Letting an insurance agent fill your form? Beware

Most of us tend to purchase insurance policies through an agent, who serves as a point of contact between the insurance company and us.

Sometimes, be it due to lack of time or knowledge, sheer ignorance or a casual approach, we depend on the agent to fill up the policy proposal form rather than fill it up ourselves.

Worse, many of us do not even care to check the correctness of the information filled by the agent and merely sign on the dotted lines.

Such casualness can prove costly, as the following case shows.
Naval Agarwal had taken a life cover of Rs2 lakh from the Life Insurance Corporation (LIC) through an agent in April 2001. He died in April 2003 and an insurance claim was lodged with the LIC by his nominee, Ashish Agarwal.

LIC rejected the claim on the grounds that the insured had withheld material information at the time of purchase of the policy.

The material information in this case was of not disclosing an existing insurance policy of Rs1 lakh purchased in March 2000. In the proposal form, the insured is required to disclose existing insurance policies, if any.

LIC’s contention was that in case insured had specified details of his earlier policies, LIC would have treated the new policy as ‘high risk insurance’ and would have considered the risk cover accordingly.

Ashish, after unsuccessfully approaching the Insurance Ombudsman, went to the Consumer Dispute Redressal Forum.

He argued that the proposal form was filled by the agent and his father only signed the proposal form at the places indicated by the agent. Further, both the policies — new and old — were purchased from the same LIC agent and he should have been aware of the earlier policy details. Hence, it was the mistake of the LIC agent to have suppressed the facts.

The consumer forum noted that “It is a general practice in the day to day insurance business that the agent fills up the lengthy form and the insured signs on the dotted lines as instructed by the agent. Therefore, there is no doubt in our mind to suppose that the insured has signed on the form as directed by the LIC agent without any idea that he was supposed to fill up the particulars of the previous policy.”

The forum also noted that the agent was LIC’s agent and he should have been aware of the existence of the earlier policy and should have filled in the data accurately.

Thus, as per their views, there was no deliberate act on the part of the insured to hide the material details and that LIC was liable to pay the claim along with interest and damages.

Ultimately, the case went in favour of the insured. But look at the efforts required to claim a sum of Rs2 lakh. It took eight years to receive the amount after unsuccessfully approaching the company and the Insurance Ombudsman. And all this, because of an error on the part of agent at the time of filling up the proposal form.

Things to keep in mind while filling the proposal form
It is important to ensure that all details are entered correctly in the proposal form. The following checklist would be in order here.

1. Ensure the form is filled by you. Do take the help of an agent in case you are not sure about any requirement, but eventually, the form should be filled by you. In an extreme case of an agent filling up the form, ensure that you read it thoroughly before signing.

2. Never sign a blank form and trust an agent to fill up the details.

3. Ensure that all the facts are stated. Do not try to hide any fact, however irrelevant it may seem.

4. Sometimes, the agent will tell you to suppress certain facts to reduce the premium amount. Never do that. The agent will get the commission for the policy and you will suffer at the time of the claim. This is particularly true for mediclaim policies.

5. In case certain details are not relevant or not applicable, instead of leaving them blank, cross them out or write ‘not applicable’ against them.

6. In case you come to know of any error in the form after taking the policy, inform the insurance company of the same immediately.
These precautions will help minimise your troubles and mental agony at the time of claim.

The writer is a chartered accountant and blogs
at http://bachhat.blogspot.com. He can be reached at vishalbharatshah@gmail.com