Pranav B Prem

The District Consumer Disputes Redressal Commission, Ernakulam (Kerala), has recommended that the Insurance Regulatory and Development Authority of India (IRDAI) issue directions to all insurers mandating that insurance policy documents be made available in the proposer’s vernacular language. The Bench comprising D.B. Binu (President), V. Ramachandran, and Sreevidhia T.N. made the recommendation while dealing with a complaint alleging deficiency in service and unfair trade practice against Kotak Mahindra Old Mutual Life Insurance Ltd.

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Background

The complainant had obtained an insurance policy from Kotak Mahindra in 2012 after paying an initial premium of ₹30,000, followed by a renewal payment of ₹29,551 the next year. According to the policy schedule, the plan was set to mature in 2022. When the complainant sought a refund of the total premiums paid upon maturity, the insurer rejected the request, citing non-renewal of the policy. Aggrieved, the complainant filed a case before the Ernakulam District Consumer Forum, which proceeded ex parte against the insurer after it refused to accept notice. The complainant contended that the insurer had not disclosed that continuous renewal was a precondition for refunding the premiums already paid. He also claimed that, since the policy document was in English, he misunderstood its terms and believed that the premiums would be refunded at maturity.

Findings of the Commission

Upon examining the insurer’s rejection letter, the forum noted that the policy clearly stipulated no refund unless at least three premium installments were paid. It also observed that the policy had lapsed due to non-payment and had not been revived within the permitted revival period, despite reminders from the insurer. The Bench held that an individual’s inability to read English or failure to go through the document cannot invalidate an insurance contract when the terms are explicitly defined. Since the insurer’s actions were consistent with the contractual terms, the Commission concluded that there was no deficiency in service and hence dismissed the complaint.

Consumer Awareness & Recommendation to IRDAI

While dismissing the complaint, the Commission took note of the consumer’s lack of understanding of policy terms due to language barriers. It advised policyholders to thoroughly review contract terms before signing and to ensure timely renewal of policies. In a significant recommendation, the Commission urged the IRDAI to consider issuing directions/advisories to insurers to:

1. Make available the policy contract, key product information/benefit illustration, and critical clauses relating to lapse, revival, or surrender in a vernacular language chosen by the proposer; and

2. Obtain a recorded acknowledgment confirming that such vernacular disclosure was made at the point of sale.

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Describing the move as necessary “in the interest of consumer protection and market integrity,” the Commission directed its Registry to forward a certified copy of the order to the Chairperson, IRDAI for appropriate action.

Cause Title: Abdul Nazar K.P. v. Kotak Mahindra Old Mutual Life Insurance Ltd.

Case No: CC No. 903 of 2023

Coram: D.B. Binu (President), V. Ramachandran, Sreevidhia T.N