years. After diligently paying premium for 15 years, to his shock he found that the maturity benefit will be paid when he turns 80 years. So, he has to wait for another 34 years after premium payment term of 15 years to get his Rs1 lakh. He says that if it can happen to a literate person, then it is surely an issue for illiterate persons.
Mr Takru suggested insurance companies should be fair as insurance is about trust. It is not business alone, but has social angle. The performance should be from investments and not based on claims denied. It is bad business which leads to betrayal of trust.
If Mr Takru wants real change, he should nudge the Insurance Regulatory and Development Authority (IRDA) to get more active. At the Moneylife Foundation’s seminar on 16 May 2012, IRDA chairman J Hari Narayan clarified that IRDA’s job is not to focus on individual complaints; but it does take up such cases on a random basis and investigates insurance companies to protect the insured. IRDA’s approach is to put systems in place and see how they work and that corrections are made whenever required, to improve processes, he had added. This is a flawed approach because wrong products and wrong selling is common.
It means individual complaints may not get solved by IRDA’s Integrated Grievance Management System (IGMS). Consumers still have to go to the insurance Ombudsman, consumer court or civil court. The advantages of Ombudsman are no cost to the insured and binding decision on insurance companies. While the insurance Ombudsman is a good option, there is often a delay in getting a hearing. It can range from six months to one year after making a complaint. In some places the Ombudsman’s post is vacant for several months. This increases the backlog of complaints.