Embracing Mediation: A Game-Changer for the Insurance Industry

In a recent report by The Economic Times, it was revealed that a staggering 27% of the cases pending in consumer courts in 2022 were related to the insurance sector. On one side of the spectrum, insurers find themselves grappling with escalating expenditures and exaggerated claims, while on the opposing end, policyholders are left aggrieved by the protracted non-settlement of claims.

While retail claims find recourse through the ombudsman scheme, the path for commercial clients diverges into a complex maze. Unlike their retail counterparts, commercial customers must choose between consumer courts or arbitration. Historically, arbitration could be invoked by the insured only if the liability is not disputed by the insurer. Only the quantum of claim was arbitrable. Now as per the recent IRDAI guideline, the arbitration clause can be negotiated between the insurer and the insured at the time of concluding the contract of insurance. The operational aspects as to how the clause can be negotiated is still unclear and clarity on this is yet to emerge. In any case, arbitration can at times be very expensive and also even after successful award can be challenged in Courts on specific grounds. . The recent introduction of commercial courts further complicates the terrain. This intricate web demands a more streamlined solution, cost-effective resolution mechanism dispute resolution in case of commercial line claims.

The Mediation Act, 2023: A Beacon of Hope

The Mediation Act, 2023 was recently passed. This groundbreaking legislation introduces internationally accepted practices of mediation and conciliation at the pre-litigation stage, offering a viable alternative to traditional dispute resolution methods. The Act encompasses provisions for voluntary or compulsory mediation, time limits, and the enforcement of mediated settlement agreements. It also addresses crucial issues such as confidentiality, the appointment of mediators, and sets a foundation for expeditious dispute resolution.

Unlocking the Potential for the Insurance Industry:

The Mediation Act, 2023 provides the insurance industry with a unique opportunity to streamline dispute resolution processes, reduce costs, and enhance overall efficiency. Here’s how the industry can leverage this new legislation to its advantage:

1. Capacity Building: Establish a pool of legal experts, accountants, engineers, and retired judges with specialized knowledge in insurance matters. This pool could be strategically located in 40-50 large cities, ensuring widespread coverage.
2. Remuneration Scales: Implement fixed remuneration scales for professionals involved in mediation processes, similar to the practices followed for surveyors and lawyers. This ensures fair compensation and encourages the participation of highly skilled individuals.
3. Industry-Specific Processes: Work towards defining processes specific to the insurance sector within the framework of the Mediation Act. This will facilitate a more tailored approach to dispute resolution, taking into account the unique nuances of insurance claims.
4. Efficient Time Management: Embrace the time limits set by the Mediation Act, ensuring that disputes are resolved promptly. This not only reduces the burden on insurers but also provides policyholders with faster access to justice.
5. Confidentiality Assurance: Capitalize on the Act’s provisions for confidentiality, assuring both insurers and policyholders that sensitive information shared during the mediation process will be handled with the utmost discretion.

Conclusion:

The Mediation Act, 2023, is a significant step towards transforming the landscape of dispute resolution in the insurance sector. By proactively embracing this legislation, the industry has the potential to foster a culture of efficient mediation, reduce litigation costs, and enhance customer satisfaction. It’s time for insurers, policy holders possibly represented by Chamber, Insurance Brokers , legal professionals, and other stakeholders to collaborate, build capacity, and pave the way for a more streamlined and effective dispute resolution mechanism in the ever-evolving insurance landscape. The Insurance Regulator could assume role of guiding force behind this effort.

Your thoughts and comments on this transformative approach to dispute resolution in the insurance sector are highly encouraged.