Highlighting a lack of clarity in terms and conditions in the case of surrendered insurance policies, the national consumer disputes redressal commission (NCDRC) directed SBI Life Insurance Co Ltd to pay Rs88,734, the premium paid by the insurer with an interest of 7%pa (per annum).
In an
order last month, the NCDRC bench of Binoy Kumar (presiding member) says, "When the insured approached SBI Life Insurance for refunding the deposited amount, the insurance company did not make any reply to the insured and more importantly, did not inform the insured to pay one more instalment in each of the two policies in order to avail the surrender value. There is no record to this effect of having informed the insured. This, in my considered opinion, is a deficiency of service on the part of SBI Life Insurance for which it is liable to refund the entire amount deposited towards the premium amount collected from the complainant."
In 2011 and 2012, Bhatinda, Punjab-based Vinod Kumar, through an agent, bought two policies from SBI Life Insurance. For both policies, he paid a total premium of Rs88,734 in two tranches. At the time of purchasing the policy, the insurance agent assured Mr Kumar of a hefty bonus amount on these policies. He also said that in case of surrender of the policies, the entire deposited amount with bonus and other benefits will immediately be given to Mr Kumar. However, Mr Kumar was never given the terms and conditions of the policies.
When Mr Kumar approached SBI Life Insurance for a refund of his entire amount with a bonus as promised by the agent, he was informed that only in case of surrender could he get his refund. As a result, he surrendered his policies but was not given a surrender receipt. Moreover, even the entire policy amount and the bonus were declined. Mr Kumar contacted the head office of SBI Life Insurance several times to get his deposited amount and bonus back, but there was no response.
Alleging that he was misled by false information about the policy, which led him to purchase it and, consequently, suffered a loss of his hard-earned money, Mr Kumar filed a consumer complaint before the Bathinda district consumer disputes redressal forum, seeking a refund of Rs88,734 with interest at 18%pa from 22 December 2011 till payment along with Rs1 lakh as compensation.
SBI Life Insurance, in its reply, denied the allegations levelled against it. It stated that as per the provision in the terms and conditions of the policy approved by IRDA (Insurance Regulatory and Development Authority of India), after the free look cancellation period expires, the policy cannot be cancelled and a refund of the premium cannot be initiated to Mr Kumar.
Further, the policy was issued based on the proposal form duly filled and signed by Mr Kumar, which is the basis of the contract between the insurer and the insured. SBI Life Insurance reiterated that the complaint should be dismissed as barred by limitation and that the grounds in the complaint are not legally valid, which is nothing but a distortion of the facts and the law.
On 8 September 2014, the district forum dismissed the complaint filed by Mr Kumar. He then filed his first appeal before the Punjab state consumer disputes redressal commission. While allowing the first appeal, the state commission set aside the order passed by the district forum.
Aggrieved by the state commission order, SBI Life Insurance filed a revision petition before NCDRC. The counsel for the insurance company contended that as per the policy provisions contained in part 3 (terms and conditions) clause-4, the policy acquires paid-up value only if at least three full policy years' premiums have been paid. "Further, for regular premium policies, surrender value will be available after the completion of at least three policy years, from the date of commencement of the policy, provided all premiums then due have been paid. This is not a single premium policy. In addition, Mr Kumar failed to opt for cancellation of the policy within the free look period and, therefore and, the order of the state commission set aside."
After perusing the record and going through the terms and conditions of the policy, NCDRC observed that the policy terms and conditions are quite complicated and the words used like paid-up value, non-forfeiture benefits, revival and surrender value are technical in nature, which require the insured to have sufficient knowledge to understand their implications.
"Further, it is not mentioned clearly in the terms and conditions that there shall be no refund for the premiums paid unless three premiums are paid in row. It is not clear what would be the situation if only two premiums are paid. This lack of clarity is important in this particular case, where, Mr Kumar was not informed about the implications for not paying three premiums in order to avail the benefit of surrender, if at all. The policy should have been clear enough to indicate that non-payment of three premiums would entail clear forfeiture of the entire amount paid thus far," the bench says.
While disposing the petition, NCDRC directed SBI Life Insurance to refund within eight weeks the entire amount collected from Mr Kumar towards the premium in both cases, along with an interest at 7%pa from the date of filing of the complaint up to realisation of the cheque.
(Revision Petition No1427 of 2016 Date: 22 October 2024)
