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As per the Insurance Regulatory and Development Authority (IRDA) Regulation on the Protection of Policy Holders’ Interest, it is mandatory for insurance companies and their agents to provide the consumer all information pertaining to the policy, at the time of selling it. This includes all the terms and conditions and the exclusion clauses.
Now here is a case where the agent not only failed to explain a particular clause in the insurance policy on how the payment of premium was to be remitted, but even advised the policy holder to make a payment in contravention of this clause. However, the insurance company refused to take responsibility for the consequences, forcing the consumer to seek the help of the court. It’s order in this case is an important one from the point of view of consumers. In January 2008, Gurmeet Singh obtained a lifetime super pension policy through an authorised agent of an insurance company. The next year, when the payment of Rs 25,000 towards the annual premium was due, the agent dissuaded the policy-holder from issuing an account payee cheque addressed to the insurer, saying that it was risky to do so as it would delay the payment. So he got him to issue a self-cheque, saying that he would draw the cash and pay it to the insurance company immediately. Since he was an authorised agent who had sold the policy to him, the policy-holder had no reason to distrust him and so he followed his advice. The agent, Ashish Kumar, however, did not remit the money as promised to the insurance company.
The insurance company also emphasised this point in response to the complaint field by the client before the court. It also contended that the agent was an adviser of the insured and not the agent of the insurance company and, therefore, the insurance company was not liable for the acts of the adviser. It also argued that the agent had been removed from the list of authorised agents much before the cheque was issued by the person and, therefore, the insurance company was not liable for any acts of omission or commission of a dismissed agent. The district consumer disputes redressal forum, after hearing the parties, directed the agent as well as the insurance company to issue an official receipt for Rs 25,000 paid by the consumer towards the yearly premium, regularise the policy and permit the complainant to pay the next instalment of Rs 25,000 towards the premium for 2010. It also directed that the client be paid a compensation of Rs 10,000 and costs of Rs 5000. In it’s revision petition before the national consumer disputes redressal commission, too, the insurance company argued that the lower courts had failed to take note of the fact that the consumer was bound by clause 28 of the proposal form, as he had signed the form. Dismissing these arguments, the apex court pointed out that first and foremost, the agent was duty-bound to explain clause 28 to the client. It was obvious that he had failed to do so because he had even got the policy-holder to act contrary to clause 28. The commission also pointed out that the insurance company had failed to produce evidence to prove that the agent had been dismissed at the time he received the cheque from the consumer.
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Those who fail to follow
this are liable for regulatory action. Similarly, the apex court has
made it known in several cases that failure to follow this regulation
constitutes deficiency in the service provided by the insurance
company and, therefore, it would be held liable for the consequences.
While the client in this
case argued that the insurance company had to take responsibility for
the action of its agent, the insurer, in turn, contended that by issuing
a self-cheque to the agent, the complainant had contravened clause 28
of the proposal form, which clearly stated that "any cash or
cheque payment made towards the first or the renewal premium is deemed
to be received by the insurance company only when it is received by any
of its office or collection point and after an official printed receipt
is issued by the company." Since no such payment was made,
the insurance company was not bound to renew the policy.