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Published in Mint on 2 September 2015, Written by Kapil Mehta

Last week, The New Yorker released a curated edition of its best cartoons over the past 90 years. My favourite is of two cavemen who have obviously just made a sacrificial offering. One of them looks quizzically at the other and says, “I don’t know how the gods feel, but sacrificing financial advisors makes me feel happy.” I couldn’t help chuckling even though the joke is on people like me—advisers in the field of finance, insurance and so on. Every morning I get a Google alert for the words “insurance broker.” The typical news headlines are “Insurance broker sentenced to four years in prison”, “Insurance broker scams truckers” and the like.
The criticism faced by the industry is severe because of mis-selling, poor complaint handling of claims and tardy servicing. Much has been said about mis-selling, so I’ll let that be. Poor complaint handling causes considerable reputation damage. There is just no efficient way for buyers to address their insurance complaints. The general process is to write to the insurer a few times, then go to the Insurance Regulatory and Development Authority of India (Irdai), and finally the ombudsman. Each step has its own limitations.
According to Irdai, in financial year 2014, there were about 2,000 unresolved grievances whereas 438,400 complaints were resolved. That is a resolution rate of 99.5%. Now this 99.5% is misleading as it includes cases where the insurer tells the complainants that their complaint is not valid. That is a conflict of interest.
In fact, the level of dissatisfaction is much higher. In the 100 or so individual health insurance claims that I’ve seen at close quarters, over half were initially rejected by the insurer. Many for frivolous reasons: a child hospitalised for observation because of heightened seizure risk was refused payment because no procedure was done on her; a woman admitted for angina pain was turned down because the insurer felt that women are less susceptible to heart attacks; to a senior citizen who died of liver cirrhosis because the underwriter was convinced that cirrhosis could only have been caused by alcoholism; an internal cyst removal in a 45-year-old lady because the cyst would have existed before she bought the insurance even though she was not aware of its existence. The common thread in these cases is that when escalated to senior people within the insurance company, the claims were paid. Not as a favour, but because they were legitimately payable.
What could these claimants have done if they did not have privileged access? Not much, I’m afraid. They could complain to Irdai’s grievance handling cell. But the responsibility of that cell is limited to facilitation and it does not adjudicate the insurer’s decisions. They could complain to the ombudsmen but that takes ages—sometimes over a year—to get a hearing. And then over 60% of the complaints to ombudsmen are not accepted, because they are outside their legal purview. Courts are a last resort but are over-worked and take years to resolve such cases.
Until the Financial Redress Agency is established, there are some steps that the industry and regulator should take to ensure that customer-first is not just a poster hanging in an office corner. Insurers must redesign the complaint handling process to meet regulations in spirit and not just in letter. Having a Board-approved process, designated grievance officers and specified turnaround times is not useful if buyers don’t get a decent, open-minded hearing. Some insurers should set up their own independent ombudsman—well-respected professionals whose decisions would be binding on insurers. Irdai has to improve the quality of publicly available data. For example, we deserve to know claim repudiation by product. How grievances were resolved? How many were in the complainant’s favour? And why were cases that reached the ombudsmen not accepted for review?
Tardy servicing is a less recognised problem but also tarnishes reputation. Servicing is the process of issuing insurance with correct details, answering queries promptly and accurately, and making endorsements fast. I routinely get home insurances with the insured address wrong (it’s amazing how many ways Bubbles, a house name, can be misspelt); health insurances with details of pre-existing diseases incorrect (for example, joint pain excluded although the buyer had specified lower back-pain or, another where pre-existing asthma was dropped from the contract), and renewal reminders not delivered. Email responses can be long-winded and unhelpful. In one incident, the insurer kept asking the claimant for a scanned document despite the claimant repeatedly saying that it was attached to the original email. Call centres can be bureaucratic. It’s difficult for me to get the fund value for my wife’s insurance from the call centre if I reveal my true identify. If I introduce myself as Mrs Mehta, the job gets done fast.
Improving servicing should be relatively easy. E-commerce companies set a high benchmark for what can be achieved. Most complaints get properly acknowledged in 10 minutes and resolved within hours. . A strong dose of technology combined with potions of quality checks should do the job for insurance. Irdai should also consider a rating for service across insurers similar to what the China Insurance Regulatory Commission has proposed.
Until all these issues get sorted out, what can you do if you are caught on the wrong side of a policy? If your intention is to unfairly make money from insurance, give up. But if you have a genuine issue, don’t give up. Don’t rant, but calmly explain your perspective. A logical case is most compelling. Keep escalating the matter within the insurer, Irdai and the ombudsman, in that order, until you are satisfied. This may feel like a David versus Goliath battle, but the fact is that in the end, David won.