Tamil Nadu

StateCommission

CC/19/2014

V. VASANTHAKUMARI - Complainant(s)

Versus

STATE BANK OF TRAVANCORE, THE BRANCH MANAGET - Opp.Party(s)

K.M. VIJAYAN

26 Oct 2022

ORDER

Date of filing : 24.01.2014

 IN THE TAMIL NADU STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI.

 

Present: Hon’ble Thiru Justice R.SUBBIAH       ... PRESIDENT

             Thiru. S. KARUPPIAH             …  JUDL. MEMBER

 

C.C. No.19 of 2014

 

                               Orders pronounced on:   26.10.2022

 

V.Vasanthakumari,

W/o.Mr.K.M.Vijayan,

No.3, Crescent Avenue,

K.P. Puram, R.A. Puram,

Chennai-28.                                         … Complainant

vs.

 

1. State Bank of India,

rep. by its Branch Manager,

R.A. Puram (P & SB) Branch,

No.84, Greenways Road,

R.A. Puram,

Chennai 600 028.

(amended as per orders dt.4.11.19

in MP No.207 of 2019).

 

2.SBI Life Insurance Company Limited,

rep. by V.Susil Kumar,

State Head-Operations,

T.C.9/1094-1, 3rd Floor,

Sathas Building, Sasthamangalam,

Trivandrum,

Kerala 695 010.

 

3.SBI Life Insurance Company Limited,

rep. by Asst. General Manager,

State Bank Learning Centre,

No.20, Pycrofts Garden Road III Floor,

Nungambakkam, Chennai 600 006.     ... Opp. Parties.

             For Complainant      :  M/s.K.M.Vijayan Associates

             For Opp. Party No.1 :  M/s.R.Subramanian

             For OP Nos.2 and 3  :  M/s.Yogesh Kannadasan.

 

This Complaint came up for final hearing on 25.08.2022 and, after hearing the arguments of the counsels for the parties and perusing the materials on record and having stood over for consideration till this day, this Commission passes the following:-

O R D E R

 

R.Subbiah, J. – President.

 

             The complainants herein seeks this Commission to direct the Opposite Parties to -

             i) deposit Rs.15 lakh with accumulated benefits and interest on the date of realization under the Policy;

             ii) pay Rs.10 lakh as compensation for the mental harassment and damages caused to the complainant & Rs.50,000/- towards costs.

 

             2.  The averments made in the complaint are concisely given below:-

           The complainant is a customer of the OPs/SBI and she took a pension Policy called "SBI Life-Unit Plus II Pension" bearing proposal No.28-5546912, dated 10.09.2007, from the 2nd OP. The Policy was issued on 24.09.2007 and its date of vesting was 24.09.2012.  She paid 10 instalments of premium at the rate of  Rs.1,50,000/- per half year  for a period of 5 years from 2007 to 2011 and the policy vested on 24.09.2012.  At the time of taking the policy in question on 24.09.2007, the agents of the OPs/Insurance Company told the complainant that pension would be paid periodically if invested on maturity, otherwise, the maturity amount would be paid. The complainant did not want to continue in the Scheme as she was in dire need of funds.  Hence, she requested the OPs/Insurance Company to credit the maturity amount of Rs.15 lakh together with accumulated benefits to her account, but in vain, whereupon, she sent a letter, dated 07.12.2012, to the Insurance Company, objecting to the conversion of the maturity amount into pension fund without any intimation to her and simultaneously, making a surrender request to pay the maturity amount.  By letter, dated 26.12.2012, the Insurance Company rejected the said surrender request and returned all the connected papers and it prompted her to lodge a customer complaint with the Insurance Company on 10.01.2013 through her Bank/1st OP and, by letter, dated 09.07.2013, she was informed that the maturity amount would be paid only by way of pension and not otherwise. Further follow-up made by the complainant did not yield any outcome.  The act of the Insurance Company in denying payment of the maturity proceeds of the Policy and extending the policy unilaterally beyond the period of maturity without the consent and against the wishes of the policy holder is not only a clear instance of service deficiency but a restrictive/unfair trade practice, due to which, the complainant has suffered not only mental agony but also loss of investment and interest, for which, the OPs are liable to compensate the complainant as sought for by her in the complaint.  

 

             3.  While the 1st OP/Bank have filed a formal version, the main contesting parties/OPs-2 & 3-Insurance Company have filed their version, inter alia contending thus:-

             It is true that the complainant applied for Unit Plus II Pension Plan and was issued with the Policy bearing No.28008478702 for a term of 5 years, commencing from 24.09.2007.   The said policy vested on 24.09.2012 and, as per its terms & conditions, in particular Schedule-I thereof and point No.b-"At Maturity" under the Head "Benefits Payable", it is made clear to the insured that where the life assured attains the vesting age, he/she will  have the option to commute upto one third of the maturity benefit and purchase an annuity with the remaining two third of the maturity benefit.  In the Proposal Form also, the complainant had opted the vesting age 58. As such, on the vesting date/24.09.2012, the PIV (Policy Investment Value) was Rs.12,69,065/-, out of which, the complainant has an option to withdraw 33% in cash and the balance has to be compulsorily utilized for purchase of the Annuity Plan.  While so, on 20.09.2012 itself, the OPs/Insurance Company sent a letter, requesting the complainant to choose the type of annuity as per her preference and also to furnish the requisite documents.  But, the complainant did not come forward to furnish the documents and details as sought for by them in the letter dated 20.09.2012, as a result of which, the Insurance Company was unable to initiate the annuity payments.  A request for surrender was made by the complainant vide letter dated 06.12.2012 and it was rejected on the ground that the policy already vested on 24.09.2012. Further, the averment of the complainant that she had paid all premiums for the 5 year cover is absolutely false, since  she had paid only 7 half-yearly premiums and failed to pay three such premiums that fell due on 24.09.2011, 24.03.2012 and 24.09.2012.   As such, the demand raised by the complainant for payment of Rs.15 lakh with accumulated benefits is highly unjustified and illegal. As to what would be the maturity benefit and how it would be paid is clearly stated in the policy document.  The policy taken by the complainant comes under the annuity plan whereunder the policy holder has to use the maturity funds to purchase an annuity plan from any annuity provider in the market or choose for the monthly annuity option.   The terms and conditions of the policy are binding on both sides and the rejection by the Insurance Company for surrender of the Policy after its maturity is purely within the framework of the policy and hence, the same cannot be stated to be either service deficiency or unfair/restrictive trade practice.  The complaint is per se illegal and perverse and hence, the same is liable to be dismissed in limini with costs.

 

             4. In order to substantiate the claim and counter-claim, the parties have filed their respective proof affidavits and, while the complainant has filed 7 documents as Exs.A1 to A7, on the side of the OPs, 6 documents have been marked as Exs.B1 to B6.

 

             5. Learned counsel for the complainant, by drawing our attention to Ex.A1/Policy, dated 24.09.2007, in particular clause-10 (i) pertaining to 'surrender' and providing that where premiums have been paid regularly for at least three consecutive years following the Date of Commencement of Policy, the Policyholder may surrender this policy for the Surrender Value at any time, contends that, in terms of the above provision, there is an option for the policyholder to come out of the policy after the lock-in period of three years.   Further, the complainant had also paid the 7th instalment beyond the lock-in period of three years and thereafter, stopped paying the premium with an intention to come out of the policy.  In such circumstances, when the complainant had made a request for surrender after the lock-in period, the Insurance Company capriciously denied the request and illegally held the accumulated premiums with them, which is a glaring instance of service deficiency. Secondly, the complainant voluntarily allowed the policy to lapse by stopping payment of premium after the 7th instalment, whereupon, as per the policy, its revival can be done by the Insurance Company only upon the written application by the policyholder coupled with payment of the defaulted instalments, as otherwise, the policy will stand automatically terminated.  But here, by reviving the policy on their own, the Insurance Company have violated the revival condition and thereby, deprived the complainant of receiving the surrender value on termination of the policy.   Thirdly, when the Policy provides for investing the maturity benefit in the annuity scheme at the choice of the policy-holder, without allowing the complainant to exercise her option to get 1/3rd maturity amount in cash by way of commutation and further, without her consent, they invested the same in their own annuity scheme, thereby, once again, a flagrant violation of the policy terms has been committed by the Insurance Company which ex facie exhibits the unfair/restrictive trade practice on their part.  Even if it is accepted for argument-sake that investment of the maturity benefit in the annuity scheme is mandatory as contended by the Insurance Company, principles of equity and fairness require that the policy-holder should have the right to come out of the scheme if she is in dire need of the funds at any point of time or if the services of the OP is poor or not at the expected level.   Thus, in view of such instances of clear service deficiency and also unfair trade practice that ultimately caused not only great mental agony but also heavy financial loss to the complainant, she is entitled for grant of the relief sought for against the OPs/Insurance Company and hence, the complaint may have to be allowed, he pleaded.

 

                     6. Per contra, learned counsel for the OPs/Insurance Company, at the outset, would contend that the complainant has not come to this Commission with clean hands, since certain factual averments made by her in the complaint are blatantly false.  According to him, the complainant claims that she had paid all the 10 half-yearly premium installments covering the 5 year policy period, whereas, the fact remains that she had paid only 7 instalments for three and a half year, which is admitted only now in the course of arguments.  Secondly, having taken a policy to get periodical pension at the reaping phase after the accumulation period is over, the endeavour of the complainant in projecting a pure pension Policy as a traditional policy is highly devious.  Having taken a policy for deriving pension by way of investment of the maturity proceeds in the annuity scheme, the intentional behaviour of the complainant to render the policy lapsed by committing wanton default in paying premium after the 7th instalment speaks otherwise, only exhibiting the mala fide intention.  Further, there is no question of lapse or revival involved here for the reason that the policy came to vest on 24.09.2012 with the accrued premiums paid by way of 7 half-yearly instalments and, in fact, 4 days prior to that, that was on 20.09.2012 itself, by the option letter under Ex.B3, they duly informed the complainant about the vesting of her policy and called upon her to exercise the option as to the type of annuity she prefers to purchase and further to submit the various documents as mentioned therein.  It was due to non-receipt of the requisite documents from the complainant, the OPs were unable to initiate the annuity payments, which only indicates that the complainant did not show any real interest in further processing of the policy scheme.  Therefore, for her own default throughout, she cannot blame the Insurance Company of any service deficiency or unfair trade practice particularly when the whole policy scheme and the terms & conditions covering the same have been duly approved by the statutory body/IRDAI.  At any rate, having not come forward to exercise her option over the letter under Ex.B3, the complainant has no locus standi to allege any violation of the policy conditions by the Insurance Company on the ground that no consent was obtained from her in respect of the annuity scheme.  Further, the uniqueness of the policy in question is that it does not allow for surrender or full withdrawal of the amount after the vesting date. As per the Policy document, which is the evidence of contract, the maturity amount will be payable only in the form of pension.  The complainant has evinced no care to further follow-up the policy scheme despite due intimation for submission of documents on  her part.  For her indolence, she cannot find fault with the OPs by alleging service deficiency and hence, the present complaint without any legal basis is liable to be dismissed at the threshold with exemplary costs, he urged.

 

             7. Having regard to the rival submissions advanced on either side, the following issues arise for consideration in this case:-

     a) Whether the complainant can seek for surrender of the pension policy that has already matured and urge the Insurance Company not to invest the maturity benefits in the annuity scheme and instead, to pay it to her in its entirety along with all accrued benefits?

             b) Whether, after the accumulation stage and at the reaping phase, the complainant has the right to go out of the pension scheme availed by her on the ground that she is in dire need of money or that the performance is not at the expected level?

             c) To what relief, the complainant is entitled to?

 

             8. Since the issues are inherently connected to each other, they are dealt with and discussed together.  Before proceeding further, it would be apt to have a brief outline of the unique features of a pension plan/policy like the present one that differs from the traditional insurance plans like Term Insurance - availed for a fixed period of time, Whole Life Insurance - providing guaranteed death benefits  and Endowment Plan - a combination of investment plus life insurance.  The major difference between the Traditional Plans and the Pension Plan is that, in the former, money is not invested in any market tool, whereas, in the latter, the savings are invested in different market instruments.  Therefore, returns are 'fixed' in Traditional Plans and in Pension Plan, depending upon the market performance, returns can be either high or low and that is why, insurance plans under the traditional category are highly secure but it is not so in the latter case.  Since the premiums paid under pension plans are used to provide cover and invest the money in different market tools, the lock-in period here would be around 3 to 5 years, whereas, the plans under the traditional policies are locked in till they attain maturity.  One another distinct feature of a pension plan is that it works in two phases called - i) Accumulation Phase covering the duration of premium payments to accumulate money and its investment by the Insurance Company on behalf of the policy-holder, and  ii) Reaping or Vesting Phase in which '1/3 of the Corpus is paid to the policy-holder while the balance is invested in an annuity scheme', whereupon, the annuitant is paid pension at regular intervals.  As such, unlike the Traditional Plans, where returns are fixed, the same cannot be fixed or kept for payment or final settlement or withdrawal in pension plans.  The premiums paid under a pension policy at the accumulation stage are not meant for payment of the maturity benefit, out of which, after commuting 1/3rd portion, with the balance corpus, the policy-holder has to necessarily buy an annuity plan for getting periodical pension and, as such, a pension policy-holder has no entitlement for withdrawal of the maturity benefit on vesting as a whole.  To put in a nut-shell, while Traditional insurance plans generally provide life cover along with guaranteed returns, non-traditional insurance plans like Pension Policies are more of an "investment product" and less of an insurance product and hence, returns therein may be usually higher but not guaranteed.  Therefore, no individual would ever avail a pension policy without being aware of the higher risk factors as well as the pros and cons involved in such plans where the premium paid is subject to investment risks associated with capital markets and the Net Asset Values of the Units that may go up or down depending upon the performance of fund and various factors that influence the capital market.  The pattern and concept of a pension plan or policy, in crux, is that the accumulated benefit available is not meant for disbursal at the end of the cover period, but, it is for investment in the market under an annuity scheme for payment of periodical pension to the annuitant/policyholder.

 

             9. In this backdrop, we have gone through the proposal form and the policy in question, marked as Ex.B2 and Ex.A1 respectively, to appreciate the issues.  From the proposal form, we see that the complainant had opted for 'Pure Pension Plan' and further, she has chosen to allocate 30% and 70% of the premium for Equity Pension Fund and Growth Pension Fund respectively.  Having so opted in the proposal on the basis of which, the policy is issued, the complainant must be aware of the core clause in the policy on "maturity" that tells the policyholder as to how the maturity benefit would be dealt with.  It is but apt to reproduce the said clause here-under:-

               " At Maturity - Where the Life Assured attains the vesting age he/she will have the option to commute up to one third of the Maturity Benefit and purchase an annuity with the remaining two third of the Maturity Benefit in accordance with prevalent tax laws.  The Annuity may be purchased either from the Company (depending on the annuity products then available with the Company) or from any other Annuity Provider."

A combined reading of the above details available in the Proposal Form and the Policy would leave no room for any ambiguity that the complainant availed the policy as a pure pension plan and that the tenor of the policy insofar as its operation upon maturity is concerned that the complainant shall purchase an annuity with 2/3rd of the maturity benefit for getting periodical pension and hence, there is no scope for wholesome disbursal/withdrawal of the accumulated corpus. It is argued that the complainant has the right to walk out of the scheme if she is in dire need of the money and if the service of the OP is not at the expected level.  But, we find no logic in the said argument since it seems that the complainant deems it to be a traditional insurance but the actuality is otherwise that it is a pure pension policy. It is true that the policy contains a point of exit by way of surrender clause 10(i) stating that where premiums have been paid regularly for at least three consecutive years following the Date of Commencement of Policy, the Policyholder may surrender this policy for the Surrender Value at any time.  Even according to the complainant, after the lock-in period of three years, with the payment of the 7th instalment, she stopped paying the premium.  If it was that much intentional, the lingering question is as to why she did not surrender the policy immediately after payment of the 7th instalment.  Obviously, she allowed the policy to cross the cover period of 5 years for vesting, knowing that, as per the policy terms, in such an event, she could not get any return except the 1/3rd commutation from the maturity benefit and she shall invest the balance in an annuity scheme at her option. Having failed to surrender the policy immediately after the 7th instalment and having allowed it to attain maturity, the complainant virtually let the gate for surrender closed permanently and it cannot be opened under any circumstance as per the framework of the policy availed by her. In such circumstances, the following averment made in the complaint assumes much significance:-

               " 9. .... There is no doubt that at that time the complainant joined in the scheme with the hope of getting pension only.  But at present there is a changed circumstance, after expiry of five years of time that the complainant wants to discontinue the scheme in order to get the maturity proceeds in full, before investing in annuity, which is optional under the policy.",

After purchasing the pension policy with a clear intention and understanding that the return is meant for investment so as to get pension, once the policy has attained maturity, she is estopped from surrendering it or seeking withdrawal of the accumulation/corpus. By acting diligently, instead of buying a pension plan, the complainant could have availed a regular traditional policy whereunder she can probably foreclose, surrender or cancel the contract for the two reasons projected in the argument. At any rate, she is bound by the terms of the policy in particular the maturity aspect to the effect that it is mandatory for the complainant to purchase an annuity scheme with 2/3rd of the maturity benefit and what is optional is that such annuity may be purchased either from the OP/Insurance Company or from any other Annuity Provider.  In the light of the above discussion, we are of the considered opinion that, having regard to the framework of the policy, the complainant has miserably failed to substantiate a case of service deficiency or unfair trade practice against the OPs and hence, on that issue, the complaint is liable to be dismissed.

 

             10. Coming to the relief aspect, it is now submitted by the counsel for the Insurance Company that, as on date, the fund value under the policy is Rs.17,52,129/-, out of which, 1/3rd amount  that comes to Rs.5,84,043/- can be withdrawn by the complainant and, from the balance amount of Rs.11,68,086/-, she has to purchase an annuity either from them or any other annuity provider as per her choice.  But, in the absence of comprehensive calculation details, based on which the aforesaid sum came to be arrived at by the Insurance Company, it is not proper to act on the said figures.  Further, by marking Ex.B3/Option Letter, dated 20.09.2012, although the Insurance Company claims that they duly informed the complainant about vesting of the policy and about the option to be exercised on her part regarding the maturity benefit, it is the grievance of the complainant she was never informed about the factum regarding maturity of policy and the formalities to be complied with.  According to her, she was actually deprived of the opportunity to exercise her option over investment of the maturity benefit as provided in the policy.  On our scrutiny, we do not find any single material on the side of the OP to indicate proof of delivery of the option letter under Ex.B3 to the complainant.  Here, the policyholder committed default in paying three last premiums and thereupon, she was under the impression that the policy got lapsed automatically and hence, she would be getting back the accrued sum.  In such circumstances, when the OPs/Insurance Company has allowed the policy to vest with the premium accrued by way of 7 half-yearly instalments, it is their bounden duty not only to inform the complainant duly about the vesting of the policy through an option letter but also to have in possession tangible evidence to show proof of delivery of such option letter to the complainant.  Even in their letter under Ex.A6, dated 09.07.2013, whereby, the Insurance Company rejected the surrender request, there is no reference or mentioning about the option letter, dated 20.09.2012.   In the absence of any proof for due delivery of the option letter, dated 20.09.2012, to the complainant, or any material to suggest that proper information was given to the complainant about the vesting of the policy and the formalities for purchase of the annuity, the only inference is that she has not been put on notice about the same and thereby, she is deprived of the opportunity to exercise her option regarding investment of the maturity benefits.  To that extent, the OPs/Insurance Company have committed service deficiency, for which, they must be fastened with liability regarding the implications arising there-from.  In our view, directing the Insurance Company to pay to the complainant the 1/3rd commutation value accrued in the Policy as on the vesting date along with interest @ 9% p.a. from the said date till the date of payment would be just and fair.   Regarding the annuity investment, the OPs shall apply the instance of a best-performed annuity scheme bought with the maturity benefits that had accrued from an identical policy vested during the relevant time and pay the proceeds from the first investment upto 2022 and they shall get an option from the complainant either to sail with the applied scheme or some other scheme of her choice from 2023 onwards.

 

             11. In the result, the complaint is allowed in part to the extent of directing the OPs/Insurance Company to pay to the complainant  1/3rd commutation value accrued in the Policy as on the vesting date along with interest @ 9% p.a. from the said date till the date of payment and, regarding the annuity investment, the OPs shall apply the instance of a best-performed annuity scheme purchased with the maturity benefits that had accrued from an identical policy vested during the relevant time and, on that basis, pay the proceeds accrued upto 2022 and, they shall get an option from the complainant either to sail with the applied scheme or to avail some other annuity scheme of her choice from 2023 onwards. The above directed payments shall be paid by the Insurance Company to the complainant within a period of six weeks from the date of receipt of a copy of this Order.  No costs.

            

            

R. KARUPPIAH                                                           R.SUBBIAH, J.

JUDL. MEMBER                                                        PRESIDENT.

 

 

LIST OF DOCUMENTS MARKED ON THE SIDE OF THE COMPLAINANT

 

•       Date            Description of Documents
•  
•  
•  
•  
• Complainant's letter seeking payment of the maturity value
•  
•  

 

LIST OF DOCUMENTS MARKED ON THE SIDE OF THE OPs

 

•       Date            Description of Documents

Ex.B1      12.01.2013 Copy of Email.

Ex.B2      24.09.2007 Proposal Form

Ex.B3      20.09.2012 Option Letter

Ex.B4      06.12.2012 Surrender Request

Ex.B5      26.12.2012 Rejection Letter

Ex.B6      09.07.2013 Rejection Letter.

 

 

 

 

R. KARUPPIAH                                                           R.SUBBIAH, J.

JUDL. MEMBER                                                        PRESIDENT.

 

ISM/TNSCDRC/Chennai/Orders/OCTOBER/2022.

 

 

 

 

Orders, dated   26 .10.2022, pronounced in

C.C. No.19 of 2014

 

In the result, the complaint is allowed in part to the extent of directing the OPs/Insurance Company to pay to the complainant 1/3rd commutation value accrued in the Policy as on the vesting date along with interest @ 9% p.a. from the said date till the date of payment and, regarding the annuity investment, the OPs shall apply the instance of a best-performed annuity scheme purchased with the maturity benefits that had accrued from an identical policy vested during the relevant time and, on that basis, pay the proceeds accrued upto 2022 and, they shall get an option from the complaina nt either to sail with the applied scheme or to avail some other annuity scheme of her choice from 2023 onwards. The above directed payments shall be paid by the Insurance Company to the complainant within a period of six weeks from the date of receipt of a copy of this Order.No costs.

 

 

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