Disputes: Arbitration, Ombudsman & Grievances
Where a motor policyholder can take a claim dispute today — the insurer's grievance officer, Bima Bharosa, the Insurance Ombudsman and the consumer commissions — and why arbitration, once a standard clause, no longer features in retail policies.
Arbitration: what it was and what changed
Arbitration means having a dispute decided by an independent arbitrator instead of a court, under the Arbitration and Conciliation Act, 1996. General insurance policies used to carry a standard arbitration clause, and it was narrow: it applied only where the insurer admitted liability and the dispute was about the amount payable, the quantum.
An IRDAI circular of 27 October 2023 removed the arbitration clause from retail general insurance policies, which include private-car and two-wheeler policies. In commercial lines the parties may agree to arbitrate under a separate agreement.
How an agreed arbitration runs
Where arbitration is agreed, the 1996 Act governs it whatever the type of policy. It begins with a written notice (section 21). Where the tribunal has three members then, unless the parties have agreed another method, each side appoints one and those two appoint the presiding arbitrator (section 11(3)).
The tribunal allocates costs in its award (section 31A). An award can be set aside only on the limited grounds in section 34, on an application made within three months.
The retail policyholder's route
The first step is a written complaint to the insurer's Grievance Redressal Officer; the insurer must resolve a complaint within 14 days. An unresolved complaint can be registered and tracked on IRDAI's Bima Bharosa portal (formerly IGMS), which routes it to the insurer. IRDAI does not itself decide individual claims.
The Insurance Ombudsman is free of cost. It can be approached if the insurer rejects the complaint, does not reply within one month or gives an unsatisfactory reply, and the complaint must be filed within one year. The Ombudsman first attempts mediation; otherwise it passes an award of up to ₹50 lakh, binding on the insurer, which must comply within 30 days. The complainant can still go to a consumer commission or court.
Consumer commissions, often called consumer courts, are chosen by the premium paid, not the claim amount: District Commission up to ₹50 lakh, State Commission above ₹50 lakh up to ₹2 crore, National Commission above ₹2 crore. A complaint is to be filed within 2 years of the cause of action, though delay can be condoned.
Choosing the right forum
A claim rejected outright can go to the Ombudsman, within its limit, or to a consumer commission, after first complaining to the insurer. MACT is a different body: it hears third-party accident claims, not disputes under a policyholder's own cover.
Rules at a glance
A rejected claim finds its forum
Imran, 33, of Mysuru, pays a premium of ₹21,000 for his car's package policy. After an accident the insurer rejects his own-damage claim of ₹3.4 lakh outright, and a friend tells him to invoke arbitration.
His retail policy carries no arbitration clause, and the old clause never covered outright rejections. Imran complains to the insurer's Grievance Redressal Officer. If the reply is unsatisfactory, or none comes within one month, he can go to the Insurance Ombudsman, his claim being within the ₹50 lakh limit. Alternatively, as his premium is below ₹50 lakh, a consumer complaint would lie before the District Commission.
Key points
- The traditional arbitration clause covered only disputes on amount where the insurer had admitted liability.
- Since IRDAI's circular of 27 October 2023, retail general insurance policies carry no arbitration clause.
- An agreed arbitration runs under the Arbitration and Conciliation Act, 1996; an award can be challenged only under section 34.
- Bima Bharosa registers and tracks a grievance; IRDAI does not decide the claim.
- The Insurance Ombudsman is free and can award up to ₹50 lakh; a rejected claim can also go to a consumer commission.
Common misunderstandings
- Arbitration is not available as of right under a private-car or two-wheeler policy; the clause was removed from retail policies in October 2023.
- Bima Bharosa is not a tribunal; it registers, routes and tracks the grievance, and IRDAI does not decide individual claims.
- The consumer commission is not chosen by the size of the claim; it depends on the consideration paid, which for insurance is the premium.
Questions people ask
My insurer admits my car claim but offers less than the repair cost. Can I demand arbitration?
Not under a retail policy, which no longer carries an arbitration clause. The dispute goes to the insurer's grievance officer and then to the Insurance Ombudsman or a consumer commission.
Who pays the arbitrator where arbitration has been agreed?
The tribunal decides in its award under section 31A. The general rule is that the unsuccessful party pays, but the tribunal has discretion.
I signed a discharge voucher to receive payment. Can I still dispute the amount?
Yes. IRDAI clarified in a circular of 24 September 2015 that signing one does not stop a policyholder seeking a higher amount before a forum established by law.
What this lesson relies on
- Arbitration and Conciliation Act, 1996 — sections 11(3), 21, 31A and 34
- IRDAI circular of 27 October 2023 on the arbitration clause in general insurance policies
- Insurance Ombudsman Rules, 2017 (as amended with effect from 10 November 2023)
- Consumer Protection Act, 2019 and the Jurisdiction Rules, 2021
- IRDAI Master Circular on Protection of Policyholders' Interests (5 September 2024)
- IRDAI circular of 24 September 2015 on discharge vouchers
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.