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Petitioner: Muhammad Mansha VS Respondent: Jubilee Life Insurance
Court Name: Insurance Tribunal, Lahore Judge(s): Ali Akbar Qureshi, Zafar Iqbal Tarar Title: Muhammad Mansha vs Jubilee Life Insurance Case No.: Petition No.76 of 2024 Date of Judgment:2024-10-07 Reported As: 2024 CLD 1543 Result: Petition allowed
JUDGMENT
JUDGMENT JUSTICE (R) ALI AKBAR QURESHI, CHAIRMAN. Policy holder has moved this insurance petition under section 122(3) of the Insurance Ordinance, 2000, to the effect, that he purchased insurance policy namely, Better Life Saving Plan, bearing No.UL20180001023357002, from the respondent/company through United Bank Ltd. Sheikhupura Branch, on 15.08.2018; that. according to the terms of the policy, the sum assured of the policy was Rs.3,00,000/- and the annual premium was fixed @ Rs.30,000/-; that the policy period commenced from 15.08.2018 and its maturity date was 15.08.2028; that the petitioner regularly paid the annual premium @ of Rs.30,000/- for six years in the policy; that the policy assured two benefits i.e. the death benefit on or before 14.12.2027 and otherwise Maturity Benefit, according to the terms of standard policy conditions. 2. The petitioner, as stated in this insurance petition, after 06 years applied for surrender of the polity for the marriage of his daughter but the respondent/company returned an amount of Rs.1,16,908/- and failed to repay/return the remaining amount of Rs.64,092/- along with profit despite repeated requests. The petitioner also stated that in 06 years he paid an amount of Rs.180,000/- in the polity on account of the premium, but the respondent/company refused to pay remaining amount Lastly, the petitioner prayed that she has fully complied with the terms and conditions of the policy by paying the premium amount regularly, therefore, the insurer be directed to pay the surrender amount of the policy along with damages and the petition be decreed in the same manner. 3. In response of the notice, the insurer appeared and submitted its reply wherein admitted the issuance of the policy, however, contended that the petitioner paid six annual premiums and the
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petitioner after applying surrender request, received an amount of the Rs.1,16,908/- as the surrender value of the existing units; that the petitioner cannot claim the entire paid premium as section 90 of the Insurance Ordinance, 2000 debar him from claiming the said amount. 4. Out of the divergent pleadings of the parties, the following issues were famed:- 1. Whether the petitioner has no cause of action to file the present application? OPR. 2. Whether this petition is not maintainable under section 90 of the Issuance Ordinance, 2000 as the petitioner has already received the surrender value? OPR 3. Whether the petitioner has not come to the court with clean hands and application is liable to be dismiss with special costs under section 35-A, C.P.C? OPR. 4. Whether the petitioner is entitled to recover the entire amount deposited by him? OPA. 5. Whether the petitioner is entitled to recover liquidated damages under section 118 of the Insurance Ordinance, 2000 as prayed for? OPA 6. Relief. 5. The petitioner himself appeared in the witness box and stated that in the year 2018 he purchased insurance policy with sum assured of Rs.3,00,000/- with annual premium of Rs.30,000/- for the period of ten years but after six years he asked for return of the paid premium but the respondent company transferred an amount of Rs. 1,16000/ in his account despite receiving an amount of Rs. 1,80,000/-. On the other hand, the respondent/company produced only one witness namely, Haseeb Javed Claim Examiner and submitted the documents Exh.RW-1/1 to Exh.RW-1/5. 6. Learned counsel for the petitioner argued that the petitioner purchased the policy namely, Better Life Saving Plan and paid an amount of Rs.180,000/- on account of the premium within a period of 05 years, but the respondent/company instead of paying the total paid amount of Rs.180,000/- paid only Rs.116,000/- and refused to pay the remaining amount, which is violative of provisions of the policy. Further contends that the terms and conditions of the products at the time of sale were not conveyed nor fully explained to the petitioner, therefore, the respondent company at this stage is precluded by law to take the benefits of the technicalities of the policy documents. That at the time of selling the policy, the petitioner was not conveyed that the maturity claim will be paid according to the terms of the illustrative plan, which is only "Assumptive". Lastly, the petitioner during the currency of the policy was not communicated about the status of the policy and performance of the alleged "Chosen Fund" which is mandatory requirement of law applicable on the case, therefore, at this stage the respondent cannot be permitted or allowed to take the shelter of the technicalities. 7. In response thereof learned counsel for the respondent company reiterated the contents of the reply and submitted that the petitioner had duly signed the proposal form i.e. policy documents wherein it is clearly mentioned that the death claim or the maturity claim of the petitioner shall be dealt with in accordance with the terms of the proposal form and the petitioner in any case is not entitled to ask for the total paid premium of Rs.180,000/- which is not available anywhere in the documents. He further argued that the petitioner surrendered the policy and the respondent company after call back confirmation transferred an amount of Rs.116,000/- through bank in his account as existing surrender value of the units. 8. Six issues were framed in this case, onus of Issues Nos.4 and 5 is on.' the petitioner, whereas, that of issues Nos.1 to 3 is on the respondent/company. All the issues are interlinked, so we find it convenient to decide all these issues jointly. 9. Heard. Record perused. 10. Deeper appreciation of the record annexed with the pleadings reveals that there are certain admitted facts i.e. the issuance of the insurance policy in the name of the petitioner, complete payment of the premium and alleged payment of maturity amount (although not accepted by the petitioner) on approaching the petitioner on attaining the maturity of the policy.
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11. No doubt, the petitioner purchased the policy and signed the proposal form wherein the terms and conditions qua the payment of the death claim and the maturity amount are mentioned. It is needless to mention that it is a special law introduced by the legislature to deal with the insurance matters, life and non-life and there are certain legal terminologies and technicalities, which are difficult to understand or to comprehend even by an educated person and for that reason, the legislature has created an office of the "Agent" to represent and act on behalf of the insurance company, and insurance company is legally bound to appoint the agent strictly in accordance with the criteria given in the law. The agent duly appointed by the company is supposed to explain in detail in a very simple Language the terms and conditions of the policy so that the prospective insured could understand the terms of the policy before obtaining the same. 12. Section 97 of the Insurance Ordinance, 2000, empowers the commission (SECP) to prescribe minimum qualifications for the person to be appointed as an Insurance Agent including the educational requirements, experience in the industry and membership of an approved trade or professional organization. The "Agents" has been defined in Rule 2(a) of the Insurance Rules, 2017, which states that an Insurance Agent is appointed by an insurer in accordance with the provisions of the Ordinance and the Insurance Rules, 2017. The qualifications required of an Insurance Agent are given in Section 97 of Insurance Ordinance, 2000 and Rule 34 of the Insurance Rules, 2017, which are as under:- Section 97 of Insurance Ordinance, 2000 "Minimum qualifications for agents. The Commission may prescribe minimum qualifications for persons appointed as insurance agents, which may extend to educational requirements, experience in the industry and membership of an approved trade or professional organization". Rule 34 of Insurance Rules, 2017 (a) For persons holding license of insurance agent or certificate of employer of agents under the repealed Act, there shall be no prescribed qualifications; and (b) For persons entering into agency contracts after commencement of the Ordinance, the minimum qualification shall be Matriculate or Secondary School Certificate, and in the case of a natural person, that person, or in the case of a body corporate, each director, or in the case of partnership, each partner, shall have the said qualification, and -- (ii) Agents operating in the life insurance business shall be required to complete a foundation course of three months duration, to be organized by the concerned insurance company. 13. In this particular case, which relates to the surrender claim of the policy, the policy holder, while appearing in the witness box, during the course of cross-examination replied in clear terms in response of a question put by the respondent/company that at the time of selling this policy to the policy holder, the petitioner was not properly explained the terms and conditions of the policy and in these circumstances the burden shifts to the respondent/company to rebut the assertions of the petitioner by adducing the confidence inspiring evidence. In this case, as appears from the record, the respondent/company has not produced in rebuttal the Insurance Agent along with the training certificates etc., therefore, there is hardly any reason to disbelieve the assertions of the petitioner. Even otherwise, the agent is appointed by the insurer and acts on behalf of the insurance company thus the insurance company was legally bound to produce the said insurance agent, who sold the policy to the petitioner, irrespective of the fact of taking the objection by the policy holder in this regard. 14. According to the preamble, philosophy and scheme of the statute i.e. the Insurance Ordinance, 2000 and the Insurance Rules, 2017, the insurer in any circumstances, whether the policy holder denies or not the fact of not conveying the terms and conditions of the policy properly, according to the circumstances of the policy holder at the time of selling the product, is bound by law to prove this important aspect of the case through strong evidence for the reason, that mostly the
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policy holders, as we experienced during the proceedings of the cases, are not well educated or educated. It is also necessary to mention here, that the technicalities of the unit linked policies are so complex that even a well-educated and qualified person cannot understand the same properly if the insurer has not arranged the appointment of a well-equipped insurance agent and what to talk of an illiterate policy holder and women folk. 15. As regard the qualifications of an Insurance Agent (mentioned Supra) the agent having the qualification of matriculate or the higher secondary school (keeping in view the standard of education) can hardly, understand the nature of the bank assurance i.e. unit linked policy, creation of statutory funds and units and investment of the fund, therefore, it otherwise seems not possible for an agent having the said qualifications to explain this type of the technicalities to an educated person, what to say about an illiterate person. 16. In order to further highlight the mandatory duties and responsibilities of the insurer to sell its products to the prospective policy holders, it is appropriate and necessary to consult Rules 51, 54, 56 and 57 of the Insurance Rules, 2017. These rules are squarely applicable and would be helpful to resolve the controversies and anomalies involved in the cases of maturity and surrender. Rule 51 is mandatory and restrain the life insurer from any misrepresentation as to the financial condition of any policy holder for the purpose of inducing or intended to induce any such policy holder to enter into, allow to lapse, forfeit or surrender his insurance policy. Rule 51 is reproduced as under:- [R:51] "MISREPRESENTATION BY LIFE INSURERS". (1) Subject to sub-rule (2), no life insurer shall-- (a) make, issue, circulate or cause to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the bonuses, shareholders, dividends or share of the surplus to be received thereon, or make any false or misleading statement as to the bonuses, shareholders dividends or share of surplus previously paid on similar policies or make any misleading representation or any misrepresentation as to the financial condition of any policyholder insured in any company for the purpose of inducing or tending to induce, such policyholder to enter into, allow to lapse, forfeit or surrender his insurance policy; or (b) make, publish, disseminate, circulate or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster or in the electronic media or in any other manner an advertisement, announcement or statement with respect to the business of insurance, or the financial position of any insurer or with respect to any person in the conduct of his insurance business, which is false, untrue, deceptive, misleading or calculated to injure any person engaged in the business of insurance. (2) Nothing contained in sub-rule (1) shall prevent an insurer from publishing any return in a form in which it has been furnished to the Commission or a true and accurate abstract from such returns. Rule 54 relates to the liability of the insurance advice which is to be given in writing by the insurer or the agent of the insurer with regard to the circumstances of the person. Rule 54 is reproduced as under:- [R.54] "LIABILITY FOR INSURANCE ADVICE". Where insurance advice is given in writing to a person by an insurer, an agent of an insurer or an insurance broker, that advice shall have regard to the circumstances of the person, and where that advice is not reasonable having regard to those circumstances, and where it is reasonable for the person receiving the advice to rely upon it, the person receiving the advice shall be entitled to recover (in the case of an insurer or an agent of an insurer), from the insurer or broker, as the case may be, any loss or damage directly suffered by him as a result of following or acting upon the
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advice in good faith. The burden of proving that due regard as given to the circumstances of the policyholder and that the advice was reasonable under the circumstances shall rest with the insurer of broker. In the aforementioned rule the phrase "circumstances of the person" used by the low makers is most significant and important. In fact, this rule cast duty upon the insurer to advise the prospective policy holder according to the circumstances of the policy holder. The word circumstances is comprehensive in nature and it is the duty of the insurer or the agent of the insurer to advise the intended policy holder according to his circumstances i.e, financial, social, educational and family etc. Rule 56 speaks about the duty of the insurer to provide certain information. This type of duty, which is to be performed by the insurer has also been inserted by the regulator of the insurance companies in Regulation 18 of the Corporate Insurance Agents Regulations, 2020. For ready reference the same is reproduced as under:- Regulation 18. The sales, process business through corporate insurance agent. Sales process for business through corporate insurance agent. The following requirements shall apply to all regular premium individual life insurance policies sold through corporate insurance agents. (a) Bilingual documents to be provided to policy holder. All documents provided to the policyholder such as proposal form, marketing brochure, sales material, policy documents and any other pre-sale or post-sale document provided to the policyholder or the Prospective policyholder shall be bilingual both in English language and Urdu language written as line by line translation on the same page. (b) Free look period to be mentioned at prominent place on policy document, policy schedule and marketing material. The insurer shall ensure that it is mentioned in bold font, at a prominent place on first page of the policy document. Policy schedule and marketing material that the policyholder can cancel the policy within fourteen (14) days of the receipt of the policy documents by the policyholder (c) Audio-visual clip for guidance on proposal form and key product features. The insurer shall ensure that a brief audio-visual clip (in English or Urdu language), of at least too (2) minute duration is shown to the prospective policyholder prior to providing him/her the proposal form for filling. The audio visual clip shall cover at least the following: (1) key features of the insurance product being Offered covering premium payment coverage extended, minimum financial component, free look period, surrender options and partial withdrawals etc. (ii) contents of the proposal from its significance, duty to provide accurate information and implication of non-disclosure and/or material misrepresentation of material information on claim adjudication. In the case of sale of regular premium individual life policies sold through telemarketing the requirement of showing audio-visual clip shall not be applicable: The insurer shall file with the Commission the audio-visual clips prepared under this clause, along with the confirmation required under sub-regulation (4) of regulation 1 to these Regulations. COMMUNICATION DURING POLICY CYCLE:- 1) The insurer shall maintain continuous communication with the policyholder so as to provide him pertinent information about the policy and any ancillary matters related thereto, in a timely and effective manner through the communication channel, chosen by the policyholder, throughout the policy cycle. The insurer will, at the least, communicate with the policyholder in the following instances as follows:
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The aforesaid rules and regulations cost upon mandatory duties and responsibilities, which are to be performed by the insurer before selling the insurance policy, and throughout the policy cycle. But in this case, as appears from the record, no such material was placed on record or got exhibited by the insurer to prove the compliance of these mandatory requirements, thus, it can safely be adjudged that the insurer has failed to perform its duty and it is clear case of mis-selling of the policy. 17. The aforementioned provisions and regulation 18 are mandatory and important in nature which cast a heavy duty upon the insurer to communicate the policy holder about the every step taken by the insurer about the Policy and any ancillary matter related thereto, in a timely and effective manner through the communication channel chosen by the policy holder, meaning thereby the insurer is bound by law and have no option but to communicate the policy holder the status of the policy, unit linked policy, statutory funds, creation of the statutory fund and units, allocation of the units to the policy holder and the most important is the details of Investment of the amount of the petitioner (premium) including the name of the company or the government securities as required by law. In this regulation the phrases "throughout the policy cycle" and any "ancillary matters" are very significant and purposely inserted by the law maker to safeguard and protect the rights and particularly the pecuniary rights of the policy holder, who is the only stake holder in the Insurance Business Needless to mention, that steps or proceedings required to be communicated to the policy holder shall be proved and established by the insurer, obviously through strong, reliable and cogent evidence. In this case, as earlier observed, the insurer has miserably failed to place on record the correspondence pertaining to the communications made by the company with the policy holder thus it is observed with grave concern, that the insurer has miserably failed to obey the mandatory requirements of law and this is sufficient to hold that this is glaring example of mis- selling of the policy. The Insurance Rules, 2017 also direct the insurer in the same manner and even otherwise, that the statutory fund and units are created by the insurer from the premium amounts of the policy holders and invested by the insurer, therefore the law has rightly held him responsible and liable to inform the policy holder the terms and conditions of the policy and all the steps taken by the insurer during the currency of the policy. 10. The petitioner has placed on record the copy of the insurance policy, whereas. RSV-1 also placed on record the policy documents along with the unit reports and the photocopy of information sent by the insurer to the policy holder on different occasions. Firstly, the policy documents were perused with the assistance of the learned counsel for the parties and found that there are two types of benefits mentioned in the policy schedule:- Benefit Assured:The benefit calculated in accordance with condition 5 of Standard policy conditions applicable to Amman Plan issued by the company, Maturity Benefit:The benefit calculated in accordance with condition 6 of Standard policy conditions applicable to Amaan Plan issued by the company. Since in this case, the policy holder is surrendering the policy before its maturity as provided in Chapter XII of the Insurance Ordinance, 2000 and alleging that the insurer is paying the surrender value, which is much less than the premium paid by the petitioner and further the insurer has not complied with the relevant provisions of the Insurance Ordinance, 2000, Insurance Rules, 2017 and Corporate Insurance Agents Regulations, 2020, at the time of selling the policy and throughout the policy cycle, therefore, it is case of mis-selling of the policy. 19. We have, as appears from the preceding paras, surveyed the relevant provisions of law and the rules applicable on the subject but the judgment would be incomplete and spiritless if the most important and significant provision of Ordinance, 2000 i.e. Section 75 is not consulted and referred to meet the ends of justice.
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20. Section 75, as appear from the language, states that an insurance contract is based on the sacred principle of utmost good faith and there shall be implied in every contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with utmost good faith. The act of utmost good faith of any party is to be assessed and gauged from the day first and till the maturity, or termination of the policy. It has already been observed in the preceding paras that on the day first of selling the product, the insurer shall inform, explain, illustrate and elaborate to the prospective policy holder about the terms and conditions of the policy in a very simple way in the language chosen by the policy holder and needless to mention that the prospective policy holder shall also disclose the true facts. The law, after selling the product to the policy holder has only bound and cast a heaviest duty on the insurer (not to the policy holder) to communicate each and ever step taken by the insurer throughout the policy cycle, the insurer will remain active and in contact with the policy holder till the maturity or termination of the policy to show utmost good faith. In this case, the insurer has failed to perform this sacred statutory dun: of utmost good faith at the time of sale and after selling the policy and failed to inform the policy holder about the status of the policy, thus, there is no cavil with the proposition to hold that the insurer has miserably failed to abide by this mandatory provision of law and it is a fit case of mis-selling, which entails serious consequences envisaged in section 76 of the Insurance Ordinance. 2000. 21. Section 76 of the Insurance Ordinance, 2000, is applicable in such like situation which states that the insurer shall not engage in misleading or deceptive conduct in the course of its business as an insurer. The aforementioned conduct of the insurer is not appropriate rather deceptive which offends the provisions of section 76. It is appropriate to reproduce terms of section 76: Insurance not to engage in misleading or deceptive conduct. i. "An insurer shall not, in the count of its business as an insurer, engage in conduct that is misleading or deceptive or is…
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