Victim of insurance mis-selling? You are entitled to get a full refund, rules NCDRC

Time of India

23-04-2025

Have you ever been forced to compulsorily buy an insurance policy with another financial product, like a loan or bank locker? Were some features of the insurance policy that would otherwise have potentially discouraged you from buying it deliberately hidden from you? If you have answered yes to any of the above, chances are that you have been missold an insurance policy.
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With cases of
insurance mis-selling
getting increasingly rampant and commonplace these days, individuals might think they are trapped with such policies, and have no other recourse but to keep paying premiums, with no scope for getting a refund. However, that is not the case.
In a recent verdict in November 2024, NCDRC (
National Consumer Disputes Redressal Commission
) clearly emphasised that any insurance policy that had been missold by the insurer or their agent to the policyholder would be entitled to a complete refund of the
premium amount
.
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In the case of Gyan Prakash Singh vs Tata AIA
Life Insurance
, the NCDRC called out the life insurer for misrepresenting the premium payment tenure to the policyholder. While the insurer's agent conveyed to Singh that the premium payment would be a one-time obligation, the premiums were, in reality, to be paid annually for 10 years.
The NCDRC also directed Tata AIA to refund the entire premium amount deposited by Singh, i.e. Rs 2,47,700, with 9% interest, along with Rs 10,000 as compensation towards mental harassment and Rs 5,000 as litigation cost.
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What was the case?
Here is a brief, chronological summary of the case, as it happened:
In 2009, Gyan Prakash Singh, who hails from a low-income family, was approached by a TATA AIA agent, who missold him multiple insurance policies under the guise that just by depositing a one-time premium, the policy's payout would go up by 1.5x, after 1.5 years.
Impressed by these claims, Singh purchased 5 policies. 'One policy was in his name: Gyan Prakash Singh (Rs. 49,900 dated 19.06.2009), two policies in his wife's name: Smt. Amita Singh (Rs. 49,900 dated 26.06.2009 and Rs 49,900 dated 28.06.2009 and two policies in his daughter's name: Nishi Singh (Rs. 49,900 dated 11.06.2009 and Rs. 49,900/- dated 11.06.2009', the judgment said.
However, within 10-15 days of receiving these policies, Singh's family found out that the premium was required to be paid annually for 10 years, and was not a one-time activity, as originally conveyed by the insurer's agent.
This, as the judgment also noted, was financially unsustainable. 'Agent of the appellants/ opposite parties (TATA AIA) told them to deposit the said amount at one time, enticed them to take the policy because such a big amount, one retired employee and his wife and daughter, every year regularly for 10 years, cannot deposit', it added.
Despite sending emails and letters to Tata AIA, he received no meaningful response from TATA AIA, as per the judgment.
Sensing that he had been wronged, Singh refused to accept the policy within a week, demanded a refund and promptly approached the concerned officials in TATA AIA; however, they did not respond. Although the typical freelook period at that time was 15 days from the receipt of the policy, the policyholder could not get a full refund for cancelling the policy.
Three years later, in 2012, TATA AIA issued a partial refund for each of the 5 policies, while forfeiting the remaining amount. Aggrieved, the policyholder approached the State Commission and subsequently, the NCDRC.
What does IRDAI say on insurance mis-selling?
Shilpa Arora, COO & Co-Founder of Insurance Samadhan, explains, 'Misselling of an insurance product occurs when an insurance policy is sold by providing false information, omitting crucial details, or using coercive tactics. Agents may falsely promise to help recover lapsed policy money, and there is a chance that the policies are offered with the allure of interest-free loans.'
'In some cases, the insurer might misrepresent the duration of premium payment, exaggerate the benefits of the policies, or even bundle the policies without the consent of the policy buyer', she adds.
Once Singh escalated the matter to the District Consumer Dispute Redressal Forum, TATA AIA issued a partial refund to Singh, paying back 1/5th of the deposit amount of each of the 5 policies, and forfeiting the remaining 4/5th amount. However, Singh did not encash this cheque.
Regarding the reason for this action, TATA AIA contended that the complaint was time-barred as the policies were issued in June and July 2009, whereas the complaint was filed in the year 2013. The complainants had approached beyond freelook period, seeking a refund of premiums, which was untenable.
In this matter, the judgment noted that 'the appellant/opposite party on 26.7.2012 issued the refund of 1/5th of the amount of each policy to the applicant/ complainant, which the applicant/complainant has not accepted by not depositing the cheque in their account. Therefore, the cause of action of the complaint having arisen on 26.7.2012, the complainant has been filed within the period of limitation. Hence, the complaint is not time-barred.'
NCDRC called out the cheating and enticement on behalf of TATA AIA's agent, and asserted that wrong information had been provided to the policyholder.
'It is clear that really the agent of the applicant/opposite party gave the wrong information to the applicant/complainant for taking the policy, and after cheating, enticed them to take the policy, which is an unfair trade practice. Under the above condition, the deduction made by the appellant/opposite party from the deposited amount of the applicant/complainant is unjustified because, after cheating, the applicant/opposite party has been enticed to take the policy, said the judgement by NCDRC.
ET Wealth reached out to insurer Tata AIA Life; however, despite multiple attempts, the insurer refused to comment on the matter.
Can I approach the insurer for policy misselling if the free-look period has lapsed?
This incident is more than a decade old, and since then, IRDAI has put across multiple checks and balances to stop mis-selling. It has resulted in bringing down such instances substantially. However, even now, such cases often surface. Many a time, policyholders might realise only while they are paying their annual premiums, long after the
free-look period
has lapsed, that they have been missold a policy.
In such a case, they can approach the concerned insurer's GRO (Grievance Redressal Officer). After receiving the complaint, if they do not respond within 15 days, policyholders can further escalate their complaint to IRDAI's
Bima Bharosa portal
.
If the query remains unresolved thereafter as well, the subject can be escalated to the
Insurance Ombudsman
, in case the
claim amount
is up to Rs 50 lakhs. Policyholders will have to incur no charges while approaching the ombudsman either online, by logging in at https://cioins.co.in/Complaint/Online or even offline.
IRDAI's circular states that the insurer will have to comply with the award of the Insurance Ombudsman within 30 days of receipt of the award. 'In case the Insurer does not honour the Insurance Ombudsman award within 30 days, a penalty of Rs. 5000/- per day shall be payable to the complainant for each day of delay', as per IRDAI.
'Remember that a total reimbursement can be granted despite the expiry of the policy's free-look period, if it is proven that the policy was mis-sold by not disclosing the terms of premium payment or other facts', explains Arora.
Keeping documented evidence of utmost importance
As per Narendra Ganpule, Partner, Grant Thornton Bharat, 'The customer must mandatorily keep documented evidence to show that he/she was mis-sold the policy by making false claims / false explanation of policy benefits.'
Since regulators require substantial proof of misselling, all communication that has taken place between the policyholder and the insurer's agent or representatives must be kept handy. While buying any policy, each document is important and can be used later to file a complaint.
'Original policy document, any written or digital communication like the WhatsApp chat with the insurer, and all the materials that were provided by the insurer at the time of sale should be kept carefully. Policyholders should always keep the call recordings or notes of the promises that were made by the agent and, most importantly, keep the proof of the payment, like premium receipts', adds Arora.