JUSTICE V.K. JAIN, PRESIDING MEMBER Late Shri Rajeev Jain, son of the complainant/respondent obtained a life insurance policy from the petitioner ICICI Prudential Life Insurance Co. Ltd., for a sum of Rs. 25.00 lacs. Shri Rajeev Jain died on 27.12.2006 during subsistence of the aforesaid policy. Being his nominee, the complainant applied for payment of the insured amount to her. The claim lodged by her however, was repudiated by the petitioner company on the ground that while submitting the proposal form, the insured had concealed the fact that he had applied for several other life insurance policies. It was further stated in the repudiation letter that the aforesaid information, except to the extent of two LIC policies, worth Rs. 2.00 lacs was not disclosed by the insured even when, petitioner company, vide its letter dated September 15, 2006 asked for the details of the previous insurance policies with other companies, along with the terms of acceptance. Being aggrieved from repudiation of the claim, the complainant approached the State Commission by way of a complaint, seeking payment of the policy amounting to Rs.25.00 lacs, along with compensation amounting to Rs.5.00 lacs and cost of litigation amounting to Rs.22,000/-.
2. The complaint was resisted by the petitioner company on the same grounds on which the claim was repudiated. It was pointed out in the reply that as per the terms contained in the proposal form submitted by the insured, the petitioner company had a right to repudiate the claim under the policy in case, any misstatement or suppression of material information was found. It was further submitted in the reply that in the proposal form, the insured had stated by writing NA (Not Applicable) against the relevant column, that he had neither obtained nor applied for any policy, as on the date of proposal i.e. September 4, 2006. Later on, when the claim was verified, it came to be known that in addition, two policies taken form LIC, the deceased had also taken one policy for Rs.25.00 lacs from Reliance Life Insurance Co. Ltd., and five policies from ING Vysya Life Insurance. The insured had thus applied for life insurance covers to the extent of Rs.57.00 lacs. It was also pointed out that the applications to Reliance Life Insurance Co. Ltd., ING Vysya Life Insurance and the petitioner company were submitted within a span of 27 days. It was claimed that the information as regards the other policies taken or applied by the proposer materially impacts the Underwriting decision of the insurance company and as a result of the aforesaid concealment by the insured; the petitioner company was denied an opportunity to evaluate the risk in a true and correct perspective. Thus, according to the petitioner company, the contract of insurance was obtained by the insured on the basis of the mis-representation and suppression of material facts. It was also alleged in the reply that the insured being an educated person was well in a position to read and understand the details given by him in the proposal form, a copy of which was later sent to him, along with policy document. However, he did not approach the petitioner company, claiming any inaccuracy in the information recorded in the proposal.
3. Vide its order dated 26.04.2010, the State Commission allowed the complaint and directed the petitioner company to pay a sum of Rs.25.00 lacs to the complainant, along with interest on that amount @ 6% per annum. The petitioner was also directed to pay Rs.20,000/- as cost of litigation to the complainant. Being aggrieved form the order passed by the State Commission, the insurance company is before this Commission, by way of this appeal.
4. A perusal of the proposal form submitted by the insured on 04.09.2006 would show that he was asked, inter-alia to disclose all the life insurance policies held / applied with the ICICI Prudential Life Insurance Co. Ltd. / other companies. The insured wrote NA (Not Applicable) in the space earmarked in the form for giving reply to the aforesaid question, thereby representing that neither he held nor had he applied for any life insurance cover either with the petitioner company or with any other company. The aforesaid information was patently false since, on 07.08.2006, the insured had applied for obtaining a life insurance policy in the sum of Rs.25.00 lacs from Reliance Life Insurance Company Ltd. Vide declaration and authorization contained on the proposal form and signed by the insured, he agreed that in case of any misstatement or suppression of material information, the company had the right to repudiate the claim under the policy. Therefore, if the information withheld by the insured is found to be material, no amount is payable by the insurance company to the complainant.
5. In an affidavit dated 28 January, 2015, an Associate of the appellant company hasth inter-alia stated as under; I say that the function of Underwriting is the most crucial and critical function in an insurance company. Each insurance company has its underwriting guidelines which is dependent on the risk taking appetite of the company. These guidelines provide the framework/basis on which decision on an application of insurance can be taken. However, an underwriter has the liberty to use his discretion while underwriting a proposal for life. There are lot of parameters like age, occupation, education, income, socio-economic background, arrangement with reinsurer etc., which influences the decision of an underwriter. The policies are issued in line with the defined norms and guidelines, The underwriting guidelines are revised over a period of time depending on amongst others, the Companys experience and risk undertaken, claims experience etc. I say that the financial underwriting guidelines which were applicable in 2006 are reproduced below: Financial Underwriting While accepting the proposals care should be taken to see that the total risk cover has a relation o the income level of the proponent. The cases of over insurance should be avoided, as the risk cannot be covered by charging some extra premium as in case of the medical risk and the probability of lapse of policy will be very high. The following limits will be applicable for the financial underwriting: Age (Years) Total S.A. (Death Risk) to be restricted to no. of times of Gross annual income Upto 35 20 times 36-40 15 times
41 45 12 times
46 50 10 times
51 60 5 times Above 60 On merits No income proof required upto Basic Sum Assured upto and including Rs.15 lakhs for individuals. (The Underwriter may call for proofs of income at his discretion even if the sum assured is less than or equal to Rs.15 lakhs). Income proof is required for all Keyman cases. It would thus be seen that while deciding whether to accept a proposal or not, the insurance company has to take into consideration a number of factors including the income of the insured so that the risk cover provided to a person is not disproportionate to his income. It is for this purpose that the insurance company has set a limit based upon the age and income of the insured for granting life cover to a proposer. In fact, as rightly contended by the learned counsel for the petitioner, if an insurance cover wholly disproportion to the income of a person is granted, that may sometime even put the life of the insured into risk at the hands of those, who would be benefitted from the amount which the insurance company would have to pay in the event of death of the insured.
6. In the present case, the income of the son of the complainant was stated to be Rs.3.00 lacs per annum. He was aged about 39 years at the time of insurance cover was taken by him. Therefore, he could not have got total insurance cover for more than 45.00 lacs of rupees. He having already taken an insurance cover of Rs.25.00 lacs form Reliance Life Insurance, the petitioner company would not have given insurance cover of Rs.25.00 lacs to him, had he disclosed the policy taken from Reliance Life Insurance to the petitioner company. As noted earlier, the proposer was required to disclose not only the life insurance policy already taken by him, but also, the applications which he had submitted for taking such policies either from the same company or from other insurance companies.
7. In my view, the information with regard to the policy of Rs.25.00 lacs taken from Reliance life Insurance was a material information, since the decision of the petitioner company whether to accept the proposal or not was dependent inter-alia on the amount of insurance cover already taken or applied by the deceased. On account of the concealment of the aforesaid material information by him, the petitioner company was deprived of an opportunity to consider the proposal in the light of all the relevant facts including the extent to which the insured had already been covered by way of other policies. In fact, a perusal of the guidelines being followed by the petitioner company clearly shows that had the deceased disclosed to the insurance company that he had already taken insurance cover to the extent of Rs.25.00 lacs from the Reliance Insurance Company, his proposal would not have been accepted or atleast he would not have been covered to the extent of Rs.25.00 lacs.
8. It was contended by the learned counsel for the complainant/respondent that the petitioner company had not declared on its website that disclosure of the previous life insurance policies was mandatory, and therefore, the said non-disclosure cannot be held against the complainant. I however, find no merit in this contention since, it was clearly and specifically agreed by the insured himself, by way of declaration contained on the proposal form, that in case of any misstatement or suppression of material information, the company had the right to repudiate the claim. The information with respect to other life insurance policies and / or applied by the proposer cannot be said to be inconsequential or trivial information since, the said information had a material bearing on the Underwriting decision of the petitioner company.
9. For the reasons stated hereinabove, I hold that since the deceased insured had withheld material information form the petitioner company and had misrepresented by writing na (Not Applicable) while replying to the Clause requiring disclosure of other insurance policies taken and applied by him, the appellant company was entitled to repudiate the claim. Consequently, no amount is payable to the complainant on the strength of the aforesaid insurance policy. The impugned order dated 26.4.2010 passed by the State Commission is therefore, set aside and the complaint is dismissed. ......................J
V.K. JAIN PRESIDING MEMBER