Insurance Policy Can’t Be Treated as an Investment Linked to Sensex for Providing Refund Based on NAV: NCDRC
Moneylife Digital Team 06 February 2023
In an important ruling, the National Consumer Disputes Redressal Commission (NCDRC) held that the complainant cannot treat an insurance policy as an investment and seek refund based on net asset value (NAV), while surrendering the policy. The petitioner in this case has invested money in unit linked pension policy (ULIP) and was seeking surrender value based on NAV applicable at that time.  
In an order, the bench of C Viswanath (presiding member) and Subhash Chandra (member) says, "...the petitioner cannot treat the insurance policy as an investment which is linked to the Sensex and seek a refund on the basis of NAV since the contract of insurance is bound by the terms which may be related to the fluctuations of the Sensex but cannot be considered to be a deposit to reap the gains of investment."
"It is also evident that the petitioner has sought the repayment of his insurance policy which is governed by the terms and conditions of that policy as per catena of judgments of the Supreme Court and this Commission. Surrender value as per clause 5 of the said policy would amount only to 25% of the NAV as of the date of refund. The respondent cannot be faulted for having followed the conditions of the policy which is a contract between the petitioner and the respondent and binds them to the terms of that contract," the bench says.
Kolkata-based Gora Chand Chatterjee has filed an appeal against an order passed by West Bengal State Consumer Disputes Redressal Commission. He bought the ULIP under lifetime pension II policy from ICICI Prudential Life Insurance Co Ltd and paid the first annual premium of Rs45,000.
Following a circular guideline from Insurance Regulatory and Development Authority (IRDAI) dated 21 December 2005, ICICI Prudential Life withdrew the policy from the market on 1 July 2006. Mr Chatterjee claimed that he did not receive any intimation from the insurer and only in December 2008 did he receive a unit statement. In August 2009, when he sought a refund of his policy, he was told that the statement he received was for 1 December 2008 to 31 December 2009. 
On 12 March 2014, a senior manager in ICICI Prudential Life informed Mr Chatterjee about the foreclosure of the policy from 2 January 2012 and sent a cheque of Rs14,321 as foreclosure amount based on the then NAV. Not happy with the payment based on the then NAV, Mr Chatterjee filed a complaint in the district consumer forum. However, on 6 April 2014, the forum dismissed the complaint, saying there was no deficiency in service since the insurer had calculated the surrender value per the policy's conditions.
Mr Chatterjee challenged the decision in the state commission, which partly allowed the appeal and, in addition to the foreclosure amount, granted him compensation of Rs3,000 and litigation cost of Rs2,000. However, not satisfied with the order, Mr Chatterjee filed an appeal before NCDRC seeking a refund of the amount based on NAV as on 12 March 2014, compensation and litigation costs of Rs20,000 each and Rs50,000 as compensation for mental agony. 
The counsel for ICICI Prudential Life submitted that on 19 September 2011, Mr Chatterjee was informed about the change in the policy conditions through an SMS. He also contended that the policy was not renewed by Mr Chatterjee for over five years and, therefore, as per clause 11 of the policy, it was terminated on 2 January 2013. As Mr Chatterjee did not encash the cheque of Rs14,321.44 sent on 2 January 2012, it was re-sent on 9 March 2014, which was encashed on 25 March 2014. 
ICICI Prudential Life also contended that only the first premium was paid by Mr Chatterjee and, on account of non-payment of the second premium on 31 December 2009, the policy ceased as per clause 6.4 (6) read with clause 5 according to which benefits were payable either on death or surrender whichever was earlier. The insurer also contended that the state commission had rightly appreciated that the IRDAI circular relied upon by Mr Chatterjee applies only to new policies and did not cover existing policies or cases of non-payment of premiums on existing policies.
Mr Chatterjee argued that ICICI Prudential Life admittedly informed in December 2008 that the final value of his policy at the relevant point of time was Rs57,859.32, and, therefore, the foreclosure value on 12 March 2014 was wrongly calculated as Rs14,321.44. 
ICICI Prudential Life contended that the circular, issued by IRDAI on 21 December 2005 and relied upon by Mr Chatterjee, did not apply to existing policies. "Therefore, as per clause 6.4 (b) read with clause 5 of the policy, the same was treated as lapsed on account of non-payment of the second premium onwards and Mr Chatterjee's entitlement was only to surrender value which was 25% of the fund value. On 28 August 2009, Mr Chatterjee had reported for a refund of money and had encashed the cheque for Rs14,321.44 in full and final settlement," it added.
The NCDRC bench observed that the crux of Mr Chatterjee's argument is that the IRDAI circular dated 21 December 2005 had directed the discontinuation of the policy and that this decision had not been conveyed to him by the insurer. "However, on being informed of the same by an insurance agent, he had not paid the subsequent premiums and his claim is, therefore, that the refund should be paid on the NAV of the amount paid as premium."
After perusing the IRDAI circular, the bench noted that it only sets out guidelines to provide fair insurance coverage and disclosure to facilitate an informed decision by the policyholder as to the investment risk and the guiding factors in the policy, which is linked to investment. "However, the policy had not been discontinued as interpreted or understood by Mr Chatterjee. Therefore, Mr Chatterjee's case that he discontinued the payment of the premium on account of deficiency in service by the respondent is not sustainable," NCDRC says.
While upholding the state commission's decision, the bench dismissed Mr Chatterjee's petition.
(Revision Petition No1253 of 2019    Date: 1 February 2023)
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