NCDRC Rejects Death Insurance Claim Due to 'Enhanced' Income by Insured in Proposal Form
Moneylife Digital Team 04 May 2023
While setting aside orders passed by fora below, the national consumer disputes redressal commission (NCDRC) says the death insurance claim rejected by Reliance Nippon Life Insurance Company Ltd was valid due to wilful misrepresentation of facts by the insured about his income in the proposal form.
In an order, the bench of justice Sudip Ahluwalia (presiding member) says, "…this Commission finds merit in the submission raised on behalf of the insurance company and is, therefore, of the view of that both the fora below acted with material irregularity in allowing insurance claim of the complainant without properly appreciating the defence of the insurance company, that it was justified in repudiating the claim on account of wilful misrepresentation of facts on the part of the insured about his Income, on the basis of which he had obtained the coverage to the extent of the sum assured."
Jaswinder Singh, the husband of Manjeet Kaur, had bought an Rs16.94 lakh insurance policy, 'Reliance Life Long Savings', from Reliance Nippon Life and paid Rs39,999 as a premium in March 2018. However, in just over four months, he died. Manjeet Kaur then filed a death insurance claim with the insurer. 
However, she claimed that the representatives of Reliance Nippon Life used vulgar and uncivilised language with her. She also alleged that an investigator, who visited her after the claim was filed, demanded her palm be greased to help pass the claim. She then filed a complaint before the district consumer disputes redressal forum at Ferozepur.
During the hearing, Reliance Nippon Life, while denying all allegations, contended that Jaswinder Singh took the policy by suppressing material facts about his income and occupation. In the proposal form, Mr Singh disclosed his annual income of Rs4 lakh as a white-washing contractor.
"However, the income tax returns (ITR) for the assessment year (AY)16-17 and AY17-18 were found invalid as per the information provided under RTI by the income tax department. The alleged ITRs were filed on 4 March 2018 and the policy was proposed on 5 March 2018. The deceased life assured (DLA) neither had an income of Rs4 lakh nor was he the contractor of white-wash, and the policy was taken on false misrepresentation of his income and occupation," it added.
Reliance Nippon Life also contended that the district forum had no jurisdiction to try the matter as the element of fraud was involved in the complaint. It submitted that the DLA was a resident of Ferozepur city, whereas the policy was proposed at Panchkula in Haryana. The DLA died within four months and 11 days after taking the insurance policy. 
The insurer also submitted that during that time, a special task force of Haryana police unearthed a syndicated insurance fraud in which the insurance policies were taken in the name of patients of cancer or critical illness and after their death, it was shown as an accident in connivance with doctors and police officials. "The facts of this complaint are similar to the modus operandi used by the said syndicate fraud. Hence, the matter required detailed investigation in order to unearth the scam involved in the present case, which is not possible in a summary proceeding, and as such civil courts would have the jurisdiction to try and decide the present matter," it added. 
However, the district forum rejected the submission by Reliance Nippon Life and asked it to pay an insurance claim of Rs16.94 lakh along with interest at 9%pa (per annum) from the date of filing of the complaint till realisation and Rs5,000 as consolidated compensation.
Reliance Nippon Life filed an appeal before the Punjab state consumer disputes redressal commission. While upholding the order passed by the district forum, the state commission observed that Reliance Nippon Life wrongly and arbitrarily repudiated the claim of Ms Kaur, and it amounts to a deficiency in service on the insurer's part. 
Reliance Nippon Life then filed a revision petition before NCDRC. While perusing the documents, the bench observed that the ITRs show that Jaswinder Singh's gross total income was Rs2.65 lakh in AY16-17, which was enhanced to Rs2.99 lakh in AY17-18. "Both the ITRs were submitted online on 4 March 2018, which was just a day before he submitted his insurance proposal form. As such, there was a manifest misrepresentation of material facts, since he had projected his income to be much above his actual income disclosed in his ITRs submitted online just a day earlier."
"The state commission did not find this to be of much consequence since it was of the view that the insurance company need not have accepted his proposal form without satisfying itself about the correctness of its contents," Justice Ahluwalia says, adding, "This is clearly an excessive and uncalled for indulgence in favour of the insured which is not in consonance with the settled law on the matter, which lays down that an insurance coverage is sought for and provided by scrupulously following the principle of 'uberrimae fidei', and every material fact must have to be truthful otherwise there would be a good ground for rescission of the contract."
While settings aside orders passed by the fora below, NCDRC allowed the revision petition filed by Reliance Nippon Life.
(Revision Petition No916 of 2020 Date: 26 April 2023)
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