Failure To Pay Minimum Surrender Value, Delhi District Consumer Commission Directs Star Union Dai-ichi Life Insurance Co. Liable

The District Consumer Disputes Redressal Commission-I, Chandigarh bench comprising Pawanjit Singh (President) and Surjeet Singh (Member) held Star Union Dai-ichi Life Insurance Company Limited liable for deficiency in services for failure to pay minimum surrender value of the Insurance Company. The bench directed it to pay the surrender value, compensation and litigation costs to the Complainant.

Brief Facts:

Miss Prabhjot Kaur (“Complainant”) applied for an agriculture loan with Union Bank of India (“Bank”) and was informed by the Manager of the bank that obtaining a Star Union Dai-Chi Life Insurance Policy/SUD Life Guaranteed Money Back Plan was mandatory. The Manager assured her that she could surrender the policy at any time. Based on this representation, the Complainant purchased the policy of Star Union Dai-ichi Life Insurance Company Limited (“Insurance Company”) by paying Rs. 25,000/-. However, the Complainant did not receive the policy document within the cooling-off period. Subsequently, she paid premiums on January 24, 2019, and January 13, 2020. When the Complainant approached the bank to surrender the policy, she was dismayed to discover that she would only receive Rs. 17,000/-, despite having paid Rs. 73,270/-. Despite multiple communications with the bank and the Insurance Company, she didn't receive any satisfactory response. Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission-I, U.T. Chandigarh (“District Commission”).

In response, the Insurance Company contended that the Complainant submitted a proposal/application form for the purchase of the SUD Life Guaranteed Money Back Plan on January 11, 2018. The policy, with an annual premium of Rs. 24,666/-, a policy term of 20 years, a premium payment term of 10 years, and a sum assured of Rs. 3,00,000/-, was issued on January 23, 2018. According to the Insurance Company, the policy was delivered to the Complainant on February 13, 2018, and was governed by the terms and conditions outlined in the policy. It asserted that the policy provided a Free Look Period, allowing the Complainant to return the policy within 15 days if dissatisfied with the terms and conditions. It accused the Complainant of fabricating a false story. Additionally, it stated that the Complainant failed to pay the third annual premium. On the other hand, the bank didn't appear before the District Commission. Therefore, it was proceeded against ex-parte.

Observations by the Commission:

The District Commission referred to the insurance policy, specifically the provision on the discontinuance of due premiums and the creation of a Reduced Paid-Up Policy after the payment of at least three full years of premiums. According to the policy, the Complainant was entitled to the minimum guaranteed surrender value which was stated as 30% of the premium amount paid. The District Commission noted that the Complainant paid three premiums, making her eligible for a surrender value of Rs. 36,356.01/-. Therefore, the District Commission held the Insurance Company liable for deficiency in services.

Based on the calculation, the District Commission directed the Insurance Company to pay the surrender value of Rs. 36,356.01/- with interest at 9% per annum from March 16, 2021, onwards. Additionally, the Insurance Company was directed to pay Rs. 10,000/- to the Complainant as compensation for mental agony and harassment and Rs. 8,000/- as litigation costs. 

Case Title: Prabhjot Kaur vs Star Union Dai-ichi Life Insurance Company Limited and Others

Case No.: CC/85/2021

Advocate of the Complainant: Shri Jagjit Singh Chatrath

Advocate for the Opposite Parties: Ms Monika Thatai and Ms Shruti Sharma proxy for Shri Nitin Thatai (For Star Union Dai-ichi Life Insurance Co.)

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