T&C can’t be insurance co’s whim

Pushpa Girimaji

I need urgent help in an insurance matter. When my husband took a home loan, the bank had insisted on an insurance policy that gave a cover of Rs 35 lakh against personal accident as well as house fire. The policy was with the bank and, following my husband’s death in an accident, the bank made a claim and recovered the amount due to them — about Rs 17.5 lakh. When I asked the insurance company to pay the remaining amount to me, I was told that since there were two borrowers (I was a co-borrower), the insured amount was equally divided between us. So, only Rs 17.5 lakh was payable. However, the policy does not say that and only my husband is the insured in the policy. What should I do? 

The insurance company cannot impose conditions not stated in the policy document to deny a claim. Please approach the grievance cell of the insurance company. If the cell does not make amends, lodge a complaint with the insurance ombudsman. You can get the contact details of the Ombudsman from policyholder.gov.in. This is a website created by the insurance regulator, Insurance Regulatory and Development Authority, for the benefit of the policy holders.

Lodging a complaint before the Ombudsman is very simple and so is the procedure. You do not need a lawyer to represent your case and you just need to state your complaint and provide the relevant documents.

Can you quote a decision of the Ombudsman, if any, that can help me in my case?

I can quote an almost identical case that came up before the Ombudsman. Here, the complainant and her husband had taken a home loan of Rs 14 lakh from Vijaya Bank and had been issued a United India Uni Home Care policy. The policy, issued in the name of the complainant’s husband, M. Prakash, had two sections. While one covered the house against fire risk, the other against personal accident and the sum assured was Rs 20 lakh in both the cases.

Unfortunately, consequent to a fall from a building under construction, the insured died, following which the bank made a claim for the unpaid loan amount of Rs 9,85, 615 and this was paid by the insurer. The wife then approached the grievance cell of the insurance company for the settlement of the full insured amount.

The grievance cell rejected it, quoting an internal circular issued by the regional office of the company, saying that in case of more than one borrower, the sum insured will be distributed among the borrowers as per the liability fixed by the bank. In this case, as per the bank, both the husband and wife were borrowers and hence 50 per cent of the sum insured was apportioned in respect of the deceased insured. Since the policy was availed by the bank, claim proceeds had to be paid to the bank towards repayment of the balance due on the loan. The bank had claimed Rs 9,85,615 only and this was settled, the insurance company said.

After perusing the policy documents, the Ombudsman observed that, as per the policy condition, upon death of the insured, insurer should pay the sum insured, Rs 20 lakh. Further, even though the insurer stated that the sum insured was apportioned between the two borrowers, there was nothing in the policy to that effect. Said the Ombudsman: “Personal accident policies are not pure indemnity policies and upon death of the insured, sum insured is payable unless otherwise explicitly restricted. In the instant case there is no such restriction in the policy.”

The Ombudsman also pointed out that in the policy, only the name of M. Prakash was stated as insured and the policy clearly said that the sum insured was payable upon the death of the borrower. The Ombudsman therefore directed the insurance company to pay the remaining amount — Rs 10,14,385 — to the widow, along with the interest calculated at two per cent above the bank rate prevailing at the beginning of the previous financial year. (M/s Vijaya Bank A/c Mr A Prakash Vs United India Ins. Co. Ltd Complaint Ref: NO: CHN-G-051-1617-0700 Award No: IO/CHN/A/GI/0008/2017-18)