Death Claim rejected by NCDRC due to Mis-representation of "Enhanced Income" in the proposal form

Death Claim rejected by NCDRC due to Mis-representation of
"Enhanced Income" in the proposal form

The National Consumer Disputes Redressal Commission has supported the death claim rejection by Reliance Nippon Life Insurance Company Ltd. on the basis of mis-representation of facts by the insured about his actual income at the time of taking the policy. One Jaswinder Singh had purchased "Reliance Life Long Savings" policy from Reliance Nippon Life in March 2018 with a sum assured of Rs.16.94 Lakhs and paid a premium of Rs.39,999. The policy was a money back term life insurance policy offered by Reliance Nippon Life which claims to provide whole life cover as per their website.
However, the policyholder died within 4 months of taking the policy. Manjeet Kaur, the wife of the deceased filed for an insurance claim but the claim was rejected by the insurer on the ground of mis-represenation of actual facts. Aggrieved by this she filed a complaint before the district consumer disputes redressal forum at Ferozpur. Reliance argued that the insured had mentioned his income to be Rs.4 Lakh per year and he was working as a white-washing contractor, but upon enquiry it was found that neither the income nor the occupation mentioned was true, and the policy was taken on false details which fall under misrepresentation of facts violating the principle of "Utmost Good Faith" in the Insurance contract.

The district forum rejected the submission by Reliance and asked it to pay the claim along with 9% interest per annum from the date of filing of the complaint till realization and Rs.5000 as consolidation compensation. Reliance Nippon then filed a revision petition in National Consumer Dispute Redressal Commission stating that the actual income of the insured was Rs.2.99 Lakh in the previous year the policy was taken. They requested the district forum’s order to be revised stating the misrepresentation of material facts leads to claims becoming void or voidable. NCDRC therefore set aside the lower fora order, and allowed the petition filed by Reliance and rejecting the claim by the applicant.

The interesting facts to observe here is that the National Consumer Commision has stated that a life insurance claim cannot be rejected for mis-statement in a proposal after 2 years which was later increased to 3 years. The ruling was made during the case hearing of Late Ajay Sharma vs Karnataka Bank & Metlife India Insurance.

There are 2 major reasons for the NCDRC to deny the claim in case of Jawinder Singh vs Reliance Nippon Life:

• There were fraud life insurance claims reported by a syndicate which had a similar modus operandi in Haryana - The insurance policies would be taken in the name of patients with critical illness and claims would be made after their death.
• Section 45 of the Insurance Act states that an insurance company cannot reject a claim after the completion of 3 years from the date of commencement of risk or reinstatement. If fraud is detected not only can claims be rejected, but premiums can be forfeited as well. If the fraud is not proven then the insurer can deny the claim on the basis of mis- represenation of facts and refund the entire premiums paid till the date of death of the insured.