Mis-selling of insurance policies: Full premium should be refunded

The National Commission acknowledged that the complainant, a retiree, couldn't afford a 10-year annual premium and concluded that the agent had misled him

Gyan Prakash Singh was approached by a Tata AIA Life Insurance agent who induced him to purchase policies. During the discussion, the agent assured Singh that he would need to pay a one-time premium only and that, 18 months later, he would receive promising returns. Singh fell for the glib sales talk. In early 2009, he purchased five policies worth ₹49,900 each — one in his name, two in his wife’s name, and two in his daughter’s name.

 

When he received the policies a couple of weeks later, he discovered that each policy required premium payments for 10 years. It was not a one-time payment, as the agent had conveyed. Singh, who had already retired from service, immediately took up the issue with the insurer, pointing out that the premiums were beyond his paying capacity and that the policies had been mis-sold.

 

The insurer refused to cancel the policies and refund the premium, claiming that the free-look period had expired. Singh argued that the free-look period could commence only from the date of receipt of the policies and that he had sent his representation within a week of receiving them. As a partial resolution, the insurer offered a refund of 20 per cent of the premium, which Singh refused to accept. Instead, he filed a complaint before the Lucknow District Consumer Forum II, alleging deficiency in service. He sought a full refund of the entire amount of ₹2,47,700 paid for the five policies. He also demanded compensation and costs.

 

Tata AIA did not contest the complaint. The Forum ordered the insurer to deduct processing charges and refund the balance premium of ₹2,47,000 along with 9 per cent interest. Additionally, the insurer was directed to pay ₹10,000 as compensation and ₹5,000 as litigation costs. A period of two months was given for compliance, failing which 12 per cent interest would be payable.

 

Tata AIA challenged the order in appeal, contending that its lawyer had failed to defend the case. The Uttar Pradesh State Commission rejected this plea, as the insurer provided no evidence to show that a lawyer had been appointed or that legal fees had been paid. The Commission concluded that the ex parte decision against the insurer was based on proper reasoning and dismissed the appeal with further costs of ₹10,000.

 

The insurer then filed a revision petition before the National Commission. It argued that the complaint was time-barred, as the policies were issued in 2009 while the complaint was filed in 2013. The Commission rejected this argument, noting that the partial refund of 20 per cent of the premium had been issued in 2012, making the complaint well within time when filed in 2013.

 

The National Commission acknowledged that Singh, a retiree, would not be able to pay an annual premium for the next 10 years. It concluded that the insurer’s agent had enticed and deceived Singh. The Commission further observed that there was no justification for refunding only 20 per cent of the premium while forfeiting the remaining amount collected through mis-selling.

 

In its judgment dated November 7, 2024, delivered by J Rajendra, the National Commission concluded that the well-reasoned concurrent findings of both the District Forum and the State Commission could not be questioned in revision proceedings. It also upheld that the award of compensation and costs was reasonable. Accordingly, the insurer’s revision petition was dismissed, and the orders in Singh’s favour were upheld.

 

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The writer is a consumer activist