Consumer Forum Orders Rs 10 Lakh Refund Over Misleading Insurance Sale to Professor
Consumer forums have highlighted concerns over misleading insurance sales, with the forum directing the insurer to return ₹10 lakh to the policyholder.
A consumer forum has directed a refund of ₹10 lakh after finding that an insurance policy was allegedly sold to a professor through misleading representations.
Consumer Forum: The Hyderabad District Consumer Disputes Redressal Commission has directed an insurance company to refund Rs 10 lakh to a 73-year-old retired associate professor, ruling that the disputed policy was sold to her without her free will and informed consent. In an order dated August 27, the commission held the bank and the insurer jointly liable for deficiency of service and unfair trade practice, and additionally awarded the complainant Rs 50,000 in compensation and Rs 10,000 in costs.
The three-member bench, comprising president B Uma Venkata Subba Lakshmi and members C Lakshmi Prasanna and B Raji Reddy, found that the insurance company had dispatched the policy documents to the complainant’s permanent address at a time when she was residing abroad. The commission held that this deprived her of a meaningful opportunity to exercise the free-look period, the 10-15 day window during which a policyholder can cancel a newly issued policy and claim a refund.
Consumer Forum: What the complainant alleged
According to the complaint, the woman visited her bank’s branch on September 4, 2023, intending to transfer funds to her son, who resides in the United States. During this visit, bank officials introduced her to two agents who, she alleged, led her to believe she was making a one-time investment of Rs 10 lakh in an insurance policy that would yield an annual return of Rs 2.67 lakh after four years.
The complainant further alleged that the agents recorded her annual income as Rs 1 crore on the policy documents, despite her being a retired associate professor drawing a monthly pension of Rs 57,000. She stated that she never intended to invest, and that bank officials obtained her signatures on loan papers before routing the funds into the insurance policy, which she said was actually structured as a recurring annual payment rather than a one-time investment as represented to her.
The complainant said she sought to cancel the policy but was initially told by bank officials that cancellation would only be possible in September 2024. On her return from the United States in March 2024, she was reportedly informed that the cancellation window had shifted further, to September 2025. She subsequently approached the consumer commission, represented by advocate A M Rao.
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Consumer Forum: How the bank and insurer responded
The bank, represented by advocate Manav Gecil Thomas, denied obtaining signatures on blank documents and argued that the disputed transaction was between the complainant and the insurance company, not the bank itself. It contended that the complainant had conflated separate loan and insurance transactions.
The insurance company, represented by law firm Areness Law, submitted that the complainant had accepted the policy without objection and that it had been issued only after her request and approval. The insurer stated that the physical policy pack was dispatched and delivered to the complainant’s address on September 18, 2023, and maintained that it had complied with all applicable regulatory guidelines.
Consumer Forum: Commission’s findings
The commission observed that as a senior citizen, the complainant was entitled to honest, fair and transparent treatment from both the bank and the insurance company, and found that their conduct reflected a lack of transparency and unfair dealing. It noted that the close timing and linkage between the loan transaction and the insurance investment raised doubts about the genuineness of her consent.
On the matter of the free-look period, the commission pointed out that while the policy proposal form listed both the complainant’s permanent and current addresses, the insurer chose to send the welcome letter to her permanent address, where she was not residing at the time. It held that this could not be overlooked, stating that a statutory opportunity to cancel cannot be considered meaningfully provided when the relevant document is sent to an address where the complainant does not reside, and where she is out of the country when it arrives.
The commission also held that a retired senior citizen cannot be presumed to understand complex insurance terms and conditions, and that the onus was on the bank and insurer to explain these clearly to her.
Consumer Forum:The order
The commission directed the insurance company to close the disputed policy and refund the full Rs 10 lakh invested by the complainant, with the refund period running from the date of the policy to the date of realisation. It further directed the bank and the insurance company to jointly and severally pay Rs 50,000 as compensation and Rs 10,000 as costs to the complainant.
