Punjab

Faridkot

CC/14/178

Joginder Singh - Complainant(s)

Versus

Max Life Insurance co. Ltd - Opp.Party(s)

Sandeep Khosla

18 Jan 2016

ORDER

 DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, FARIDKOT

 

Complaint No. :     178

Date of Institution: 12.12.2014

Date of Decision :  18.01.2016

 

Joginder Singh aged about 48 years, s/o Kanshi Singh r/o Shaheed Bhagat Singh Road, House No. B-III/74 Kotkapura, District Faridkot.                                                                                  ...Complainant

Versus

1. Max Life Insurance Co. Ltd, 90 A Sector 18, Udyog Vihar, Gurgaon 122015.

2. Axis Bank, Near Partap Singh Nagar, Faridkot Road, Kotkapura District Faridkot.....OPs

 

Complaint under Section 12 of the

Consumer Protection Act, 1986.

 

 

Quorum: Sh. Ajit Aggarwal, President,

               Smt Parampal Kaur, Member,

               Sh P L Singla, Member.

 

Present: Sh Sandeep Khosla, Ld Counsel for complainant,

              Sh Vipin Tayal, Ld Counsel for OP-1,

              Sh R P Goyal, Ld Counsel for OP- 2.

             

(Ajit Aggarwal, President)

                                            Complainant has filed the present complaint under Section 12 of the Consumer Protection Act, 1986 against OPs seeking directions to OPs to pay Rs 36,000/- as surrender value of policy with interest and for further directing OPs to pay Rs 25,000/- as damages for deficiency in service and harassment besides litigation expenses.

2                                    Briefly stated, the case of the complainant is that complainant is an account holder of OP-2 and employee of OP-2 compelled him to purchase the insurance policy of OP-1. Complainant paid Rs 20,000/-each for year 2011 and 2012 and policy bearing no. 785425075 was issued to him. Complainant paid Rs 40,000/-to OP-1 and thereafter, complainant could not carryon the policy and asked for refund of surrender value and as per Policy, complainant is entitled to refund of 90% of premium as surrender value, but OP paid no heed and took long time to refund Rs 10,669.81/-vide cheque dt 23.09.2014 and this amount is not as per terms and conditions of Policy. It is contended that complainant is entitled to get 36,000/-i.e 90% of the premium paid and not Rs 10,669.81/-. OPs also did not pay him interest on his amount. Complainant has made many requests to them to make payment of Rs 36000/-as surrender value alongwith interest, but all in vain. All this amounts to deficiency in service and has caused financial loss, harassment and mental tension to him for which he has prayed for directing the OPs to pay Rs 25,000/- as compensation alongwith litigation expenses incurred by him besides the main relief. Hence, the complaint.

3                                    The counsel for complainant was heard with regard to admission of the complaint and vide order dated 16.12.2014 complaint was admitted and notice was ordered to be issued to the opposite parties.

4                                 On receipt of the notice, the opposite party-1 filed written statement taking legal objections that complainant availed the policy bearing no. 785425075 from OP-1 towards which the premium of Rs 20,000/-was needed to be paid annually but complainant had paid the premium for only two years and he failed to deposit the renewal premiums due to reasons best known to him. Even after due intimation by OP-1, complainant did not deposit the premium which led to the lapse of policy. Even thereafter, no request for revival of policy was made by complainant which caused the termination of policy. It is asserted that Insurance Company was constrained to act as per the terms and conditions of the policy and it calculated the surrender value of the policy prevailing at the time of lapse of policy after deducting the surrender charges and issued a cheque bearing no. 577987 dt 23.09.2014 for Rs 10,669.81 to complainant, which was duly cleared by complainant on 17.12.2014. It is averred that surrender value of Rs 10,669.81/- was issued to complainant through cheque after deducting the surrender charges of Rs 16,000/-, which was calculated at 80% of the amount of one Annual Premium from the surrender value prevailing at the time of lapse of policy. This amount was calculated by Company as per terms and conditions given in the policy and thus, there is no deficiency in service on the part of OP-1. Moreover, complainant has no cause of action to file the present complaint as terms and conditions of the policy documents were duly explained to complainant at the time of signing the proposal form. Policy documents were dispatched to complainant in time and Policy Review Period is explicitly contained in the Policy document and as per clause pertaining to Policy Free Look Period the policyholder shall have a period of 15 days from the date of receipt of the policy to review the terms and conditions of the policy and if the Policy holder disagrees with any of the terms and conditions, he has the option to return the policy stating the reasons for his objections, upon which he shall be entitled to return of premium paid subject to deduction of a proportionate risk premium for the period of cover and expenses incurred on medical examination and on account of stamp duty. Complainant was provided the free look period of 15 days to review the policy terms and conditions, but he never approached OP-1 during that period. It is further averred that this complaint is filed with malafide intention and is liable to be dismissed. Ld counsel for OP-1 asserted that after dully understanding and deliberating upon the terms and conditions of policy on 13.09.2010, complainant duly filled and signed the proposal for for Max New York Life-Secure Dreams Plan ensuing which the policy documents for a sum assured of Rs 2,00,000/-under the base policy was issued to him on 22.09.2010 and was dispatched at his address and under said policy, Annual Target Premium (ATP) payable of Rs 20,000/-was to be paid annually on 22^nd September every year till 22.09.2020 and copies of proposal form and policy document alongwith illustration duly signed by complainant dt 14.09.2010 was issued to complainant. On 23.10.2012, OP-1 also sent policy lapse intimation letter to the complainant intimating that said policy has lapsed due to non payment of premium which was due on 22.09.2012. Vide this letter, it was also requested him to deposit for reinstating the policy. On 14.10.2014, complainant sent an e mail requesting OP regarding details of his policy and OP reverted back to his mail and said that policy in question has been in lapse mode since 22.09.2014 due to non payment of premium and could not be revived as revival period has also been lapsed. It is also informed that vide cheque dt 23.09.2015, amount of Rs 10,669.81/- has been refunded to complainant, which was duly received by complainant on 27.09.2014, it was also requested to complainant to register e mail ID with OP Company. However on merits, it is reiterated that there is no deficiency in service on the part of answering OP and all the other allegations and allegations regarding relief sought too are denied with a prayer to dismiss the complaint with costs.

5                                     OP-2 filed reply taking preliminary objections that as per provisions of Banking Regulations Act, 1949, answering bank cannot carry on Insurance Business. There is no privity of contract qua matter in dispute and as such, complaint is not maintainable in this Forum and is liable to be dismissed. It is asserted that alleged cheque regarding refund of surrendered policy is issued by OP-1 and not by OP-2. Moreover, complaint is bad for misjoinder of parties. As a referral agent/facilitator, role of bank is limited only to the extent of providing leads to the Max New York Life Insurance Co. Ltd and thereafter, whatsoever, relationship is there, and it is purely between insured and the insurer. Complainant has concealed the material and true facts from this Forum. As per Section 230 of Indian Contract Act an agent neither sue nor can he be sued except under special circumstances.  There is no deficiency in service on the part of answering OP. However, on merits, OP has denied all the allegations levelled by complainant and reiterated that there is no deficiency in service or unfair trade practice on the part of opposite party. It is totally denied if Bank official had compelled complainant to purchase the said insurance policy. Bank only apprised the complainant about the product of Max New Life Insurance Co. Ltd and complainant after knowing, understanding willingly and consciously purchased the said insurance policy. Moreover, grievance relating to said policy has to be settled by Insurance Company only and not by OP-2 Bank and complainant should be directed to seek redressal of his grievance from Op-1 and not from OP-2. It is reiterated that there is no deficiency in service on the part of OP-2 and the allegations with regard to relief sought too were refuted with a prayer that complaint deserves to be dismissed with costs.

6                            Parties were given proper opportunities to prove their respective case. The complainant tendered in evidence his affidavit Ex.C-1 and C-9 and documents Ex C-2 to C-8 and then, closed his evidence.

7                              In order to rebut the evidence of the complainant, the opposite party-1 tendered in evidence, affidavit of Vidit Bhasin, Sr Manager as Ex OP-1/1 and documents Ex Op-1/2 to 8 and then, closed the evidence on behalf of OP-1. Ld counsel for OP-2 also tendered in evidence affidavit of Manish Singla as Ex Op-2/1 and closed the evidence on behalf of OP-2.

8                                               The ld Counsel for complainant argued that the complainant has an account in the bank of OP-2. The employees of Bank compelled him to purchase the policy of OP-1 Insurance Company. On it, he purchased the insurance policy for which, he had to pay the annual premium of Rs 20,000/-. He paid premium for two years i.e for the year 2011 and 2012 amounting to Rs20,000/-each. As such, he paid Rs 40,000/- and thereafter he was unable to carry on the policy and asked OPs to refund the surrender value of the policy. As per terms and conditions of the policy, he is entitled for the refund of 90% of the premium paid as surrender value. The OPs did not refund the surrender value and took long time to refund and they paid only Rs 10,669.81 vide cheque dt 23.09.2014. They paid very less amount, whereas the complainant is entitled to Rs 36,000/- i.e 90% of premium paid by him as per terms and conditions of the policy. The OPs did not pay any interest on this amount. Complainant asked the OPs to make payment of remaining amount, but they refused to make payment. The complainant is entitled to get the remaining amount as surrender value of his Policy alongwith interest. Copies of policy document are Ex C-2 to 4. Copy of premium receipt is Ex C-5. Copy of the cheque of Rs 10,669.81 is Ex C-6. Non payment of this amount by OPs amount to deficiency in service and trade mal practice on their part. The OPs may be directed to pay the correct value of the policy of complainant alongwith interest and compensation.

9                         To controvert the arguments of complainant, ld counsel for OP-1 argued that complainant purchased policy issued by OP-1 towards which he had to pay Rs 20,000/-as premium every year for ten years i.e till the year 2020, but he paid only premium for two years and after it, he failed to deposit the revival premiums. Due to non payment of premium as per terms and conditions, his policy lapsed. The OP-1 duly gave intimation regarding it to complainant vide their letter dt 23.10.2012 vide which, he duly informed regarding the fact that his policy is lapsed due to non payment of premium and he was advised to pay premium on time to reinstate his policy. The copy of letter is Ex OP-1/6, but the complainant did not pay the premium and further no request was forwarded by him for revival of his policy within revival period of 24 months, which led to the termination of his policy. The Insurance Company acted as per terms and conditions of the policy and paid the surrender value of the policy prevailing at the time of lapse of policy after deducting surrender charges and issued a cheque amounting to Rs 10,669.81 to complainant, which is duly encashed by the complainant on 17.12.2014. The consequences of non-revival of policy within renewal period are laid down in Clause 13 of terms and conditions of the policy and surrender charges are laid down in Clause 4 (e) of the policy documents. As per these clauses, if any customer surrenders his policy in 3^rd year of the policy then, in that case, the surrender charges shall be levied as 80% of amount of one annual premium. At the time of lapse of the policy of complainant, its fund value was Rs 26,669.81/- and as per terms and conditions, Rs 16,000/- i.e 80% of one annual premium amount of Rs 20,000/- were deducted as surrender charges and the remaining amount i.e surrender value of Rs 10,669.81 was paid to complainant vide cheque dt 23.09.2014 as amount towards the surrender value on the termination of policy. The complainant purchased the insurance policy after understanding all the terms and conditions of the policy and signed the proposal form at his own. As per IRDA Regulations, a free look period of 15 days was also given to the complainant in which he could review the terms and conditions of the policy and if he disagrees with any of the terms and conditions of the policy, he had option to return the policy, for which he shall be entitled for the refund of premium paid by him. The complainant availed this free look period of 15 days to review the terms and conditions of the policy, but he did not have any grievance towards the terms and conditions of the policy and complainant accepted the same without any objection. Once the customer accepts the terms and conditions of the policy, then, no variation can be made in the same. The OP-1 duly informed regarding the lapse of the policy on time and also paid the surrender value of the policy on the request of complainant to him. The complainant sent an e-mail on 14.10.2014 to OP-1 requesting for the details pertaining to his policy. Copy of the e-mail is Ex OP-1/7. OP-1 duly replied to his e-mail and sent the details of his policy to him. Copy of e-mail sent by OP-1 as reply is Ex OP-1/8. The Insurance Company calculated the surrender value of the policy of complainant correctly as per terms and conditions of the policy and paid the same to the complainant and nothing is due towards the OP-1 regarding surrender value of the policy. There is no deficiency in service and trade mal practice on their part. The complainant has filed this complaint with malafide intention to harass the OPs. He has prayed for dismissal of complaint with costs.

10                       The Ld Counsel for OP-2 argued that OP-2 is Bank and as per Banking Regulations Act, bank cannot carry on insurance business. The role of the bank in selling the insurance policy is very limited to the extent as a referral agent/facilitator only to provide lead to Insurance Company and thereafter, whatsoever relationship is there, it is purely between insured and the insurer and Bank has not interference between their relations. There is no privity of contract between OP-2 and complainant. The OP-2 Bank is only an agent of OP-1 for selling their products. As per Section 230 of Indian Contract Act, an agent neither sue nor he can be sued except under special circumstances for the acts done by him for his principal being his agent i.e where the principal resides abroad, agent does not disclose the name of principal or where the principal cannot be sued, So, in this case, OP-2 cannot be sued for his acts done by him as agent of OP-1. He is unnecessarily impleaded as party to this complaint. OP-2 has nothing to do with the surrender value or regarding the payment of surrender value of the policy of complainant. The dispute is only between complainant and OP-1 and OP-2 is unnecessarily dragged into this litigation. There is no deficiency in service on the part of OP-2. The present complaint against OP-2 may be dismissed.  

 

11            The case of the complainant is that the complainant purchased an insurance policy from OP-1 for which he had to pay an annual premium of Rs 20,000/-. He paid premium for two years and after it, he could not carry on the policy and requested OP-1 for surrender of the policy and for payment of surrender value of the policy. The OP-1 paid only Rs 10,669.81 as surrender value of the policy, which is very less as per terms and conditions of the policy and they did not calculated the surrender value correctly. The version of OP-1 is that they calculated the surrender value of the policy correctly as per terms and conditions of the policy. As per clause 4 (e) of the policy, they are entitled to deduct surrender charges as 80% of the amount of the one annual premium.If the policy is surrendered in 3^rd year of the policy, which is applicable in the case of complainant. At the time of lapse of the policy, the fund value of the policy of complainant is Rs 26,669.81 and they rightly deducted Rs 16,000/-as 80% of one annual premium which was Rs 20,000/-per anum.      

12                      The perusal of Insurance Regulatory and Development Authority (Treatment of Discontinued Linked Insurance Policies) Regulations, 2010 framed by IRDA under the Insurance Act 1938 and IRDA Act 1999, regarding the Discontinued Insurance Policies and their Surrender Values, whereas under Regulation 2(1) (vi) definition of Discontinuance means the state  of a policy  that could arise on account of non-payment of the contracted premium due before the expiry of the notice period provided for in sub regulation (1) of 5 of these regulations. Definition of Discontinuance Charges given under Regulation 2(1) (xi), Discontinuance charges means a charge that does not exceed the limits specified in these regulations, expressed as a percentage of one annualized level premium or fund value that can be levied upon discontinuance of a non-single premium policy, which means surrender charges. As per Regulations No. 4, A policyholder shall be entitled to exercise one of the following options upon the discontinuance of the policy:    

1. Revival of the policy, or

2. Complete withdrawal from the policy without any risk cover.

   Under the Regulation No. 6 Obligation of the insurer upon complete withdrawal of the policy,

   Regulation 6 sub Regulation (1) Where the policyholder exercises the options available at sub-regulation (ii) of Regulation 4 or does not exercise the option available in terms of the proviso to sub-regulation (i) of regulation 5, the fund value of the policy shall be credited to the discontinued policy fund. The proceeds of the discontinued policy shall be refunded only upon completion of the lock in period. The income earned on the fund value shall also be apportioned to the discontinued policy fund and shall not be made available to the shareholders.

   (2) The insurer shall refund the amount by means of a cheque or demand draft, to be delivered to the insured or the nominee, at his last known address or by any other electronic mode of payment. However, the insurer may deduct discontinuance charges on the date of discontinuance on such policies, which shall, not exceed the charges stated in sub-regulation (v) of regulation 7 of these regulations.

   Obligation of an Insurer upon discontinuance of a policy

   Regulation 7. The obligations of the insurer in this regard shall be as follows:-

3. To impose discontinuance charges only to recoupexpenses incurred towards procurement, administration of the policy and incidental thereto.

   (v) to ensure that the charges levied on the date of discontinuance ( as a percentage of one annualized premium) do not exceed the limits specified below:-

Where the policy is discontinued during the policy year	Maximum discontinuance charges for the policies having annualized premium upto 25,000/-	Maximum discontinuance charges for the policies having annualized premium above 25,000/-
1	Lower of 20% * (AP or FV) subject to a maximum of Rs 3000/-	Lower of 6% * (AP or FV) subject to a maximum of Rs6000/-
2	Lower of 15% * (AP or FV) subject to a maximum of Rs2000/-	Lower of 4% * (AP or FV) subject to a maximum of Rs5000/-
3	Lower of 10 % * (AP or FV) subject to a maximum of Rs1500/-	Lower of 3% * (AP or FV) subject to a maximum of Rs4000/-
4	Lower of 5% * (AP or FV) subject to a maximum of Rs1000/-	Lower of 2% * (AP or FV) subject to a maximum of Rs2000/-
5 and onwards	Nil	Nil

 

                                Provided that where a policy is discontinued, only discontinuance charge may be levied by the insurer, and no other charges by whatsoever name called shall be levied.

As per chart of discontinuance charges made under the Regulation 7 Sub-regulation (v) if a policy is discontinued from 3^rd year of the policy, the maximum discontinuance charges for the policy is prescribed as lower of 10% of annualized premium or fund value subject to a maximum of Rs 1500/- can be deducted as surrender charges whereas the OPs/Op-1 deducted 16,000/- as 80% of one annual premium of Rs 20,000/- in violation of IRDA Regulations at its own. The OP-1 cannot deduct any charges more than as prescribed by IRDA which is a Regulatory Authority for insurance business in India. The Act of OP-1 for charging surrender charges more than as prescribed by IRDA is a clear cut deficiency in service and trade mal practice on their part. The complainant is entitled to get the surrender value of his policy after deduction of Rs 1500/-as surrender charges from his fund value as per statement of account regarding the policy of complainant for the year 2011-12 supplied by Op-1 as Ex C-8 and as stated by OP-1 in their written statement was Rs 26,669.81 and OP-1 can only deduct Rs 1500/- from it as surrender charges and have to pay the remaining amount to complainant as surrender value.

13                             From the above discussion, the present complaint is hereby partly allowed and OP-1 is directed to pay Rs 24,169.81 to complainant as surrender value minus Rs 10,669.81 already paid by them to complainant vide cheque dt 23.09.2014 alongwith interest at the rate of 9% per anum from 23.09.2014 till final realization. Op-1 is also directed to pay Rs 5000/-as compensation for harassment and mental tension suffered by him and Rs 2000/-as litigation expenses incurred by him. Compliance of this order be made within one month of receipt of the copy of the order, failing which complainant shall be entitled to proceed under Section 25 and 27 of the Consumer Protection Act. Copy of order be given to parties free of cost under rules. File be consigned to record room.

Announced in Open Forum

Dated : 18.01.2016

                     Member            Member                  President

                      (P Singla)          (Parampal Kaur)     (Ajit Aggarwal)