Issuance Of Non-consensual Insurance Policies, Telangana State Commission Holds HDFC Bank And HDFC Insurance Co. Liable

Brief Facts:

Mr Manoj P Mehta (“Deceased”), the husband of Mrs Jayshree M Mehtha (“Complainant”), obtained a loan of Rs. 22,00,000/- for a tenure of 9 years from the HDFC Bank (“Bank”). The bank insisted on obtaining insurance (credit protection policy) for the loan amount and told the deceased that it was mandatory for loan approval. The total premium for the policy was Rs. 40,000/-, which was deducted upfront from the loan amount sanctioned to the deceased. The bank didn't provide any policy documents to the deceased or the Complainant. After the death of her husband, the Complainant approached the bank to invoke the insurance policy to clear the loan account. However, the bank shrugged off responsibility, directing her to approach HDFC Life Insurance Co. Ltd. (“Insurance Company”), who refused to provide any insurance-related documents. Despite numerous requests, the loan account remained uncleared, and the Complainant didn't receive any satisfactory response from the bank and the insurance company. Feeling aggrieved, the Complainant filed a consumer complaint in the State Consumer Disputes Redressal Commission, Telangana (“State Commission”).

In response, the bank contended that the deceased obtained two policies from HDFC Life Insurance Co. Ltd., namely HDFC Life Group Credit Protect and Insurance and HDFC Life Group Health Shield Policy. The bank argued that there is no cause of action against them, as they are not connected to the insurance company. It claimed that it deducted Rs. 40,000/- from the loan account under two policies: personal accident insurance and death or disability insurance. It asserted that if it receives any amount from the insurance company, it gets credited to the loan account, and any excess gets refunded to the nominee. It argued that there had been a misjoinder of the party, and the complaint should be dismissed.

In response, the Complainant, in her rejoinder, challenged the bank's contentions, alleging collusion between the bank and the insurance company. She disputed the issuance of the credit protection policy, claiming it was created solely to defeat her rights. The Complainant asserted that the bank falsely represented that the premium paid covered the entire loan amount. She further alleged unfair trade practices, pointing to discrepancies in email IDs and policy details. The Complainant contended that the deceased's signature was taken on blank forms, later filled out to suit the bank's needs.

The insurance company, in its written version, argued that the complaint was misconceived and lacked merit. It asserted that the State Commission had no territorial jurisdiction and denied the mandatory nature of the credit protection policy. Further, it provided the details of the insurance policy obtained by the deceased, emphasizing that no policy was taken for Rs. 22 lakhs. It claimed that there was no deficiency in service or unfair trade practice on its and requested dismissal of the complaint.

Observations by the Commission:

The central issue revolved around the deduction of Rs. 40,000/- from the deceased's account for the payment of premium, with the Complainant asserting that it was meant to cover the entire loan of Rs. 22,00,000/-. In contrast, the bank and the insurance company contended that the deduction was bifurcated into two premiums for different policies.

The State Commission referred to the loan application form and the sanctioned letter, noting that the loan of Rs. 22 lakhs was granted with the deceased and the Complainant as co-borrowers. However, discrepancies arose regarding the purpose of the Rs. 50,000/- mentioned as an insurance premium in the sanctioned letter. The statement of account indicated a deduction of Rs. 40,000/- labelled as "Credit Protect Premium," creating doubt as to whether this amount was exclusively for the Credit Protect Policy or multiple policies.

Further, the State Commission referred to the documents submitted by the bank and by the insurance company. The State Commission noted that the "Member Enrollment Form-SMQ Regulated Entity," contained several discrepancies, such as overwriting in the date column. The State Commission questioned the authenticity of the document and highlighted the absence of any documents proving the deceased opted for two policies as claimed by the bank and the insurance company.

The State Commission referred to the Group Health Shield policy which was signed after the death of the deceased and therefore, it questioned the credibility of the insurance company's contention regarding the printing date. Therefore, the State Commission concluded that the policies were seemingly issued based on the whims of the bank and insurance company rather than the deceased's wishes. Examining the Complainant's evidence and arguments, the State Commission held that the actions and inactions of the bank and the insurance company amounted to both deficiency in service and unfair trade practices.

The State Commission acknowledged the contention that Rs. 40,000/- may not be sufficient to cover the risk of Rs. 22 lakhs over nine years but emphasized that the bank and the insurance company were obligated to obtain the policies as per the borrower's consent. In a balanced decision, the State Commission directed the bank and the insurance company to deduct the equivalent of Rs. 40,000/- from the loan account and pay compensation of Rs. 5,00,000/- for deficiency in service and unfair trade practices. Additionally, they were instructed to furnish necessary circulars of the Credit Protect Coverage Policy and bear the costs of Rs. 20,000/-.