State Consumer Disputes Redressal Commission
Life Insurance Corporation Of India, vs Mrs. Alice John, on 29 August, 2013
BEFORE THE GOA STATE CONSUMER DISPUTES REDRESSAL COMMISSION, PANAJI GOA F.A. No. 46/13 1. Life Insurance Corporation of India, Having its office at EDC Complex, Patto, Panaji Goa 2. Sr. Divisional Manager, Life Insurance Corporation of India, Having its office at IPP Cell, Western Zonal Office, Yogakshema Building, West Wing, J. B. Marg, Mumbai 400 021. ..Appellants/O.Ps. V/s. Mrs. Alice John, w/o Mr. P. K. John, residing at 22, Palamar Colony, Bambolim, Goa 403 202 .Respondent/ Complainant Appellants/ OPs are represented by Adv. Shri. A. K. P. Moye Respondent/Complainant is represented by Adv. Shri N. G. Kamat Coram: Shri. Justice N.A. Britto, President Smt. Vidhya R. Gurav, Member Dated: 29/08/2013 ORDER
[Per Justice Shri. N. A. Britto, President] The Life Insurance Corporation of India, OP No.1 in C.C. No.47/2008, has filed the present appeal assailing the order dated 25/01/2013 of the Lr. North Goa District Forum at Porvorim.
2. Some facts are required to be stated to dispose off this appeal.
3. The Respondent/Complainant obtained from Life Insurance Corporation of India a Jeevan Akshay III Plan No.170 - policy by paying a single premium of Rs.3,00,000/- with effect from 18/10/2005 which entitled the Complainant to receive an annuity for life of Rs.18,000/- (or is it Rs.18,210/-?) payable every year. The first annuity payment was done on 18/10/06 and the next was due on 18/10/2007.
As per the terms and conditions of the policy, the policy could not be assigned nor surrendered.
4. However, the Complainant by letter dated 08/06/07 requested the LIC to accept the surrender of the policy on compassionate grounds as she was suffering from cardiac problems and needed lump sum money urgently. The Complainant by letter dated 25/07/07 was requested by Divisional Office of the LIC, to whom the case was referred to, to submit the medical certificate mentioning the treatment which was required to be undergone and the expenditure involved.
The Complainant submitted a certificate dated 26/07/07 of Dr. A. V. Deshpande stating that the Complainant was suffering from ischeamic heart disease, and coronary angioplasty and CABG would cost Rs.3.5 lacs.
5. On or about 14/08/07 the Complainants request was processed and the Complainant was paid a sum of Rs.2,49,189/- by cheque. The Complainant accepted the cheque on 24/08/07, signed a discharge voucher and encashed the cheque.
6. The complainant then, by letter dated 24/10/07 written through her husband and nominee informed to the LIC that a sum of Rs.51,000/- was arbitrarily deducted without their consent and only a sum of Rs.2,49,189/- was paid, further stating that in case the said amount was deposited in the Bank there would have been no deduction and the said nominee wanted to know the logic behind the said deduction, further stating that such policies were not in the interest of the people and required a review. It was stated that the second annuity was due in October 07. The letter was followed by another letter dated 05/03/08 stating that at no point of time it was explained to them that such a heavy deduction from the deposited amount would have been made. A grievance was also made that an annuity due for 2006 2007 was not paid and that there was no convincing reason for making a deduction of Rs.50,811/- without the written consent of the party. A request was made to reconsider the case and pay an amount of Rs.68,811/-.
7. The letter dated 24/10/98 was replied to by Officers of the LIC, at various levels by letters dated 22/11/07, 27/11/07 and 30/07/08. In this last letter, the Complainant was explained how the surrender value was calculated in terms of circular dated 13/01/07 and after taking into account factors such as mode of annuity, age of annuitant, last policy anniversary, etc. The surrender value was worked out and shown as Rs.2,49,189/-.
8. The circular dated 13/01/07 issued by L.I.C. as regards the surrender of Jeevan Akshay plans takes note that the Corporation was receiving requests for allowing surrender, interalia, of Jeevan Akshay Plans, and also takes note that these were immediate annuity balances where surrender value was not allowed. It also takes note of the fact that even then such requests were being considered on merit basis and in certain cases surrender value was allowed. The circular has decentralized the authority and entrusted the Regional Manager (Actuarial) in the Zonal Offices, with a view to serve policy holders in a better way and has set out a formula how the surrender value is to be calculated and which was communicated to the Complainant vide the said letter dated 30/07/08. The Corporation has also issued another letter dated 31/12/07 on the subject of surrender under annuity plans to the Zonal Managers of the Corporation stating that the Corporation came across instances when the annuitant after applying for surrender, refuses to accept the surrender value amount and to avoid such situations, the Zonal Managers should follow the procedure of first quoting the surrender value amount to the annuitant, take his consent and then proceed to process the surrender requests.
9. Shri Moye, the lr. advocate of the LIC would submit that the Complainant could have received the surrender value of Rs.2,49,189 on 24/0807 under protest or refused to accept the same and continue with the policy. Lr. advocate would submit that after the surrender of the policy there was no question of paying the annuity due on 18/10/07. To say that the surrender value could not be the same as the sum total of premia paid, lr. advocate Shri Moye has placed reliance on LIC of India vs. Dr. Sampooran Singh I (1992) CPJ 165 (NC) and to explain what surrender value is, Shri Moye has referred to Policy Service Manual No.13, a note of explanation, which says that:
Surrender Values are probably misunderstood more than any other matter connected with Life Assurance, and although a man would see the absurdity of claiming a return of his fire insurance premiums if his house were not burnt down he sees nothing strange when giving up a life policy in demanding a return of the whole or greater part of the premiums he has paid. It is with a view to showing how untenable such a claim is that this explanation of Surrender Values is written.
Insurance, whether Fire or Life, is based on the principle of averages, a large number of persons contributing to a common fund which is divided amongst those members who sustain loss by the happening of the event insured against. The man who claims a refund of the whole of the premiums paid by him overlooks the fundamental principle of Life Assurance which is, as already explained, the payment of claims out of contributions received from other Policyholders, in order to spread the individual losses over a large area and thus minimize their effect. It is certain that out of a large number of persons some will die in a year, and although the PROPORTION of deaths can be predicted with comparative accuracy, it is impossible to foresee which INDIVIDUALS will die.
The Insurer collects premiums from its Policyholders on the understanding that it will pay the Policy moneys as and when the Policyholder dies or his Policy matures.
If the probability of death were the same at all ages, the premiums required to enable the office to pay the claims as they arise would be the same at all ages and the transaction would be precisely similar to Fire Insurance, each years premium meeting each years claims, expenses, etc., and leaving over nothing which could be returned as Surrender Value. As is well known, however, the probability of death increases with each year that passes, the increase being very marked as old age approaches. Notwithstanding this a level premium is usually charged for Life Assurance, calculated in such a way that in the long run the Office receives enough to pay all the claims. At the outset this level premium is greater, and towards the end of life, less than is necessary to cover each years risk, and therefore the claims of the first few years of assurance are less than the premiums received in that time, so that the Insurer gradually accumulates a fund or reserve as it is called. This fund is held by the Insurer for the benefit of the Policyholders as a whole and if one of them wishes to discontinue his Policy it is only equitable that he should be entitled to a share of it. This share is what is known as the Surrender Value of the Policy. Now as the fund is formed only from the balance of the premiums left over after payment of the claims, expenses, etc. it is clear that the total fund will be much less than the total premiums paid, and it follows that each individuals proportionate share of the fund (i.e. the Surrender Value of his Policy) must generally be much less than the premiums paid by him.
10. Admittedly, the policy taken by the Complainant from the Corporation could not have been surrendered in terms of condition no.7, as surrender was not allowed. It is the Complainant herself who applied for the surrender of the policy on compassionate grounds on 08/06/07 and submitted the necessary documents as were required of her and accepted the surrender value on 24/08/07 without any murmur or demur. The Complainant did not accept the surrender value under any protest and grievance against the deduction came to be made for the first time only by letter dated 24/10/07, after a period of more than two months.
11. First of all, we must note that an insurance policy is a contract between two parties.
The Complainant after having accepted the surrender value unconditionally on 24/08/07, put an end to the said contract and as such also put an end to her relationship being a consumer vis--vis the services being provided to her by the service provider namely Life Insurance Corporation and as such the Complainant could not have raised a dispute subsequently regarding surrender value. The Complainant accepted the surrender value, signed a discharge voucher and encashed the cheque paid towards the same.
12. The Apex Court in United India Insurance Co. vs.Ajmer Singh Cotton & General Mills and Ors, II (1999) CPJ 10 has held that :
The mere execution of discharge voucher would not always deprive the consumer from preferring claim with respect to the deficiency in service or consequential benefits arising out of the amount paid in default of the service rendered. Despite execution of the discharge voucher, the consumer may be in a position to satisfy the Tribunal or the Commission under the Act that such discharge voucher or receipt had been obtained from him under the circumstances which can be termed as fraudulent or exercise of undue influence or by misrepresentation or the like.
If in a given case the consumer satisfies the authority under the Act that the discharge voucher was obtained by fraud, misrepresentation, undue influence or the like, coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified in granting appropriate relief.
13. In First Appeal No.32/2011 in the case of United India Insurance Co. Ltd. Vs. Mr. Satkar Agencies & ors this Commission after relying on the above case of Ajmer Singh Cotton and General Mills, has held as follows:
16. In Ajay Verma (Supra) again reference was made to the case decided by the Supreme Court and further reference was made to National Insurance Company v/s Kulka Rice & and General Mills, 2008 (1) CPC 28 ( Haryana) wherein it was held that once the final settlement of claim was accepted by the complainant without any protest it was not proper for the District Forum to enhance the claim and the order of the District Forum was set aside.
17 As already observed, in the present case, the complainant not only persuaded opposite party no.2 to persuade opposite party no.1 to settle the claim but the complainant as well as opposite party no.2 accepted the payment of Rs.1.13 lakhs by way of full and final discharge of the claim of the complainant, against the opposite party no.1 and the sum which was credited to the account of the complainant with opposite party no.2 . In such a situation, the complainant could not have reopened the controversy by filing the complaint which ought to have been dismissed by the Ld. District Forum.
14. The National Commission in M/s. K. K. Jewels Impex through its partner, 2013 (3) CPR 140, has followed the said case of Ajmer Singh Cotton & General Mills, (Supra) and another case also decided by the Supreme Court in National Insurance Co. vs. Schtia Shoes, 2008 (5) SCC 400, and has held that:
the Complainant having voluntarily entered into the full and final settlement is now estopped from re-agitating the claim by filing a complaint. As such, the complaint is liable to be dismissed as not maintainable.
15. In our view, the Complainant herself having approached the Corporation on compassionate grounds for surrender of the policy, a policy which otherwise could not have been surrendered, and after having accepted the surrender value on 14/08/07 without any murmur or demur and after having signed a discharge voucher could not have raised the issue that she ought to have been paid the balance of Rs.50,811 and the annuity which was not due to her at the time of surrender. On this ground alone the complaint ought to have been dismissed.
16. The Complainant concedes (para 14 of the complaint) that as per the terms and conditions of the policy, the policy did not provide for any deductions on any account whatsoever. However, the Complaiannt fails to take note of the fact that the policy could not be surrendered and because of that no deductions were contemplated. The Complainants contention appears to be that the circular dated 13/01/07 would have only a prospective effect and could not have been applied in the case of the Complainant who had taken the policy prior to the said circular and applying the circular with retrospective effect would amount to nondisclosure of the terms and conditions of the policy. In support of this contention Shri N. G. Kamat, the lr. adv. would rely on Air India Employees Self Contributory Superannuation Pension Scheme vs. Kuriakose V. Cherian & ors.
AIR 2005 SC 3716/2005 8 Scale 109, wherein it was held that:
The LIC having accepted the annuity and having effected monthly payments can neither reduce the annuity amount nor refund it to the trust to the detriment of the retirees since the annuity has already crystallized and no change can be made in such annuity as stipulated by the impugned amendments. LIC has obligation to fulfill the promise given by it to the retirees, who are assured under the annuity scheme.
17. We are unimpressed with the said submission made on behalf of the Complainant apart from the fact that it is devoid of any logic.
The policy itself did not provide for any surrender prior to the said circular. No promise was made by L.I.C. at any time that the policy holders, on surrender, would receive, full premium paid. The surrender came with the circular and so also the formula for deduction. The surrender was to be allowed on merits in case the annuitant required medical expenses to be met for the treatment of his/her spouse and therefore any surrender had to be made on the basis of the formula adopted by the said circular. It is not the case of the Complainant that any of the annuitants, similarly placed like the Complainant, prior to 13/01/07 were refunded in full the single premium paid as surrender value of the policy. If that was the case then the Complainant could have atleast complained of discrimination. That is not the case of the Complainant. The Policy itself did not provide for surrender. The Complainant herself accepted the surrender at her own request willingly in terms of the said circular, though not knowing about the existence of the said circular and therefore now cannot be heard to say that by virtue of the said circular the terms and conditions of the policy have been changed.
If at all they have been changed, they have been changed to benefit the policy holders, like the Complainant and the Complainant having accepted the benefit under the Circular now is stopped from contending that the terms and conditions of the policy could not have been changed. Another submission made is that the Complainant was required to be told what would be the surrender value, in terms of letter dated 31/12/07. The Corporation has taken a stand that the said letter was issued after the Complainant accepted the surrender value. Even if we were to go by the said letter, the Complainant could have refused to accept the surrender value as offered to her on coming to know that it was less than single premium paid on 24/08/07 and asked the policy to be continued, or in the words of the Corporation, reinstated.
18. To sum up the Complainant having herself asked for surrender of the Policy on compassionate grounds and after having received the surrender value and signed the discharge voucher was not entitled to raise any dispute as regards the surrender value paid to her. The Complainant was not entitled to any further annuity, not due to her at the time of surrender, after receiving the surrender value of the Policy.
19. In view of the discussion supra, we have no other option but to allow the appeal, set aside the impugned order and dismiss the complaint, but considering the facts, with no order as to costs.
[Smt. Vidhya R. Gurav] [Justice Shri. N. A. Britto] Member President /lm