JUSTICE V.K.JAIN (ORAL)

The complainant / petitioner took a Life Long Unit Linked Insurance Policy from the respondent company paying a premium of Rs.4,50,000/- for the first year. The complainant paid two more yearly premium of Rs.4,50,000/- each thereby making the total premium made by him to Rs.13,50,000/- in three years. The petitioner / complainant thereafter sought discontinuation of the policy. The respondent company refunded an amount of Rs.657928/- to the complainant. Being dissatisfied, he approached the concerned District Forum by way of a consumer complaint.

2.      The consumer complaint was not  resisted by the respondent company and was allowed by the District Forum. Being aggrieved from the order of the District Forum, the respondent company approached the concerned District Forum by way of an appeal. The appeal, however, came to be dismissed solely on the ground that the complainant was not a consumer. Being aggrieved, the complainant / petitioner is before this Commission.

3.      The first question which arises for consideration is as to whether the complainant / petitioner can be said to be a consumer or nor. The term ‘consumer’ has been defined in Section 2(1)(d) of the Consumer Protection Act, 1986 which was applicable at the relevant time. A person purchasing good or hiring or availing services for consideration is a consumer unless the goods are purchased or the services hired or availed for a commercial purposes. This is not the case of anyone that the complainant is engaged in the business of buying such policies and then making profit by surrendering these policies. In fact by its very nature such a policy cannot be said to have been taken for speculative purposes. The policy was for a period of 30 years and as per the terms of the policy which the complainant claims not to have received, the policy holder had to continue with the policy for at least 10 years. Though the policy could be surrendered after two years, very heavy penalties were prescribed in case the policy was surrendered prematurely. Such a transaction can never said to be for a commercial purpose. A reference in this regard can be made to the decision of this Commission in First Appeal No. 1173 OF 2014 - Paramjit Kaur Vs. Aviva Life Insurance Co. India Ltd. date 14.3.2016 wherein the Commission interalia held as under:-

“4.      Learned Counsel for the appellant submitted that as policy was obtained for life along with accidental benefits and not for speculative purpose, learned State Commission committed error in dismissing complaint as not maintainable on the ground of investment for speculative business; hence, appeal be allowed and impugned order be set aside and mater may be remanded back to the learned State Commission to decide complaint on merits.  On the other hand, learned Counsel for the respondent submitted that order passed by learned State Commission is in accordance with law; hence, appeal be dismissed.

5.      Perusal of disputed policy reveals that it was named as Life Long Unit Linked Fund and sum insured was Rs.14,00,000/- and regular annual premium amount was Rs.1,00,000/-.  It also covered accidental benefits of Rs.14,00,000/-. Learned State Commission observed that complaint was not maintainable in the light of judgment of this Commission in III (2013) CPJ 203 (NC) – Ram Lal Aggarwalla Vs. Bajaj Allianz Life Insurance Co. Ltd. & Anr. whereas, perusal of aforesaid judgment reveals that in the aforesaid case Unit Gain Super Diamond Policy was taken with Rs.2,00,000/- annual premium for 24 years. Policy in the aforesaid case was for investment purpose whereas, disputed policy is for covering life as well accidental benefit  and this policy cannot be equated with policy in the case of Ram Lal Aggarwalla (Supra). Learned State Commission has committed error in dismissing complaint as not maintainable as policy was for investment in speculative business.  Learned Counsel for the petitioner has placed reliance on judgment of this Commission in 2012 Law Suit (CO) 606 – Met Life India Insurance Co. Ltd. Vs. Addanki Satyanarayana in which claim for unit linked policy with life insurance was held maintainable before Consumer Fora, though, in that policy maturity value was 2,51,73,756/- and death benefit was only Rs.5,02,000/- whereas in the case in hand, sum assured was Rs.14,00,000/- along with accidental benefits of same amount. Thus, it becomes clear that complaint filed by the complainant was maintainable before learned State Commission and learned State Commission committed error in dismissing complaint as not maintainable and appeal is to be allowed.”

4.      Coming to the merits of the case, though the case of the complainant is that the policy document was received by him after eight months when the lookout period was over, assuming that the policy document was actually received within the lookout period, the terms of the policy to the extent they stipulate deduction of exorbitant penalty in case of premature surrender of the policy, are ex facie unfair and unreasonable. As per the calculation given by the respondent company to the State Commission, they were entitled to deduct as much as 91.51% of the initial fund value and 36.21% of the accumulation fund value. Accordingly, the respondent sought to deduct Rs.360337.1406 out of the initial fund value of Rs.393639/-. The respondent paid only Rs.33292/- to the complainant out of the initial fund value of Rs.360337.1406. It would be pertinent to note here that initial payment made by him was Rs.4,50,000/-.  Therefore, they paid only Rs.33392/- out of Rs.4,50,000/- to the complainant.

5.      Thereafter, the complainant had paid Rs.9 lacs to the respondent in two instalments of Rs.4,50,000/- each. The value of the accumulation unit was Rs.979251/-. The respondent deducted Rs.36.21% of the said value and paid a sum of Rs.624636/- to the complainant out of the payment of Rs.9 lakhs which he had made by way of instalment Nos. 2 & 3.

6.      The submission of the learned counsel for the respondent company is that not only they have to pay accumulation value, they also have to pay/ adjust premium payable on the life insurance of the policy holder and in this case, they had provided a life insurance cover of Rs.85 lacs to the complainant which they would have paid even if the complainant was to unfortunately die, on the very first day of taking the policy.

7.      The learned counsel for the respondent further submits that the policy document which they issued to the complainant was duly approved by IRDA and the parties are bound by the terms of the policy which the complainant never returned  during free lookout period. He also submits that this is not for this Commission to add to or subtract from the policy document. Reliance is placed upon the decision of this Hon’ble Supreme Court in  Suraj Mal Ram Niwas Oil Mills (P.) Ltd. Vs. United India Insurance Company & Anr – [Civil Appeal No. 1375 of 2003, decided on 8.10.2010.  However, I find no merit in the submission since in my opinion, the terms of the Policy document constitute unfair practice and therefore, cannot be enforced even if they have approval of IRDA. I therefore, need not go into the case of the complainant with that the policy document containing the terms of surrender was not received by him within the free lookout period.

8.      The respondent is an insurance company. In all fairness, it must get the premium applicable on the life insurance cover of Rs.85 lacs which it had promised to the complainant. This should be in addition to a fair and reasonable penalty on account of premature surrender of the policy. The complainant applied for surrender of the policy after three years. Therefore, the respondent company should be  entitled to deduct the insurance premium payable  for the first three years on the grant of a pure life cover of Rs.85 lacs to a person of the age of the complainant. It would be for the respondent company to calculate the insurance premium accordingly for three years and deduct that amount from the surrender value.

9.      Since deduction of as much as 91.51% from the initial fund value and 36.21% from the accumulation fund would be highly unfair and unreasonable, the respondent company cannot be allowed to make such a huge deduction. In my opinion, a deduction of 5% per year out of the surrender value would be fair and reasonable. Not only this will meet the administrative expenditure / management fee of the respondent on the one hand, it would also discourage a consumer who seeks to prematurely get out of the policy for one reason or the other. Thus, out of the initial fund value, the respondent will be entitled to a deduction of 5% for each completed year after the payment. As far as the accumulation units surrender value is concerned, the respondent will be entitled to deduction of 5% out of the said value for each complete year after the payment, the complainant having made payment in two instalments.

10.    For the reasons stated hereinabove, the petition is disposed of with the following directions:-

(i)      The respondent company shall be entitled to deduct the annual premium which it regularly charges on a standalone life insurance policy on the life of a person of the age of the complainant. If the complainant sought surrender after three years, the respondent will be entitled to deduct annual premium of  first three years.

(ii)      In addition to the insurance premium in terms of Direction (i) above, the respondent will also be entitled to deduct 5% of the initial fund value for each completed year after the payment.

(iii)     The respondent will be entitled to deduct 5% of the accumulation fund value from the value of the accumulation units, for each complete year after receiving the payment.

(iv)    The balance amount payable in terms of this order shall be calculated and paid to the complainant within 12 weeks from today alongwith a calculation sheet failing which it shall carry interest @ 9% p.a. w.e.f. the date of this order. The revision petition stands disposed of.