Delhi Consumer Commission Holds TATA AIA's Repudiation Of Life Insurance Claim Valid Over KYC Verification Failure

The District Consumer Disputes Redressal Commission-II, comprising Monika A. Srivastava (President) and Kiran Kaushal (Member), has partly allowed a complaint against TATA AIA Life Insurance challenging the repudiation of a life insurance policy. While upholding the repudiation of the claim, the Commission held that the insured had failed to complete the mandatory identity and health verification requirements.

Brief Facts

The complainant's husband had purchased a Fortune Guarantee Plus Policy from TATA AIA Life Insurance(Opposite Party), commencing on 25-10-2021, with a sum assured of Rs. 11,55,150/-. The premium was paid monthly via ECS. The policyholder passed away due to COVID-19 on 14-12-2021. Even after his death, two premiums were deducted from the bank account of the complainant's son. Following the death of the insured, the complainant submitted a claim seeking payment of the assured sum. However, by a letter dated 15-12-2022, the insurer rejected the claim and refunded only the premium amount of Rs. 41,800/-.

Thereafter, the complainant, along with her son, visited the insurer on 28-02-2023 and requested the release of the policy amount. However, the insurer refused to reconsider the claim. Aggrieved by the repudiation, the complainant approached the District Consumer Disputes Redressal Commission-II, Udyog Sadan, seeking payment of the insured amount along with interest at the rate of 24% per annum from the date of repudiation till realization. The complainant also sought Rs. 2,50,000/- towards mental agony and harassment, along with Rs. 20,000/- as litigation expenses.

TATA AIA Life Insurance, the Opposite Party, contended that it had initiated a verification process through an investigator on 11-11-2021 to verify the details furnished in the proposal form; however, no response was received from the insured. The insurer submitted that the insured could neither be contacted nor photographed for KYC verification. It further contended that since the insured failed to make himself available to clear doubts regarding his KYC details, the insurance contract was void ab initio. The insurer also relied upon a policy clause stating that in cases of non-accidental death occurring within 90 days from the commencement of risk, the policy would stand terminated and only the premiums paid would be refundable. Since the insured died within two months of commencement of the policy, the insurer maintained that only refund of the premiums was payable.

Observations of the Commission

The Commission observed that the policyholder had failed to provide the relevant information regarding his KYC details. The Commission noted the investigator's report and held that the insured was unavailable for verification and failed to make any subsequent effort to present himself to clear doubts regarding his KYC details. It observed that the policy was void ab initio.

Furthermore, the Commission observed that the insured had died before the expiry of 90 days from the commencement of the risk under the policy. It referred to the policy clause prescribing a 90-day waiting period for non-accidental deaths. The Commission also observed that the insurer's conduct in delaying the refund of the premium amount was improper. It noted that although the insurer treated the policy as void ab initio, the premium was refunded only after nearly one year. The Commission held that the insurer had no justification for retaining the complainant's money for such a prolonged period.

Accordingly, the Commission held that OP had acted in accordance with the terms and conditions of the policy by refunding only the premium amount of Rs. 41,800/- instead of paying the full sum assured. While upholding the repudiation of the insurance claim, the Commission partly allowed the complaint and directed the Opposite Party to pay interest at the rate of 8% per annum on the refunded amount, along with Rs. 10,000/- towards mental agony and litigation expenses.

Case Title: Aysa vs TATA AIA Life Insurance

Case No.276/2023

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