Scribd Logo
Upload

Welcome to Scribd!

  • 2K views

    IRDAI Memorandum Jeevan Saral Final Draft

    Uploaded by

    Moneylife Foundation
    The document summarizes complaints received about LIC's Jeevan Saral insurance product. It describes how senior citizen policyholders received returns of only around 30% of premiums paid upon maturity, despite being marketed and sold as an investment product. It outlines several cases where ombudsmen and courts ruled in favor of policyholders. It calls on IRDAI to intervene on behalf of policyholders and ensure LIC properly compensates those negatively impacted by Jeevan Saral's poor returns.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    IRDAI Memorandum Jeevan Saral Final Draft

    Uploaded by

    Moneylife Foundation
    2K views4 pages
    The document summarizes complaints received about LIC's Jeevan Saral insurance product. It describes how senior citizen policyholders received returns of only around 30% of premiums paid upon maturity, despite being marketed and sold as an investment product. It outlines several cases where ombudsmen and courts ruled in favor of policyholders. It calls on IRDAI to intervene on behalf of policyholders and ensure LIC properly compensates those negatively impacted by Jeevan Saral's poor returns.

    Original Description:

    IRDAI Memorandum Jeevan Saral Final Draft

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document summarizes complaints received about LIC's Jeevan Saral insurance product. It describes how senior citizen policyholders received returns of only around 30% of premiums paid upon maturity, despite being marketed and sold as an investment product. It outlines several cases where ombudsmen and courts ruled in favor of policyholders. It calls on IRDAI to intervene on behalf of policyholders and ensure LIC properly compensates those negatively impacted by Jeevan Saral's poor returns.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    2K views4 pages

    IRDAI Memorandum Jeevan Saral Final Draft

    Uploaded by

    Moneylife Foundation
    The document summarizes complaints received about LIC's Jeevan Saral insurance product. It describes how senior citizen policyholders received returns of only around 30% of premiums paid upon maturity, despite being marketed and sold as an investment product. It outlines several cases where ombudsmen and courts ruled in favor of policyholders. It calls on IRDAI to intervene on behalf of policyholders and ensure LIC properly compensates those negatively impacted by Jeevan Saral's poor returns.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Date: 18 August 2018

    The Chairman,
    Insurance Regulatory and Development Authority of India (IRDAI)
    Sy No. 115/1, Financial District,
    Nanakramguda, Gachibowli,
    Hyderabad – 500032

    Sub: Traditional policy Jeevan Saral (With Profit) caused 65%-70% loss of
    investment for senior citizens

    Dear Sir,

    Greetings! We are writing to you on behalf of Moneylife Foundation, a Mumbai-


    based NGO involved in advocacy for financial literacy, details of which can be
    found at end.

    Moneylife Foundation has received several complaints by LIC Jeevan Saral


    policyholders. Life Insurance Corporation of India’s (LIC) Jeevan Saral used to be a
    hot-selling insurance product for agents, until it was withdrawn. The higher
    insurance cover provided by this product essentially worked as a good sales pitch.
    The buyers were not informed that the product would give poor returns due to the
    same reason as the investment component was low. To make matters worse, the
    product gives negative returns for those in the higher age group, although said
    person would have purchased the product for investment purposes.

    Ironically, even the agents, who sell such products, may not know that the
    customer may get lesser money than total premiums paid. It defeats the purpose of
    buying an insurance product with investment as a goal. It also shows that even
    traditional products, and not just unit-linked insurance plans (ULIPs), can give
    negative returns.

    Even an LIC branch head was clueless about Jeevan Saral giving negative returns
    and sought clarity from his higher-ups. It happens during policy surrender or
    making it ‘paid-up’; but, in the case of Jeevan Saral, it has happened even at policy
    maturity. A senior citizen couple has got just one-third of the premiums paid over
    the years.

    For example, a 58-year-old person, paying half-yearly premium of Rs4,076 for 12


    years, had paid a total of Rs97,824. The maturity sum assured, which was paid to
    him after 12 years, was a mere Rs24,575 plus bonus, amounting to Rs34,405. Even

    Page 1 of 4
    though the maturity amount was mentioned in the policy document, it was missing
    in the proposal, which only specified the death sum assured of Rs1.25 lakh. As the
    proposal did not mention the pathetic maturity sum assured, it tantamount to mis-
    selling by LIC itself. The policy was sold with inaccurate and misleading proposal
    form!

    While the death cover of 15 times the premium is good, it leads to hefty negative
    returns due to higher mortality charges for senior citizens. Some policies even have
    20 times the premium as cover for senior citizens, which would mean even lower
    returns. Even a younger person will barely get premiums back at maturity; hence,
    Jeevan Saral was a bad investment product.

    Maturity Sum Assured versus Death Sum Assured: Jeevan Saral has two different
    sums assured: death sum assured and maturity sum assured. A common person
    would not know the difference and would assume that he/she will get the sum
    assured (death) plus bonus, on policy maturity. Even a financially literate person
    may miss it, as the LIC proposal form only has field for death benefit sum assured.
    So, paying close attention to the policy document specifying the maturity sum
    assured is important when it varies from the death sum assured.

    Proposal Form: Jeevan Saral was sold to a senior citizen couple without informing
    them that the maturity amount will be far lower than the total of the premiums
    they paid. It is unfair disclosure, as the customer is usually unaware of the maturity
    sum assured being at variance from the death sum assured. The couple filled the
    proposal form, which only had death sum assured specified. The maturity sum
    assured was not mentioned in the LIC proposal. This is misleading. The maturity
    sum assured was in the policy document, but most policyholders do not look at the
    policy details.

    Branch Office Surprised with Negative Returns: That Jeevan Saral can give
    negative returns for those in the older age group may not be known to agents or
    even at the branch office level. The head of an LIC branch wrote to the divisional
    office, seeking the reasons for a customer getting only one-third of the investment
    amount. He wrote, “People trust and have faith in LIC for investments. If their
    savings is not protected, then how can we market other products based on
    promises of loyalty expected for LIC schemes?” If the seller and their branch heads
    do not know about product returns, what can be expected from a lay customer? In
    brief, Jeevan Saral is a not so ‘saral’ a product.

    National Federation of Insurance Field Workers of India letter to LIC: It states –


    “Please find enclosed herewith a maturity discharge voucher for policy
    no.892713507 wherein it is observed that the policyholder has paid Rs4,70,400 as
    premium during the 10 year policy term@ a yearly premium of Rs47,040, whereas
    the total maturity value offered to him is Rs1,65,186 only. The policyholder in this
    case is getting Rs3,15,214 less than what he has paid. Forget about any growth, he
    is in fact; getting nearly 75% less than the total premium paid by him.

    RTI information not given: RTI seeking information on Jeevan Saral policies
    maturity claim payment and premium collected for these policies was not given.
    Page 2 of 4
    The reply gave excuse as “not able to give such data.” It states – Information
    sought is not maintained by this office of the Public Authority hence information
    sought is not available as provided u/s 2(f) of RTI Act, 2005. Further, this
    information is not required for the normal, routine and regular administrative
    work. The information will have to be collected only to meet the demand of the
    applicant. Therefore collecting and collating the information for providing the
    same to the applicant will amount to creation of a new record and will result in
    disproportionate diversion of the limited resources of this Public Authority, as
    mentioned in Section 7(9) of RTI Act, 2005. This would be definitely detrimental to
    public interest because it would put undue strain on the limited resources of this
    Public Authority.

    Mumbai Ombudsman Rejection: The senior citizens did not get justice at the
    Mumbai Ombudsman, despite getting a paltry one-third of premium at maturity.
    The ombudsman’s decision states: “If the insurance company has paid the amount
    as per policy conditions, it is not possible for us to entertain your complaint.
    However, you may approach any other Forum/Court for the redressal of your
    complaint.”

    Hyderabad Ombudsman’s Favourable Decision: The Hyderabad Insurance


    Ombudsman’s Office, on the other hand, has given justice to a policyholder in a
    similar case. The Deccan Herald newspaper, on 20 January 2016, had a news report
    regarding Jeevan Saral. It drew attention to the decision given by the ombudsman
    in the policyholder’s favour. The policyholder did not receive the amount
    promised under Jeevan Saral. He stated that LIC had advertised Jeevan Saral in
    newspapers in 2002. It had claimed that the scheme offers higher returns to the
    insured. The complainant stated that he paid Rs48,040 as premium, while the
    maturity amount was Rs34,894. He was told that the sum assured was Rs1 lakh
    and, hence, was expecting that amount.

    Hyderabad Ombudsman's order procured under RTI reveals that during the
    hearing, the representative of the insurer stated that non-specifying of the correct
    maturity benefit was a typographical mistake that occurred during the printing of
    the policy document. Does it also mean that not specifying the maturity amount in
    the proposal form is also a mistake from LIC, as the proposal form does not have
    separate fields for maturity and death sum assured? The ombudsman ordered LIC
    to pay Rs1 lakh to the insured. It is strange that the Mumbai ombudsman refused
    to reopen the case even when the policyholder provided details of the Hyderabad
    ombudsman’s decision against LIC.

    High Court (HC) Decision: After the Hyderabad ombudsman’s decision asking
    LIC to pay Rs1 lakh to the insured, the LIC divisional manager filed a writ petition
    in the HC. The Dharwad bench of the Karnataka HC imposed a fine of Rs10,000 on
    LIC for filing a writ petition against an order of the ombudsman. The bench order
    procured under RTI states that the insured is at liberty to levy execution and attach
    the property of the petitioner LIC, if LIC failed to pay the sum.

    So, there is hope for Jeevan Saral policyholders. But one successful case does not
    entail its applicability to all policyholders. The Insurance Regulatory and
    Page 3 of 4
    Development Authority of India (IRDAI) should intervene and help policyholders.
    After all, IRDAI is also accountable for approving a toxic product, knowing that
    senior citizens will end up losing their hard-earned money.

    Product Suitability: IRDAI Protection of Policyholders’ Interests Draft Regulation


    (2017) dropped the ‘suitability’ regulation, which was present in the 2014 draft. It
    states: “The insurer, insurance agent and the insurance intermediary shall also
    ensure the suitability of the product with relevance to prospects’ income, personal
    and family circumstances, life stage, financial goals and risk appetite.” If such a
    regulation is enforced, products like Jeevan Saral will never be sold to senior
    citizens.

    Protection of Policyholders’ Interest Draft Regulation: IRDAI Protection of


    Policyholders’ Interests Draft Regulation (2017) has dropped the key rights, which
    were present in the 2014 draft. Right to professional diligence, right of fair
    disclosure, right to receive suitable advice and right to protection against unfair
    contract terms are some of the rights that are missing. If pro-consumer clauses are
    altered, who can be blamed if the intermediaries mis-sell the product?

    We appeal to you to take action and ensure LIC makes amends for Jeevan Saral
    policy maturity to repay all the premiums paid along with bank savings rate
    interest. Senior citizens invested in the product to get positive returns and did not
    buy policy to lose 65%-70% of premium paid. After realizing these facts, holders of
    Jeevan Saral policy have started surrendering their policies to avoid further loss.
    LIC should compensate not only these policyholders, but also those policyholders
    who have already surrendered their policies before maturity and have received the
    amount, by paying back the entire premium paid by them along with interest at 8%
    p.a. Jeevan Saral product should never have been approved by IRDAI to have
    eligibility to sell to senior citizens.

    With Best Regards,

    Sucheta Dalal Debashis Basu


    Founder Trustee Founder Trustee
    Moneylife Foundation Moneylife Foundation

    CC:
    1. Shri Piyush Goyal
    Minister of Finance
    Ministry of Finance,
    New Delhi-110011

    Page 4 of 4

    You might also like