Rama Manohar (name changed), a 62-year-old housewife from Mumbai, had approached her bank for advice on an insurance policy that would provide them with a regular income after retirement and also funds for the higher education of their grandson, when he reaches the age of 15. Mr and Ms Manohar’s son has been afflicted with a serious health issue since birth and has limited earning capacity. To support the future of their grandson, they had taken the decision to sell their flat and invest the proceeds from the sale in an insurance policy.
Their relationship manager recommended Tata AIA’s Value Income Plan and managed to convince Ms Manohar that the plan was suitable for her needs. The process of reviewing the proposal, evaluating documents and signing of forms occurred during the pandemic-enforced lock-down in 2020. The policy, when finally issued, was to commence on 30 December 2020, with an annual premium of Rs20.90 lakh to be paid for five years, while providing cover for a period of 40 years.
These were absolutely not the terms that Ms Manohar was expecting. Not only was the premium payment period kept at five years, but instead of having her grandson as the nominee, he was shown as the life assured on the policy. The whole point of seeking an insurance policy for Ms Manohar, was to have a regular income and provide some funds for their grandson’s education. The relationship manager had instead insured the life of her grandson for a period of 40 years at a hefty annual premium!
Furthermore, the proposal listed Ms Manohar as a salaried employee of a private concern, when she was, in fact, a housewife. It also incorrectly stated that she had an annual income of Rs85 lakh, which the insurer had surprisingly never crosschecked through income-tax (I-T) returns or salary slips.
At the time when the policy was issued, Ms Manohar was also coping with stress brought on by pressing health issues in the family. While her husband was looking after their grandson when his parents were quarantined due to COVID, Ms Manohar’s mother was undergoing pacemaker implantation surgery in Pune. The resulting chaos and stress at home meant that they were unable to raise a complaint or cancel the insurance policy within the stipulated free look-in period.
Nevertheless, Ms Manohar filed a complaint with the grievance redressal officer (GRO) of Tata AIA on 12 August 2021, seeking relief on the grounds that she was mis-sold the policy. As expected, their complaint was rejected by the GRO on 12 December 2021, stating that Ms Manohar had been given a written document mentioning that a policy on the life of her grandson was being issued after receipt of the signed proposal form, relevant documents and the initial premium deposit. The GRO, in the rejection of the complaint, said, “Complainant is qualified, and had read and understood the proposal form before signing. The request for cancellation of the policies was received beyond the stipulated free look period…after a gap of nearly eight months.”
After being rejected by the GRO, Ms Manohar approached the insurance ombudsman for relief on 20 December 2021 and a hearing on the matter was held online on 23 September 2022. The forum rightfully observed that the delay in filing a complaint in order to cancel the policy was marginal, considering the exigent circumstances.
On investigation of the policy documents, they concluded that the proposal incorrectly mentioned Ms Manohar’s annual income as Rs85 lakh, without any documented proof. The ombudsman’s order reads, “It is observed, that while underwriting, insurance company had not obtained ITR of the proposer and had accepted the proposal on the basis of a financial questionnaire and copies of passbook showing bank balance.” On verification of Ms Manohar’s I-T returns for the past three years, the forum discovered it to be below Rs5 lakh in each case.
While strongly reprimanding the company for its failure to complete the due process in the verification of Ms Manohar’s personal details, the ombudsman’s order stated, “The respondent company failed to ascertain regular income and paying capacity of the complainant. This shows the insurance company had not followed financial underwriting rules at the time of issuing policy to the complainant. It is noted from PIVC (Pre-Issuance Verification Call) recording submitted by the company that while verifying the details, complainant informed that her grandson is nominee under the policy, when the representative of the company informed that the policy is issued on the life of (the grandson) as per proposal.”
After an investigation of all facts, the forum noted in its order dated 30 September 2021, that the insurance company had not sold the policy to Ms Manohar in a transparent manner and that it was a clear case of mis-selling. It directed Tata AIA Life Insurance to cancel the policy and refund the premium amount of Rs20.90 lakh within 30 days of receiving the order. However, as it turns out, Tata AIA has challenged the order and has decided to take the matter to the high court.
This incredible case of mis-selling came to light recently, when Mr and Ms Manohar sought guidance from Moneylife Foundation, regarding their next steps. Abhay Datar, a retired banker and a consumer activist, who provides guidance in many insurance and banking-related matters for Moneylife Foundation’s members, advised Ms Manohar to avoid falling into a trap of lengthy legal battles and expensive court fees. Instead, they were advised to file a consumer court complaint, which would give them a relatively quick, inexpensive and desirable outcome.
Mis-selling of insurance policies is an unfortunate menace that continues to affect not just senior citizens but many others as well. While her fight for justice continues, Ms Manohar’s case is an excellent example for others to be vigilant about what insurance companies trick you into buying and to follow through with the grievance redress process for eventual relief.
Interested readers can seek guidance and advice on insurance or mediclaim related matters from Mr Abhay Datar, most Fridays between 4-6 pm at the Moneylife Foundation office in Dadar, Mumbai. Call (022) 24441058 or (022) 24441059 for an appointment.