Importance of Mediation for Insurance Industry

Importance of Mediation for Insurance Industry


It is very difficult to imagine a society without any disputes or conflicts. The best scenario is if disputes can be resolved at minimum possible cost both in terms of money and time. Every person who is seeking justice used to go to the court for justice. This is the reason why over 7.5 lakh cases are still pending before the court in India. Courts have been overcrowded with litigations. That’s why the necessity of an alternative method of justice evolved to resolve the disputes outside the court without the hassle of traditional process of litigation known as Alternative Dispute Resolution.

Legislative Recognition Of Alternative Disputes Redressal:

The alternative dispute redressal has received parliamentary recognition. The Legal Services Authorities Act, 1987 brought about the establishment of Lok Adalat System for settlement of disputes cheaply and quickly. Further sec 89 of the Civil Procedure Code (Amendment) Act, 1999 brings about a settlement of disputes outside the courts. Sec 89 of the Civil Procedure Code gives power to the court to formulate the terms of settlement and then provide them to the parties for observation and then after receiving the observation the court shall discuss the matter through the mechanism of Alternative Dispute Resolution.  So if it appears to the court that there are some elements of settlement which may be acceptable to the parties, the court shall formulate the terms and conditions of settlement and give them to the parties for observation. After receiving the observations of the parties, the court may settle the matter of dispute through- arbitration, conciliation,mediation, judicial settlement including settlement through Lok Adalat. Alternative dispute resolution is more flexible than the court proceeding.


Mediation is like having a skilled referee in a game where both teams have a disagreement. The referee, or mediator, starts by explaining the rules and ensuring everyone is on the same page.  The mediator encourages fair play and helps them brainstorm solutions that both teams can agree on. Once they've agreed on the rules of the game, they shake hands, sign a fair play agreement, and get back to playing with a clear understanding of how to resolve issues if they come up again.

Process Of Mediation:

Mediation is an alternative method of resolving disputes without resorting to the courts.

Selecting mediator: There are Alternative disputes resolution organisation and institution which help the parties to find out a mediator who is suitable to the nature of their dispute. The parties can also select a person with their mutual discussion to resolve the dispute between them.

Mediation and hybrid process: In this process the mediator that is a neutral third person provides help and assistance to the parties involved the dispute. Here the mediator collects information from both the parties and tries to settle the dispute between the parties. He may bring the parties to the negotiation table or start a process of negotiations. The mediator gives the parties various options to choose for solving the disputed matter between them.

Mediation And Insurance:

We all know that mediation is an informal, non-binding process for conducting settlement between the disputed parties. Insurance is a contract where an individual or entity pays a premium to the insurance company in exchange for a financial protection or reimbursement of losses resulting from an event. All insurance contract is a “contract of adhesion”. It means one party will decide all the rules and regulations of the contract and the other party if satisfied then he can accept it or leave it. In India, IRDAI (Insurance Regulatory and Development Authorityof India) makes rules and regulations for insurance companies. These rules are intended to protect the interests of the policyholders. These companies often mislead people and deny their valid claims. As per IRDAI guidelines, every insurance company should have its own procedure to redress consumer grievances where a dedicated grievance redressal officer will handle policy-related disputes.

In spite of these rules and regulations, the insurance disputes are increasing. As people may not trust the neutrality of a Grievance Officer of the company, mediation can help solve this issue efficiently. The neutral third party,mediator can facilitate communication between insurer and insured and help the parties to come to a settlement without going to the court to resolve their disputes.


Mediation process is an informal process where both the parties solve the matter without any typical court proceedings. It is more time and cost savings procedure and the parties have the control over their participation in mediation. As more or more people are making insurance policies with companies the rate of disputes will also increase with time which may not be resolved by court's traditional litigation process and then mediation can definitely be a game changer for insurance industry.