 "SBI Life files special leave petition in SC")
Private life insurer SBI Life Insurance has filed a special leave petition in the Supreme Court in response to the Allahabad High Court order asking the Insurance Regulatory and Development Authority (Irda) to scrutinise all policies of SBI Life. The court had also said that if Irda finds that SBI Life, which has suffered penalties in the past, for its defaults has acted in breach of its guidelines it would be appropriate for it to direct the SBI Life to discontinue its policies and to wind up its business.
Irda is presently looking into the order and trying to see how to implement the order. A senior Irda official explained that they have received the order from Allahabad HC and are discussing on the mechanism that they will have to adopt to implement the directions of the court.
SBI Life refused to comment saying that the matter is sub-judice.
The matter pertains to Virendra Pal Kapoor, a 72 year old retired scientist from Lucknow. He invested Rs 50,000 in the year 2007 in SBI Life - "UNIT PLUS II - Single", a Unit Linked Product offered by SBI Life Insurance Company Limited with an option of a limited term of five years (from January 9, 2007 to January 9, 2012), on the basic sum assured for life with risk cover at 625 per cent of Rs 3,12,500, with a choice of investment in growth fund (100 per cent). The petitioner survived the term of the policy of five years. On its maturity he was paid only Rs 248 as a balance in the fund, on which the policy was terminated.
The court noted that SBI Life is a subsidiary of SBI and that "SBI Life Unit Plus II - Single" a unit linked product on a standard form of contract did not have the approval of Irda to its twin options in which the higher option reduced the entire investment of a senior citizen with high rate of mortality charges. "It was an unconscionable contract and was thus arbitrary, illegal and void document. It did not bind the petitioner," said the court.
The court also observed that the petitioner was misled into entering into a contract without the individual knowing the finer details and without him being explained the contents of the policy.
In September 2010, Irda has revised its unit-linked policy guidelines that have made the product more transparent with additional disclosures.
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"The Central Government will do well to ensure that the investors are not cheated in a manner as in the present case, in which the entire investment of the senior citizen has been lost on the pretext of the policy being in tune with Irda guidelines. The 'Serious Fraud', Department of Ministry of Corporate Affairs must examine these policies and unlawful gains made by the Company and its Directors including the Directors of SBI, in the Company, by cheating the policyholders on the pretext that its policies are in compliance with Irda regulations," said the court in its order.
In March 2014, Irda had asked SBI Life to refund the prescribed amount to the policyholders of Dhanaraksha Plus Limited Premium Paying Term (LPPT) Group Insurance Product. Here, Irda had said that the life insurer had adopted business practices in violation of prescribed regulatory norms where the LPPT was sold as Single Premium Policy in violation of approved File and Use features. Also, it said that the insurer paid excess commission to Corporate Agents over and above the eligible 2 per cent.
Post this, SBI Life Insurance appealed to Irda against the directive issued by the regulator to refund Rs 275.29 crore to the beneficiaries of the group insurance schemes. The final order is yet to be passed by Irda, as the regulator is in discussion with its legal team on this particular refund matter.