Insurance Ombudsman

The appointment of the Insurance Ombudsman and the turning down of the offer by the appointee, apparently a rare sight in this country, should not mystify anyone, because of the patent illegality of the appointment notification, discovered later.
Chapter 125 of the Insurance Ordinance 2000 that deals with the appointment and functions of the Ombudsman clearly debars any person from appointment to this office who has been during the two years prior to appointment employed with an Insurance Corporate. M.A. Lodhi who declined the appointment, has been gainfully employed since 2000 on contracts renewed every two years as Chairman of the National Insurance Corporation.
This episode does cast a dark shadow on the workings of the government and the machinations of the lobbies that operate in the corridors of power. How the Ministry of Commerce, that is the operational ministry for the insurance sector, prepared a proposal for appointment of a person who is debarred under the law and sent it for the Prime Minister's approval and orders for appointment is a matter that needs to be probed.
Also to be investigated is why and how did the Prime Minister's own office and secretariat let it go through and make him suffer the embarrassment?
The need for appointing an Insurance Ombudsman, with a view to resolving disputes between insurance companies and policyholders, has been acutely felt for some time now. The initiative, in this regard, has been prompted by the urge to address the grievances of policyholders, as they are not getting proper treatment under the present scheme of things.
Moreover, pointing out that Insurance tribunals are also planned to be set up in Karachi and Lahore, a news report has it that the Ministry of Commerce has already submitted a summary to the Prime Minister for approval of terms of reference for the Insurance Ombudsman. From all indications, the whole idea behind the new effort seems to revolve around the understandable expectation that the 'Ombudsman' would speed up the hitherto slow process of resolution of disputes, hopefully to the relief of such policyholders whose claims get either rejected, or partly admitted by the insurance companies.
It is, however, another matter that while so concerned about the plight of disappointed policyholders, the ministry has no concrete idea of how many of such cases happen to be under litigation.
This may be beside the point here in view of the overall perception of policyholders, generally speaking, being not fairly dealt with by the companies. The situation, viewed from that angle, though pointing to the traditional bureaucratic approach to resolution of problems, does offer a hint of urgency in this matter.
For, instead of further delaying the remedial measures through indulgence in a statistical exercise, a beginning has been made by putting in place an effective mechanism for relief of those already suffering injustices. For, as reportedly pointed out, details of such cases can be obtained from the insurance companies in due course of time.
As for the eligibility criteria of the Insurance Ombudsman, that has to be determined by people having deep legal knowledge of matters related to the insurance sector. The same can be said about the procedure governing the disposal of complaints.
Now that the effort appears to be in its preliminary stages, all these details can be worked out, basically on the lines of the Federal Ombudsman system, as later adopted for the Provincial and Tax and Banking too.
The affairs of the insurance sector have remained neglected rather too long thereby leading to emergence of a plethora of problems in its functioning. The focus on the plight of the policyholders, around whom insurance industry revolves, would certainly point to seriousness with which it is being now taken up. As for the serious setback to the insurance sector from protracted indifference of the government, it may be recalled that the total number of individual policyholders had dropped from nearly three million, in 1995, to 2.20 million in 2003.
It has also been noted that out of nearly 400,000 new policies issued every year, about 50% lapse for non-payment of the second premium. According to one study, reduction in the number of policies was noticeable during the period 1996-2000.
Moreover, overall business of insurance industry, in terms of premium and investment income, is stated to have dropped significantly in 1996 and 1997, subsequently picking up pace later. It will be recalled that insurance business in the subcontinent was properly regulated by the Insurance Act and laws were enacted to protect the interests of the policyholders from time to time.
However, under changing circumstances, they remained relegated to the background rather too long. Now that the appointment of Insurance Ombudsman is in the offing, it should mark the beginning of an effective mitigation of the plight of policyholders, thereby contributing to smooth and rapid growth of the insurance sector.