In April 2026, the Karnataka high court presided over by Justice Sachin Shankar Magadum, held that the insurance ombudsman cannot deny a complainant the right to engage an advocate once proceedings move beyond the mediation stage and enter the adjudicatory phase under Rule 17 of the Insurance Ombudsman Rules, 2017. This amounts to a denial of a fundamental procedural right.
The verdict reopened a debate that the insurance sector has sidestepped for years: in a system designed to protect ordinary policyholders, why are they being asked to fight increasingly complex insurance battles alone?
A system under strain
The numbers tell a striking story. The Council for Insurance Ombudsmen (CIO) annual report for FY25 shows the 18 ombudsman offices received 53,102 complaints compared with 52,575 complaints received in 17 offices in the previous year, indicating that the underlying stress in the system remains significant.
The Insurance Regulatory and Development Authority of India’s annual report for FY25 adds a sharper edge: grievances surged 20% to about 257,000 complaints, with claims accounting for 69% of all grievances in general insurance.
The complexity problem
With the insurance ombudsman, the intent was straightforward: give ordinary policyholders a free and fast mechanism to resolve disputes.
Consider a health insurance claim rejected on grounds of a pre-existing disease. Building a credible representation at the ombudsman level requires examining the original proposal form, the waiting period, 60-month moratorium clause, the portability history, whether the alleged pre-existing disease is related to the current hospitalization and whether the insurer has complied with Irdai’s policyholder protection guidelines. This is not a task that can reasonably be expected of an emotionally distressed claimant without assistance.
Disputes over misselling are no less demanding. A proper submission requires producing evidence, the customer's age, income, premium-paying capacity, need-based sales, seller disclosures, tele-calling records, proposal forms and Irdai’s guidelines. India's insurance literacy gap compounds the problem further.
The structural imbalance
The ombudsman system, in practice, is not an encounter between equals. When a policyholder approaches the ombudsman, they face an insurer backed by dedicated claims teams, legal and compliance departments. The asymmetry is not incidental; it is structural.
What the Karnataka court said
The Karnataka high court's order draws a careful line. The ruling does not collapse the distinction between the ombudsman and a court of law. It specifically addresses the adjudicatory stage under Rule 17 of the Insurance Ombudsman Rules, 2017 — the phase that kicks in when mediation has either failed or is bypassed and the ombudsman is required to examine the case on merits and issue an award.
Importantly, the ruling does not say that the ombudsman must resemble a district court. The mediation and counselling function — the informal, accessible, cost-free stage at which most cases are resolved — remains unaffected.
Informed representation vs. legal complexity
Critics of third-party representation often conflate two distinct concerns. The first is legitimate: that allowing unrestricted legal representation could turn a simple grievance forum into a formal adversarial arena, introducing delays, procedural sparring and the costs that come with them. The second is less defensible: that policyholders who need help are somehow gaming the system by seeking it.
The Karnataka high court's ruling implicitly rejects the second concern. And the first concern about procedural inflation can be addressed through safeguards without restricting access to representation altogether. Hearings can be time-bound. The ombudsman can retain wide discretionary powers over procedure.
The problem is not just in the quantum of complaints, but in the quality of their resolution. A complaint poorly presented may not receive the hearing it deserves, regardless of its merit.
The case for a structured framework
What India's insurance ombudsman system needs is not a free-for-all on representation, but a structured framework that allows genuine assistance while preserving the system's core character. Several models are worth examining.
In the UK, the Financial Ombudsman Service explicitly permits third-party representation, including by claims management companies, while maintaining a free, consumer-accessible process.
In Australia, the Australian Financial Complaints Authority allows representatives but permits the authority to manage the process to prevent undue delays. Both systems have managed to balance accessibility with fairness without converting ombudsman proceedings into courtroom exercises.
In India's context, a workable framework could include permitting representation by qualified insurance intermediaries, domain-specific consultants or advocates at the adjudicatory stage; restricting representation at the mediation stage to preserve its informal character; mandating disclosure of any representation fees charged to complainants, and empowering ombudsmen to regulate conduct during hearings.
The larger stakes
Irdai has articulated an ambitious vision: "Insurance for All by 2047."
In FY25, the sector collected premiums worth ₹11.93 trillion, issued 418.4 million policies and paid claims of ₹8.36 trillion — numbers that reflect a market of genuine scale. But penetration at 3.7% of GDP, the third consecutive annual decline, signals that trust remains a barrier.
Consumer trust in insurance is built not just through good products and prompt claims, but through a credible assurance that disputes will be resolved fairly. Every case where a policyholder with a legitimate grievance loses at the ombudsman because they could not present their case effectively is a crack in that foundation.
The insurance ombudsman system is among the most important consumer protection mechanisms India has built. Keeping it accessible and free is non-negotiable. But accessibility cannot mean abandoning policyholders to navigate technical disputes alone, against well-resourced institutional counterparties, with no guidance and no support.
(Shilpa Arora is co-founder and COO of Insurance Samadhan)