Subject: Have an investment linked insurance policy? Then you are not a consumer.
Backdrop: The Consumer Protection Act includes all services within its ambit except those which have been rendered free of charge or availed for commercial purpose. There are several judgments that observe that even business houses can file consumer complaints for grievances against insurance companies, because the purpose of insurance is not commercial gain or for earning profits, but to indemnify against losses.
In contrast, there are unit linked or investment linked life insurance policies which are taken by individuals. These policies have a duality- to provide insurance coverage and act as an investment. In a recent judgment, the National Commission has held that such policies involve speculative gains through trading in shares in the stock market and hence are commercial in nature. So a consumer complaint for a grievance regarding such policies would not be maintainable.
Case Study: Ram Lal Aggarwalla filed a complaint before the Cuttack District Forum alleging that the branch manager of Bajaj Allianz Life Insurance Company had sold a Unit Gain Super Diamond Policy worth Rs 10 lakh for which a premium a of Rs 2 lakh would have had to be paid each year for the next 24 years, totalling Rs 48 lakh. Aggarwalla’s grievance was that he was sold the policy with a disregard of his total income and without considering his ability to pay such a high premium. He claimed that the policy was sold by the manager with malafide intent to meet sales targets. Aggarwalla also alleged that the company had played with his money without authorization, resulting in his funds reducing to Rs 1,36,000 for which no details had been furnished.
Bajaj challenged the maintainability of the complaint before the consumer forum on grounds that a unit or market linked policy is for speculative gain and the holder could therefore not be termed a consumer.
Bajaj also pointed out that Aggarwalla was a lawyer and a notary, and could therefore not have signed up for a policy without being clear about its terms and conditions. Also, the policy was taken through his wife who is an agent of the company. Bajaj alleged that Aggarwalla wanted his wife to earn the commission and then take back the premium under some pretext. He had hence filed the complaint, the company said.
Although allegations had been made against the branch manager by name, he had not been made a party to the complaint, which is bad in law. Every policy has a free look-in period of 15 days and it can be returned within this period if the insured is unhappy with the terms and conditions; but in this case, this was not done. The complaint was filed years later instead.
The District Forum observed that the policy was investment linked, the premium for which is put in the share market for speculative gain. Holding such investments to be beyond the purview of the Consumer Protection Act, the Forum dismissed the complaint as non maintainable. Aggarwalla appealed against this order to the Odisha State Commission which agreed with Forum’s view.
He then filed a revision plea with the National Commission which said that the proposal form had been filled in by Aggarwalla and transactions had been made through his wife. It, too, held that the policy was for speculative gain so the holder would not be a “consumer” defined as per the Consumer Protection Act. The complaint was found to be devoid of merit. The Commission dismissed Aggarwalla’s revision petition and imposed a cost of Rs 10,000 to be paid by Ram to the Consumer Welfare Fund within four weeks, along with 9% interest if not paid within the stipulated time (National Commission’s judgement dated 23.4.2013 delivered by Ms Rekha Gupta.)
(The author is a consumer activist and has won the Govt of India’s National Youth Award for Consumer Protection.)