Can a life insurer reject a death claim because the policy had lapsed and still be asked to refund the premium paid by the policyholder? In a significant ruling, the Maharashtra State Consumer Disputes Redressal Commission upheld HDFC Life’s decision to deny a Rs 70-lakh death claim after finding that the life insurance policy had lapsed due to non-payment of the renewal premium.
What was the dispute?
The case revolved around a complainant whose late husband had purchased an HDFC Life Classic Assure Plus policy by paying an annual premium of Rs 7 lakh. The policy offered a minimum death benefit of Rs 70 lakh.
According to the complaint, the policyholder paid only the first annual premium. The second premium, which fell due on October 3, 2016, was never paid, even within the contractual grace period of 30 days.
Therefore, under the policy terms, the insurance cover had ceased and the policy was no longer in force on the date of the insured’s death, i.e., 4 July 2017, explains Vivek Kumar, Advocate, Delhi High Court.
The complainant argued that since the insurer had sent an email stating that the premium amount was “valid till 05.07.2017,” the policy should be treated as subsisting.
She contended that while HDFC Life had asked the policyholder to pay the renewal premium and stated that the amount was valid till July 5, it later rejected the claim by stating that the policy had lapsed much earlier, from October 3, 2016.
She alleged that this amounted to a deficiency in service and an unfair trade practice, and sought payment of the Rs 70 lakh death benefit or a refund of the premium already paid.
The Commission agreed with the insurer that the policy was not in force on the date of the policyholder’s death. The Commission rejected this argument after carefully interpreting the email.
“It observed that the email merely specified the validity of the premium calculation required for policy revival and did not extend the insurance coverage or revive the policy automatically,” says Kumar.
Revival required payment of outstanding premiums along with compliance with IRDA regulations, which never happened before the insured’s death, he adds.
