Harjit Kaur took a home loan from SBI for Rs 9 lakh. However, the bank while sanctioning the loan also made her buy SBI Life Dhanraksha Plus LPPT insurance policy. She had to pay a premium of Rs 63,445 for this policy. Only because of this policy the total loan amount disbursed by SBI went up to Rs 9.63 lakh.
The insurance policy was sold to settle the home loan outstanding in case of the borrower’s death. Without the insurance protection, the liability to pay EMIs for the remaining tenure or paying off the outstanding balance of the house loan would have fallen on the husband or other family members.
Unfortunately, on June 10, 2011, Mrs Kaur died in a hospital at Amritsar after a brief illness. Shortly after that, her husband filed an insurance claim with SBI Life Insurance, however, it was rejected.
Why did SBI Life Insurance reject the policy claim?
SBI Life Insurance rejected the insurance claim because the insurance policy had been obtained by suppressing material evidence pertaining to pre-existing illnesses of the policyholder who was then deceased. After the rejection of the insurance claim from the insurance company, the husband of the deceased policyholder filed a case in the District Consumer Forum.
Fight in District Consumer Forum
It was a case of forced insurance selling, and the insurance company was found to be denying the rightful claim of the relative of the home loan borrower. The District Consumer Forum in their order dated October 15, 2015, said, “We find that the insurance death claim has been repudiated for the other prime reason that the deceased policyholder suppressed the fact of her continuing ailments (as alleged) in her ‘proposal form’ pertaining to the policy in question. However, it needs to be examined against the backdrop that the policyholder never herself opted for the insurance policy out of her free will (since it was never routine/standard life/health policy etc.,) and she had to compulsorily go in for its purchase at the instance/ compelling persuasion of the bank from who she had availed ‘housing loan’ and thus being in a subservient position she had to join the bank’s group insurance as member and to purchase the said policy that indemnified the housing loan outstanding but only in the remotest event of the sad demise of the borrowing policyholder.”The District Forum had passed an order which was favourable for the deceased policyholder. The order read, “In the light of all discussions, while partly allowing the present complaint we hold the titled bank service providers as guilty of unfair trade practice/ deficiency in service and thus order them to settle the impugned claim in full in terms of the related policy (i.e., liquidate the housing loan outstanding).” A compensation and cost of litigation award was also given by the District Commission.
Fight lost in State Consumer Forum
After the insurance company lost in the District Consumer Forum, they filed an appeal in the State Consumer Forum. The State Consumer Commission passed an order in favour of the insurance company.
They said in their order dated August 19, 2016, “It is evident from the medical treatment record that the policyholder suppressed the material information with regard to her health prior to her enrolment to the insurance policy. The policy in question was obtained by concealing the material facts regarding her health as such, the insurance contract became void-ab-initio, and the claim of the complainant was rightly repudiated by the company. The findings of the District Forum are contrary to the facts brought on the record. Therefore, the order of the District Forum cannot be sustained in this appeal.”
Case goes to NCDRC
The husband of the deceased policyholder filed an appeal in NCDRC. NCDRC made the following observations, “It is evident that the deceased policyholder did not approach the company for an insurance policy. It was rather, a policy that was required to be taken as part of the house building loan that was sanctioned by the bank. There is no evidence on record that the deceased policyholder approached the insurance company for a policy of life insurance. This is also evidenced by the fact that the insurance policy proposer was SBI.”
NCDRC also said that the insurance policy purchase has been processed as a collateral compulsion of the housing loan disbursement. “The complainant simply ‘signed’ at the ‘pre-marked’ destinations on the ‘proposal form’ along with the other documents,” said NCDRC in their order dated December 4, 2023.
NCDRC passed the award that SBI Life was indeed at fault and practised unfair trade practices and was also deficient in service. Hence, the order passed by the district consumer forum was held true.
“Such acts and omissions do add up to amount to ‘unfair trade practice’ and ‘deficiency in service’ under the act and thus making them vulnerable to an adverse award. The order of the State Commission is set aside, and the order of the District Forum affirmed,” said NCDRC in the order.