Dept circular cannot modify policy conditions: Consumer forum

A departmental circular cannot modify contract conditions of an insurance policy, a consumer forum here has said while directing LIC to pay over Rs 6.96 lakh for deducting surrender value from a pension plan holder's investment prior to refunding her money.
The New Delhi District Consumer Disputes Redressal Forum held the state-run insurance company deficient in service for deducting an amount of Rs 6.46 lakh when the 71-year-old woman had surrendered her pension policies, saying the policy conditions clearly said no surrender value will be deducted.
"We have gone through the policy document in which it is categorically mentioned - 'The policy shall not acquire any surrender value' - whereas opposite party refunded the amount to complainant after deducting surrender value which is a clear case of deficiency on its part.

"No departmental circular can modify the contract conditions of policy," the bench presided by C K Chaturvedi said, adding that "deduction of surrender value which is not there (in policy condition) is unfair trade practice and against public policy and thus void."
The bench directed LIC to refund amount of Rs 6,46,055 to Delhi resident Meera Mahbubani, along with Rs 50,000 as cost of litigation.
The order came on the complaint of Mahbubani, who had said that she had invested Rs 52.5 lakh in 17 LIC pension plan policies, but since she was not satisfied with the returns she had decided to surrender the policies to re-invest the amount in other schemes of the company.

Even though the policy conditions said no surrender value will be deducted and LIC had assured her that no amount will be cut if she re-invests 50 per cent of the money, yet Rs 6.46 lakh was deducted despite her re-investing Rs 32 lakh in various LIC schemes, she had alleged.
LIC in its defence had contended that the amount was deducted as per a 2007 departmental circular which authorised such a deduction.