Insurance firm indicted for unfair trade practices

Jehangir B Gai


Publication: The Times Of India Mumbai; Date:2011 Mar 10; Section:Times City; 
Page Number 12


 Bajaj Allianz insurance indicted for unfair trade practices Backdrop:
Companies often lure consumers with attractive schemes, but later try to
renege on their commitment. In a significant ruling, the Central Mumbai
District Forum bench, comprising president Nalin Majithia and Bhavana Pisal,
came down heavily on Bajaj Allianz and directed the insurance company to pay
penal and deterrent compensation, which is rarely, if ever, done.
Case study: Onkar Prasad Dixit, a senior official of Sahara Commercial
Corporation, had taken a policy known as Bajaj Allianz Swarna Vishranti
Pension Plan from Bajaj Allianz General Insurance. The policy was taken on
July 19, 2004 with a sum insured of Rs 26 lakh, plus bonus. Although a yearly
premium of Rs 6,17,929 was payable, the insurance company offered a rebate
of Rs 18,870, thereby reducing the premium to Rs 5,99,099. This amount had
to be paid every year for a period of five years. Thereafter, the insurance
company would pay a monthly pension of Rs 22,944 during the lifetime of the
insured, and on his demise, the amount would be paid to his wife. However,
the detailed terms and conditions of the policy were not furnished to Dixit.
Right from 2004 till August 2009, Dixit kept paying the annual premium.
Even though the premium for five years would total Rs 29,95,295, the
insurance company collected Rs 30,20,128, overcharging Rs 24,832. Yet,
when Dixit asked the insurance company to release the benefits, available
under the policy, evasive excuses were given to avoid payment.
After persistent follow-up, Bajaj Allianz informed Dixit that the company had
made a mistake in stating the benefits under the policy. The insurance
company also claimed that its Swarna Vishranti Pension Plan policies had been
withdrawn after obtaining permission from the Insurance Regulatory
Development Authority (IRDA) and hence Dixit’s policy automatically stood
cancelled. However, the company offered to refund Rs 29,35,599.
Dixit then took the LIC Jeevan Akshay VII policy, and asked Bajaj Allianz to
transfer the premium paid by him to LIC. Even though this was done, there
was a difference in the benefits available under the LIC’s policy, which had a
lower annuity amount, resulting in a loss of Rs 5,78,360 to Dixit. In November
2009, Dixit filed a complaint before the Central Mumbai District Forum.
The insurance company defended itself by stating the complaint was
misconceived because the policy had been withdrawn after taking IRDA’s
permission and the premium received had been transferred to the LIC on
Dixit’s request for another policy. In his order dated January 29 , Nalin
Majithia, president of the forum, observed that the insurance company had
failed to produce any proof or documents to show that the IRDA had granted
permission for the withdrawal of the policy. It noted that the insurance
company had misled the consumers by offering an attractive policy, but
refusing to honour its commitment, after collecting nearly Rs 30 lakh as
premium. The forum indicted Bajaj Allianz of having indulged in unfair trade
practice and held that there was deficiency in service. The forum observed
that it was necessary to award heavy compensation as a deterrent so that
such unfair trade practices would not be repeated in the future.
Accordingly the forum directed the insurance company to pay a penal
compensation of Rs 4 lakh to Dixit. The forum also directed Bajaj Allianz to
refund the excess premium of Rs 24,832 overcharged by it. It also directed
Bajaj Allianz to pay Rs 5,78,360 to compensate Dixit for the loss caused by the
difference in the annuity amounts between the policy issued by Bajaj Allianz
and that issued by LIC. An interest of 9% per annum on these amounts was
also granted and costs of Rs 10,000 were awarded.It is hoped that the new trend of awarding penal or deterrent compensation will gain momentum. This is the only way to improve the system. Otherwise,
service providers will continue to dupe the vast majority of consumers.