Did you know that cancelling your policy during the Free-look period has a cost attached? In case of ULIP, the NAV fluctuation is also part of this cost. But, what if the policy has been mis-sold to you? Is there any advantage in bypassing an intermediary to escape and avoid mis-selling and inaccuracies in the proposal?
Moneylife reader Ms Menon wrote to about an insurance policy sold of HDFC Life insurance that was sold to her father by a manager at one of the branches of HDFC bank, Chennai. She says the manager misrepresented the facts. “He said the policy holder would be my father and my mother would be the 1st beneficiary and I would be the 2nd beneficiary. In fact when he got the form filled, my father signed 1st, then my mother and lastly me. But when the policy documents came, I was the policyholder, my father was the beneficiary and my mother's name appeared no where”, says Ms Menon.
Ms Menon wanted to use the free-look period to cancel the policy for a full refund. “We knew that my father couldn't get a policy because he is 73 yrs of age. So he asked how it was possible to get an insurance policy at his age. They said it wasn't a problem in their bank. The sum assured was as per policy documents, Rs30 lakhs but we were told it was Rs50 lakhs. We've got the policy cancelled in the free look period by attaching a letter stating we want a full refund as this is a case of mis-representation of facts. But we've received Rs4000 less (Rs2.96 lakhs as against Rs3 lakhs that we paid as premium) Please suggest a suitable solution to this problem, whether we can get a full refund and whether some action can be taken against that bank employee.”
Why did she get Rs4000 less? During this free-look period of 15 days, the policyholder can choose to cancel the policy, change to another policy or alter the features selected in a policy. The premium refund will be adjusted for proportionate risk premium for the period on cover, expenses incurred by the insurer on medical examination and stamp duty charges. In case of ULIP, the risk of fluctuation in the NAV will be borne by the policyholder. So, if there is market crash between the time of policy issue and surrender, the policyholder will bear the risk even if the surrender is within the free-look period.
In case of mis-selling, you can compel the insurance company to repay the full amount. But, the onus is on you to prove mis-selling. Moneylife had taken up case of Arvind Injamuri, a retired ticket collector from Sholapur who was mis-sold Rs12 lakh worth ULIP by Reliance Life branch office. After a long fight, Mr Injamuri got back Rs12 lakh plus interest as there was strong proof of signature forging, inconsistent personal data in policies, dodgy witness details, wrong or unidentifiable photos, Pan card details even when it was not applied for one family member and so on.
Read - http://www.moneylife.in/article/reliance-life-ulip-mis-selling-justice-served/31172.html
In the case of Ms Menon, she had not kept copy of proposal form to substantiate her claim. The policy document had her signature as policyholder. Why did she sign as policyholder when she did not intend to be policyholder? If it was not her signature, she can get a forensic/handwriting expert to confirm that the signature was forged. If true, then she would still have a case. In absence of any proof, it is a difficult case. Moneylife did contact HDFC Life.
Here is HDFC Life’s response – “In the free-look in form, the customer has mentioned the reason of cancellation as 'misrepresentation of facts' and did not reveal anything beyond. Thus, it did not trigger a complaint of mis-sell. If Kavitha Menon insists that it was a mis-sell, we request her to connect with us to register a complaint. We will investigate the case and if found any discrepancy, we would refund the remaining amount.”
Is there an advantage of bypassing intermediary such as agent or bank personnel to avoid mis-selling and inaccuracies in the proposal? Online life insurance purchase does ensure that what the customer declares is what is received by the insurance company. There is no intermediary and hence there should not be any surprises in the policy document. Even if you are buying life insurance product through an intermediary, you can ensure accuracy of the proposal form by filling it yourself and not relying on the intermediary.
The 15 day free-look period starts from the time an insurance policy reaches the buyer. It's a reasonable period for the policyholder to go through the fine print and understand the policy. But, confirm with the insurance company if they send the policy documents by post or deliver it through the intermediary in case of an offline product. If it is routed through an intermediary, you need to beware as the intermediary can delay giving you the policy documents. When you are in doubt about any product or agent, don’t buy. It’s not a limited time offer.
Unscrupulous intermediaries try to deprive the policyholders of free-look period facility. If the insurer routes the policy through intermediary, they may not give it to the customer after a long time. The intermediary has earned commission and obviously does not want it to be reversed by policyholder cancelling the policy within the free-look period. Insurance companies should be sending the policy documents by mail as it will help to validate the mailing address of the policyholder.
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