Surrender charge on policy; HC asks IRDA, PNB Metlife to reply
14 Feb, 2014 03:03 PM
The Delhi High Court has sought response from insurance regulator IRDA and PNB-MetLife India Insurance Company Ltd on a plea seeking quashing of a rule imposing penalty on surrender of a life insurance policy.

The court's notice came on a plea of a lawyer who invested Rs 50,000 in a stock-market linked insurance policy of PNB Metlife in 2010 and got a return of Rs 1,844 in February 2013 on termination of policy.

The insurer deducted 19,663 as surrender charge after intimating Vidya K Sagar, lawyer practicing in the Supreme Court, that the fund value of his policy was Rs 21,507 on the date of termination of the policy.

Justice Manmohan issued notice to the insurance company also and fixed the case for hearing on April 3.

The petition has sought quashing of the rule of Insurance Regulatory Development Authority (IRDA) that allowed a firm to impose penalty on surrender of life insurance policies.

It said that the IRDA approved such a policy in violation of the object and provisions of the IRDA Act that allows the insurer to deduct 90 per cent of the invested money as surrender charge.

"Whether an insurance company can invest in the stock market and how the insurance regulator allowed it to do so," it said.

The petition alleged that PNB Metlife would have got crores of rupees from the policy holders in collusion with the regulator.

It has sought a direction to the insurers to "inform where exactly the money of the petitioner was invested and how it got such loss/reduced to such a low amount."

It has also sought information about the total amount of money "deducted/collected by the company by imposing the penalty on surrender of insurance policy".
Source : Business Standard

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