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Consumer disputes with insurance service providers are not new. Prompt resolution of these disputes remains an issue, with a considerable time lag between lodging complaints and resolving them. There have been a growing number of unresolved complaints and the insurance regulator Irdai has taken serious note of this. What is the recourse available to policyholders? What can they do and whom should they approach?
Take the example of Raghuvir Singh, who had bought a unit-linked insurance plan (Ulip). Ulips are insurance plans that have an investment component and give returns to the policyholder at the end of the policy term. When Singh purchased this plan with a private sector player, he had indicated that the fund should be invested in equity-linked instruments.
As Singh was a high risk taker, he wanted to enjoy the benefit of higher returns given by the equity instruments. However, the insurer erred while allocating his fund and invested the premiums in debt market instruments. Singh did not notice this anomaly for three years, and as a result, the policy delivered much lower returns than what he should have got, had the premiums been invested in equities.
Deciding that he would accept nothing less than full compensation for his losses, Singh first filed a written complaint to his insurer through their Grievance Redressal Officer (GRO) along with all the necessary documents in support of the complaint. Not receiving a satisfactory reply from his insurer despite several visits, he approached the Insurance Ombudsman.
As the Ombudsman generally deals with claims-related complaints, Singh was unsure whether his grievance would be taken up. He simultaneously escalated his complaint to Irdai's Grievance Redressal Cell of the Consumer Affairs department. Fortunately, the insurer responded to Singh soon and awarded him a favourable sum as compensation.
Not everyone may be as lucky as Singh. Rajesh Verma had taken a home loan of Rs 9.65 lakh in 2005 and a loan cover of Rs 1.26 lakh. He died three years later. But the insurance company refused to pay insurance on the loan, saying that the age proof of the insured was not given. They also claimed that the premium amount was returned on the same day as it was paid. However, the bank statement of Mrs Verma showed that the amount was repaid in 2010, two years after his death.
Mrs Verma approached the District Consumer Commission, which awarded the judgement in her favour. Not to be outdone, the insurer dragged the case to the State Commission. When it was dismissed there too, they appealed to the National Commission. But the verdict here too was not in favour of the insurer. According to reports, the insurer even went to the Supreme Court with a Special Leave Petition, which was rejected in 2014. After a tortuous six-year-long legal battle, the jury is still out on whether the aggrieved policyholder eventually received her compensation.
While the insurer was directly culpable here, there have been cases where agents and intermediaries have been instrumental in triggering long-drawn disputes. Let us take the example of Ashish Shah who had to knock the doors of the Allahabad High Court to fight against a case of illegal and void policy terms.
In 2007, Shah took a single premium five-year insurance policy from a leading private life insurer by paying Rs 50,000. Much to his surprise, he was paid just Rs 248 in 2012. Befuddled, he approached the court. It was then that he became aware about the intricacies of the policy.
Apparently, Shah had opted for a sum assured of Rs 3.125 lakh as suggested by his agent, who hadn't explained the impact of choosing that sum assured. Under the terms and conditions of the policy, about Rs 9,000 per year would be used for insuring the customer, adding up to Rs 45,000 in mortality charges alone. After deducting the commissions, the customer was left with just Rs 248.
Shah was not aware of this and never intended the policy as a life cover. He came to know that the policy was supposed to be terminated automatically when the fund value reached Rs 10,000. This term was intimated to him through a letter, whereas in practice, any change of terms needs the signature of all parties.
The judgement went in favour of Shah, as the company had not followed the rules. The company was asked to return the premium and Rs 10,000 to cover the costs incurred by the customer. Reports related to the case reveal that instead of petering out to a close, it's still being appealed in the Supreme Court.
Lessons
The above examples show that it is possible to take legal action to resolve insurance disputes through civil or consumer courts. However, timelines may be very long and one may not get a favourable settlement unless the case is strong and the documentation is perfect. Legal expenses can be quite prohibitive in certain cases.
Despite this, it is evident that consumers resort to legal action in many cases when approaching the insurer's Grievance Redressal Cell or the Insurance Ombudsman fails. The government has also enacted a Right to Information Act in 2005 to give citizens an access to the information under control of public authorities to ensure transparency and accountability. The onus is on the Irdai to continue to insist on fast-tracking of dispute resolution and impose strict penalties on insurers if they fail to do so. Equally, consumers need to undertake sufficient due diligence not only while purchasing insurance policies but also after it becomes operational.
Precautions for policyholders
* Verify agent credentials and insist on getting written documentation for all promises or commitments made by the agent or insurer
* Disclose all relevant information to the insurer while purchasing the policy
* Ask your agent about the charges involved and the amount to be invested for Ulip products
* Review your insurance plan regularly
* Take care while issuing cheques. Cross check with your insurer to examine the exact payment terms
3-STEP ACTION PLAN
Approach the insurer's consumer grievance cell
- Write a letter or send an email to the insurer, describing the complaint. Attach all relevant proofs in support of the case
- Take an acknowledgement from the insurer, along with the date of the acknowledgment
- Ascertain if the complaint can be filed with the Ombudsman
- If yes, write a complaint giving details of the case and the required proof
- If no, escalate the complaint to Irdai
- Approach Irdai's grievance redressal cell and write to them or file an online complaint
- The complaint can be tracked if filed online
- If there is no response or if the insurer's response is unsatisfactory, escalate the case again to Irdai
The writer is CEO, BankBazaar.com
