Senior advocate Arvind Datar, who represented the petitioner Foundation, argued that nearly five crore persons were "mis-sold" this policy.
The country's most trusted insurer, Life Insurance Corporation (LIC) of India, will face scrutiny by the Supreme Court on July 15 over allegations of cheating and misrepresentation of over five crore investors who put their hard-earned money into an endowment assurance plan called 'Jeevan Saral'.
A bench of Chief Justice Ranjan Gogoi and Justice Deepak Gupta heard the petition filed by a private trust, Moneylife Foundation, wherein it was alleged that several persons beyond 50 years, who were induced to take the policy as a good investment, ended up getting less than half the money — deposited by way of premiums at the time — when the policy matured.
Senior advocate Arvind Datar, who represented the petitioner Foundation, argued that nearly five crore persons were "mis-sold" this policy. The amount involved could be huge as the actual investment in Jeevan Saral Plan 165 was between Rs 73,800 crore and Rs 1 lakh crore, the petition stated.
CJI asked Datar, "How are you aggrieved?" The bench possibly hinted that the policyholders who lost their money should have come to the Court instead. Datar pointed out that the petitioner had come across the plight of several policyholders and decided to approach this Court after making several representations to the Insurance Regulatory and Development Authority (IRDA), which is bound to act against LIC under Section 33 of the Insurance (Amendment) Act 2015. So far no action was taken despite Ministry of Finance on September 29, 2018 asking LIC to examine a representation forwarded by the petitioner to IRDA seeking action.
The bench said the issue raised required consideration and said, "We have many more questions to put to you." While the matter is expected to be heard by Court on July 15, it is interesting to see that the LIC maintained throughout that the highlighted issue is a mere "discrepancy".
The policy was launched in February 2004 promising maturity sum assured along with loyalty additions at the time of policy holder's death or maturity of the policy term. In case of death, the nominee would get sum assured and return of premium deposited. This amount was to vary based on the age of entering the policy and its total term. By 2014, the policy began to mature and it is then the investors realized they were duped.
The petition stated that a 58-year-old person who deposited a total of Rs 97,824 as half-yearly premium of Rs 4,076 for 12 years got a sum of Rs 34,405 (including bonus) at the expiry of 12 years. The sum assured to him was Rs 1.5 lakh but he was not aware that the same would be payable only in the event of death. The petition claimed that LIC misled the people by assuring in its pamphlets about 10% annual return in the event of death or maturity.
In fact, most policies sold between 2003 and 2006 did not print the 'maturity sum assured' at all.
"It is very much possible that a policy can be mis-sold. It is not about LIC but across policies this has been happening. This kind of a move in Supreme Court is welcome. But at the same time consumers too must realize that insurance is not an investment product. Particularly it should be considered when one is young," said a financial expert on condition of anonymity.
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