CONTENTS Introduction

History of Insurance

Insurance Ombudsman

Functions of Ombudsman

Basic Features of Ombudsman

Effectiveness: The Myth or The Reality

Conclusion

Acknowledgement

Bibliography

Introduction
The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders interests. In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002. Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country. The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the countrys GDP. A welldeveloped and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country. An ombudsman is someone who investigates complaints made by people against the government or any public organisation. An Ombudsman has become a standard part of the machinery of any democratic government in the modern world. The institution of ombudsman originated in Scandinavian countries1. The Government of India has designated several ombudsmen for the redressal of grievances and complaints from individuals in the banking, insurance and other sectors being serviced by both private and public bodies and corporations. The author in this article has dealt in more details some regulatory authorities impacting common man apart from Banking, Insurance and Income Tax Ombudsman. The word ombudsman has one familiar element, man, but it is difficult to think of what ombuds could mean? Ombud means "commissioner" coming from Old Norse umbodh 2, "charge, commission, administration by a delegacy. An ombudsman is someone who
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Patoria Rohit Ombudsman : A Regulator to regulate the regulator 2006 4th edition pg

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investigates complaints made by people against the government or any public organisation. Ombudsman means the grievance man or a commissioner of the administration. A precise definition of Ombudsman cannot be given. In India the idea of insurance ombudsman(IO) was first mooted in the year 1998. Central government by the powers conferred on it by sub section (1) section 114 of insurance act 1938, has set up an ombudsman specifically for Insurance sector. Main objective of insurance ombudsman is redressal and settlement of disputes arising between insured and insurer. Insurance ombudsman is a quasi-judicial body established for speedy settlement of disputes in fair, impartial and judicial manner.

History of Insurance
In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular. 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the

Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers3. The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business4. An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector5. The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business. 1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices. In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then. In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd.,
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the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973. This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein , among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners6. Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000.7 The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.

Insurance Ombudsman
Ombudsman traces its history to Sweden way back in 19th century and it literally means an authority who is empowered to investigate individual complaints against public authorities, departments etc. Later it has been adopted in many countries including UK, Australia etc8. In India the idea of insurance ombudsman(IO) was first mooted in the year 1998. Central government by the powers conferred on it by sub section (1) section 114 of insurance act 1938, has set up an ombudsman specifically for Insurance sector. Main objective of insurance
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Supra note 1 at pg 3 Supra note 3 Available at www.irda.gov.in/worldhistory

ombudsman is redressal and settlement of disputes arising between insured and insurer. Insurance ombudsman is a quasi-judicial body established for speedy settlement of disputes in fair, impartial and judicial manner. The proceedings before insurance ombudsman are summary proceedings without involving any cost and they are speedy too. Thus, the main advantages of IO is its cost effectiveness and expeditious settlement of disputes. Insurance ombudsman is open to all individuals where the claim amount is less than Rs.20 lakhs. Powers of insurance ombudsman include examining the complaints regarding:

Partial or total repudiation of claims Delay in settlement of claims Legal construction of policy(policy wordings) Premium paid or payable Non-issue of insurance documents to customers after receipt of premium9.

Therefore the insurance ombudsman cannot attend to all complaints. Following are the instances where the insurance ombudsman cannot entertain a complaint.

Any complaint which falls outside the territorial limits of the ombudsman Any complaint where the claim amount is more than 20 lakhs. Any dispute/issue/complaint which is under trial in any other judicial or quasi judicial body.

Where the complaint is not regarding personal lines of business. Where the complaint is filed by any artificial juristic person Any complaint which is lodged after one year from the date of issue of first reply by the insurer.10

Sharma Deepa, Consumer Grievance Redress by Insurance Ombudsman available at www.insurancearticles.com

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First step to seek redressal under IO scheme is that insured has to apply in writing to the IO under whose jurisdiction the insurer falls. Complaint can be filed either by the insured or his legal heirs and should clearly state the name and address of the insurer against whom the complaint is made, nature and circumstances giving rise to dispute, nature of loss sustained by the complainant and relief sought from IO. Further, complainant has to substantiate his claim with all the documentary evidences. Initial role of the IO would be of a mediator to settle the grievance on a mutually agreeable basis. This mediation process would be for a maximum of 1 month. After hearing both the parties IO may pass an award, which if acceptable to the complainant, is sent to insurer for final execution. Insurer has to comply with the award within 15 days and same has to be informed to the IO11. If the grievance is not settled on a mutually agreeable basis, IO gives a speaking award within a period not exceeding three months. If the complainant is not satisfied with the award, he can appeal in any other forum or court, however such facility is not available to the insurer. To this extent IO is a one sided system. Here it may be noted that award passed by the IO has to be complied with, by the insurer within the specified time i.e., 15 days. However, if the insurer opts for non-compliance of the award, there is nothing an IO can do. That is to say that it has no judicial powers for the execution of award given by it, like other judicial systems like consumer forums, civil courts etc. Specific feature of the IO is that no advocates are allowed to represent insurer/ complainant to argue their respective cases. Further IO being a non-judicial authority, does not have the powers of summoning particular persons/witness and examining them on oath. Another specific feature of IO is that it can pass award for ex-gratia settlement of disputes, while such powers of exgratia settlement are not vested with other redressal mechanisms such as consumer courts etc

Functions of Ombudsman
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The institution of Insurance Ombudsman was created by a Government of India Notification dated 11th November, 1998 with the purpose of quick disposal of the grievances of the insured customers and to mitigate their problems involved in redressal of those grievances. This institution is of great importance and relevance for the protection of interests of policy holders and also in building their confidence in the system. The institution has helped to generate and sustain the faith and confidence amongst the consumers and insurers.12

Basic Features of Ombudsman

Appointment of Insurance Ombudsman The governing body of insurance council issues orders of appointment of the insurance Ombudsman on the recommendations of the committee comprising of Chairman, IRDA, Chairman, LIC, Chairman, GIC and a representative of the Central Government. Insurance council comprises of members of the Life Insurance council and general insurance council formed under Section 40 C of the Insurance Act, 1938. The governing body of insurance council consists of representatives of insurance companies. Eligibility Ombudsmen are drawn from Insurance Industry, Civil Services and Judicial Services. Terms of office An insurance Ombudsman is appointed for a term of three years or till the incumbent attains the age of sixty five years, whichever is earlier. Re-appointment is not permitted.13 Territorial jurisdiction of Ombudsman The governing body has appointed twelve Ombudsman across the country allotting them different geographical areas as their areas of jurisdiction. The Ombudsman may hold sitting at various places within their area of jurisdiction in order to expedite disposal of complaints. The offices of the twelve insurance Ombudsmans are located at (1) Bhopal, (2) Bhubaneswar, (3) Cochin, (4) Guwahati, (5) Chandigarh, (6) New Delhi, (7) Chennai, (8) Kolkata, (9)
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Ahmedabad, (10) Lucknow, (11) Mumbai, (12) Hyderabad. The areas of jurisdiction of each Ombudsman has been mentioned in the list of Ombudsman. Office Management The Ombudsman has a secretarial staff provided to him by the insurance council to assist him in discharging his duties. The total expenses on Ombudsman and his staff are incurred by the insurance companies who are members of the insurance council in such proportion as may be decided by the governing body. Removal from office An Ombudsman may be removed from service for gross misconduct committed by him during his term of office. The governing body may appoint such person as it thinks fit to conduct enquiry in relation to misconduct of the Ombudsman 14. All enquiries on misconduct will be sent to Insurance Regulatory and Development Authority which may take a decision as to the proposed action to be taken against the Ombudsman. On recommendations of the IRDA, the Governing Body may terminate his services, in case he is found guilty.

Power of Ombudsman Insurance Ombudsman has two types of functions to perform (1) conciliation, (2) Award making. The insurance Ombudsman is empowered to receive and consider complaints in respect of personal lines of insurance from any person who has any grievance against an insurer. The complaint may relate to any grievance against the insurer i.e. (a) any partial or total repudiation of claims by the insurance companies, (b) dispute with regard to premium paid or payable in terms of the policy, (c) dispute on the legal construction of the policy wordings in case such dispute relates to claims; (d) delay in settlement of claims and (e) nonissuance of any insurance document to customers after receipt of premium. Ombudsman's powers are restricted to insurance contracts of value not exceeding Rs. 20 lakhs. The insurance companies are required to honour the awards passed by an Insurance Ombudsman within three months. Manner of lodging complaint

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The complaint by an aggrieved person has to be in writing, and addressed to the insurance Ombudsman of the jurisdiction under which the office of the insurer falls. The complaint can also be lodged through the legal heirs of the insured. Before lodging a complaint: i) the complainant should have made a representation to the insurer named in the complaint and the insurer either should have rejected the complaint or the complainant have not received any reply within a period of one month after the concerned insurer has received his complaint or he is not satisfied with the reply of the insurer. ii) The complaint is not made later than one year after the insurer had replied. iii) The same complaint on the subject should not be pending with before any court, consumer forum or arbitrator. Recommendations of the Ombudsman When a complaint is settled through the mediation of the Ombudsman, he shall make the recommendations which he thinks fair in the circumstances of the case. Such a recommendation shall be made not later than one month and copies of the same sent to complainant and the insurance company concerned. If the complainant accepts recommendations, he will send a communication in writing within 15 days of the date of receipt accepting the settlement. Award The ombudsman shall pass an award within a period of three months from the receipt of the complaint. The awards are binding upon the insurance companies 15. If the policy holder is not satisfied with the award of the Ombudsman he can approach other venues like Consumer Forums and Courts of law for redressal of his grievances. As per the policy-holder's protection regulations, every insurer shall inform the policy holder along with the policy document in respect of the insurance Ombudsman in whose jurisdiction office falls for the purpose of grievances redressal arising if any subsequently. Steady increase in number of complaints received by various Ombudsman shows that the policy-holders are reposing their confidence in the institution of Insurance Ombudsman.

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Effectiveness: The Myth or The Reality

If we are to closely ascertain the link between the basic function of ombudsman in India and its efficacy then it is tough to draw a parallel between the two as the role of the ombudsman is very much curtailed and does not come anywhere near to fulfilling the objectives of what the nomenclature actually suggests. Certain points coupled with the fact that not much power has been assumed upon this office are what really hinder the progress of this designation. Ombudsman in our country has not been given enough power to expedite all cases as most of them may be beyond its jurisdiction in the first place. The pecuniary jurisdiction is inane as 20 lakhs nowadays is just the premium which most insurers pay therefore large scale cases are left out. A law should always be progressive and archaic laws can only have place in the archives. Secondly the fact that the whole process of coming into settlement is so tedious, the concept of expeditious settlement is totally defeated. Therefore unless laws are modified ombudsman efficacy would always have question mark beside its chair.

Conclusion
I would in my conclusion like to opine that the office of ombudsman is one of great importance and if effectively worked upon can actually result in a much more patrolled insurance sector. The importance which the office assumes is however not backed up by adequate powers. The office is disabled from functioning to its core by giving limited powers to it. Therefore if the arms of the office are stretched a little bit more then this office would definitely fulfil the role for which it had been set up.

Acknowledgements
I would like to conclude my project by thanking our Assistant Prof. Ms. Jinia Kundu for her constant support and guidance as well as her relentless efforts in helping me come through this research. I express my heartfelt gratitude to her for adding the touch of professionalism in this research paper.

Bibliography
Books referred Deepa Sharma, Consumer Grievances Redress by Insurance Ombudsman Rohit Patori,a Ombudsman: A regulator to regulate the regulator

Websites Referred www.irda.gov.in www.irda.gov.in/history www.irda.gov.in/worldhistory www.insurancearticles.com