So, we were touched to receive an email from Ms Bhat on 18th August to tell us, "It happened only after reading your articles and the case you had pleaded before national commission (actually Moneylife Foundation had taken the matter to the Supreme Court, without much success). I am thankful to you for rendering great service to many sections of society." She told us that she was not computer-savvy but wanted to tell us how she argued her case so that it could help others.
As expected, LIC has challenged the order before the Allahabad High Court, knowing fully well that the 71-year-old will find it difficult to engage the kind of legal power the insurance giant has at its disposal. We hope someone public-spirited legal expert would come forward to help her. Here is how Ms Bhat fought her case.
A resident of Noida, Ms Bhat purchased the Jeevan Saral policy on 13 September 2010 from LIC's Meerut office and paid Rs5,09,460 in premium over ten years and six months. When her policy matured on 13 September 2021, LIC informed her that the maturity amount would be only Rs2,07,311.
This was much below the total premium she had paid for the policy, which was supposed to be an insurance-cum-investment product and sold on the promise of high returns. After failing to get any reprieve from LIC, she approached the IO.
"Reading articles from Moneylife
helped me file my complaint before the IO," Ms Bhat says. "The policy bond clearly stated that the policy was with profits, but LIC told me that the maturity amount is as per the terms and conditions (T&C) of the policy. While selling the policy, LIC described it as an ATM (any time money) policy but never disclosed about the two sum assured (SA) concept mentioned in the policy. In the proposal form, only one sum of Rs10 lakh was mentioned. The bonus calculations were not attached with the policy bond, so I have no way to understand that the policy was not suitable for senior citizens." (Read: Life Insurance: LIC Jeevan Saral: A Toxic Product)
During the hearing, Ms Bhat quoted some judgements and awards given by consumer commissions and IOs, some of which were published by Moneylife. CS Prasad, IO for western Uttar Pradesh (UP) and Uttarakhand, observed, "The essence of these judgements primarily stresses the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties. Good faith forbids either party from concealing (non-disclosure) what he privately knows. Just as the insured has a duty to disclose, similarly, it is the duty of the insurers and their agents to disclose all material facts within their knowledge, since the obligation of good faith applies to them equally with the insured."
LIC's Jeevan Saral used to be a hot-selling insurance product for agents until it was withdrawn when it turned highly controversial because of gross mis-selling and exaggerated claims about returns and benefits. In fact, Jeevan Saral was a traditional product that could make your premium (money paid) disappear! This can happen in many policies during surrender or making it 'paid-up', but, in the case of Jeevan Saral, it has happened even at policy maturity. (Read: Will LIC Be Made To Pay for the Horrible Mis-selling of Jeevan Saral?
The reason was that, in the Jeevan Saral policy, the premium remained the same for all ages for a given death sum assured (SA) and policy term, which meant that the maturity amounts would be different. The higher the age, the lower the maturity amount to compensate for higher morality charges. Jeevan Saral was supposed to give better surrender and/or paid-up value. It was considered a good plan with a lot of flexibility for young people. The main issue with the product is for those in the higher age group.
Thousands of policyholders who purchased Jeevan Saral policies feel badly cheated and have been writing to us for help. However, consumer courts and, in the case of Ms Bhat, the IO, have proved the better forum because LIC has not succeeded at the national commission and has avoided going back to the Supreme Court.
In one such case, LIC had challenged an order passed by the state consumer disputes redressal commission in Maharashtra before the national consumer disputes redressal commission (NCDRC). However, the NCDRC dismissed the appeal filed by LIC. Deepak Rajmal Kothari, the policyholder, with help from consumer activist and columnist Jehangir Gai, initiated execution proceedings for holding the chairman and managing director of LIC criminally liable for wilful disobedience of the order. As soon as the summons were served through the police, LIC complied and paid up the entire amount. (Read: Jeevan Saral: LIC Pays Up Rs26.67 Lakh After Chairman is Summoned by Consumer Commission
After receiving several complaints from Jeevan Saral policyholders, Moneylife Foundation sent a memorandum to IRDAI on 18 August 2018
, pointing out that Jeevan Saral (with profit), a traditional policy, has caused senior citizens to lose as much as 65% to 70% loss of the money invested over 10 years.
After that, Moneylife Foundation, on behalf of lakhs of Jeevan Saral policyholders, filed a public interest litigation (PIL) in the Supreme Court (SC). However, SC dismissed the petition on the ground of maintainability. A Bench of Chief Justice Ranjan Gogoi and Justice Deepak Gupta,bench of chief justice Ranjan Gogoi and justice Deepak Gupta, said, "We are not inclined to entertain the present petition as a PIL, in which event the maintainability of the petition under Article 32 at the instance of the petitioner nos. 3 and 4 will be in serious doubts as they have an alternative remedy under Article 226 of the Constitution or to initiate proceedings before the appropriate forum. The writ petition is dismissed, leaving the petitioners with the option to avail other remedies in law. We make it clear that we have not expressed any opinion on the merits of the case."
Coming back to the award received by Ms Bhat, in an order passed in January this year, Mr Prasad, the IO says, "To take a fair, just and balanced view of the matter, the insurer is directed to pay an amount of Rs302,149 along with maturity bonus of Rs207,311 (as intimated to the complainant) so that the total premium paid by the complainant of Rs509,460 is made good. The complaint is accordingly disposed off."
During the hearing, LIC contended that the policy issued to Ms Bhat had two SA, one death SA and another maturity SA. "The maturity sum assured under the policy is Rs157,690 and death SA is Rs10 lakh. On survival on the date of maturity, the maturity SA along with loyalty addition is payable. Under the policy, maturity SA is Rs157960 plus loyalty addition is @Rs475 per Rs1,000, i.e., 475/100x157960=75031, i.e., a total of Rs232,991 is payable. Also the unpaid premium due March 2021 of Rs24260 plus late fee thereon is deductible out of this maturity claim amount," LIC submitted.
Mr Prasad, the IO, observed that LIC issued an 'inappropriate' policy bond for 10 years to Ms Bhat, a Kashmiri migrant widow, when she was 59. "The insurer issued the policy bond for a death SA of Rs10 lakh while it is seen that in Hindi, 'purnavadhi bimadhan' is written as Rs157,960 on the face of policy bond. But in English, it is written as 'plan and term of assurance' as pointed out by the complainant."
"This misprinting of the maturity SA was not noticed by the insurer and bond was issued. Such mistakes should have been avoided but at the same time, nobody can be allowed to take advantage of the bonafide mistake of another party," the IA noted.
The insurance ombudsman then directed LIC to pay Rs3,02,149 and a maturity bonus of Rs2,07,311 to Ms Bhat.
However, instead of repaying the entire premium to the senior citizen policyholder, LIC filed a writ petition before the Allahabad High Court.
"LIC, as usual, has made it an ego issue and filed a writ petition before the Allahabad High Court. It may also engage top lawyers. However, I cannot afford (to engage top lawyers). I don't know how to handle this case in the HC so that as per the IO order, I would at least receive the premium I paid for the policy," Ms Bhat says.
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