Cheeky Customer Paid With His Life

Insurance is an important part of our lives but how many of us are aware that the underlying principle of every insurance contract is Uberrimae fidei or contract of utmost trust?

The principle is that the customer is expected to honestly disclose all the information in the proposal form. Most of us do not understand much about insurance or which kind of policy to obtain, the quantum of insurance to take, etc.

So we invariably rely on agents representing insurance companies who may not fully explain the principle of Uberrimae fidei. Therefore, it is not uncommon to find, particularly in the case of life and medical insurance, the proposer (or consumer) hiding certain vital information concerning his/her health; concealing may be done on one’s own volition or on the advice of the agent.

This often leads to claims being rejected. It is better to admit unpleasant facts, at the risk of the insurance company rejecting the proposal or charging a higher premium. What the policyholder forgets is that when a claim arises, first and foremost an insurance company will check the genuineness of the claim and of the information provided by the policyholder.

In another case, Mehfooz Mirza of New Delhi had obtained accident insurance cover. His vehicle met with an accident and he lodged a claim. To the shock of the claimant, it was rejected on the grounds that there was no valid policy in existence. The baffled policyholder was told by the insurance company that the cheque given by him towards the premium was returned unpaid by his bank, so the policy stood automatically cancelled.

He had been informed by the insurance company about the bounced cheque, but he seemed to have neglected the advice. Feeling aggrieved, he filed a consumer complaint before the District Forum which was rejected. The Forum agreed with the contention of the insurance company that there was no policy in existence as the cheque had bounced. Eventually, the matter came in appeal before the National Commission, which also upheld the order of the District Forum. Hence, due to his own negligence, the claimant became the victim; instead of getting paid by the insurance company, he ended up spending time and money seeking judicial remedy; all because of his own failure to ensure that the cheque was honoured.

Every consumer should remember that when dealing with an insurance company, the easiest thing is to obtain a policy; obtaining claims is another matter; so avoid being cheeky, else you are playing with your life and those of your loved ones.