Consumer Forum orders Star Union Insurance to pay compensation to customer for not paying full surrender amount
In a recent decision, the District Consumer Disputes Redressal Commission-I, Chandigarh bench, addressed a case involving Star Union Dai-ichi Life Insurance Company Limited. The commission found the insurance company accountable for a deficiency in services, specifically regarding the failure to pay the minimum surrender value of the insurance policy.
Background – Brief Facts:
Miss Prabhjot Kaur sought an agricultural loan from Union Bank of India, which mandated the purchase of a Star Union Dai-Chi Life Insurance Policy/SUD Life Guaranteed Money Back Plan. Assured of the policy’s surrender flexibility, the Complainant purchased it by paying Rs. 25,000. Despite not receiving the policy document within the cooling-off period, the Complainant paid premiums in 2019 and 2020. Upon attempting to surrender the policy, she discovered she would only receive Rs. 17,000 despite paying Rs. 73,270. Unsatisfied with responses from both the bank and the insurance company, the Complainant filed a consumer complaint.
Contentions:
The Insurance Company contended that the Complainant submitted a proposal on January 11, 2018, and the policy, delivered on February 13, 2018, had a Free Look Period. The Complainant was accused of fabricating a false story, and non-payment of the third annual premium was highlighted. The bank did not appear before the District Commission.
Commission’s Observations:
The District Commission scrutinized the insurance policy, emphasizing the provision on discontinuance of due premiums and the creation of a Reduced Paid-Up Policy. The policy entitled the Complainant to a minimum guaranteed surrender value of 30% of the premium amount paid. With the Complainant having paid three premiums, the District Commission held the Insurance Company responsible for a deficiency in services.
Commission’s Decision:
The Insurance Company was directed to pay the surrender value of Rs. 36,356.01 with interest at 9% per annum from March 16, 2021, onwards. Additionally, compensation of Rs. 10,000 was awarded to the Complainant for mental agony and harassment. Litigation costs of Rs. 8,000 were also imposed on the Insurance Company.
