JUSTICE (R) ALI AKBAR QURESHI, CHAIRMAN. Policy holder has moved this insurance petition under section 122(3) of the Insurance Ordinance, 2000, to the effect, that he purchased insurance policy namely, Better Life Saving Plan, bearing No.UL20180001023357002, from the respondent/company through United Bank Ltd. Sheikhupura Branch, on 15.08.2018; that. according to the terms of the policy, the sum assured of the policy was Rs.3,00,000/- and the annual premium was fixed @ Rs.30,000/-; that the policy period commenced from 15.08.2018 and its maturity date was 15.08.2028; that the petitioner regularly paid the annual premium @ of Rs.30,000/- for six years in the policy; that the policy assured two benefits i.e. the death benefit on or before 14.12.2027 and otherwise Maturity Benefit, according to the terms of standard policy conditions.
2. The petitioner, as stated in this insurance petition, after 06 years applied for surrender of the polity for the marriage of his daughter but the respondent/company returned an amount of Rs.1,16,908/- and failed to repay/return the remaining amount of Rs.64,092/- along with profit despite repeated requests. The petitioner also stated that in 06 years he paid an amount of Rs.180,000/- in the polity on account of the premium, but the respondent/company refused to pay remaining amount Lastly, the petitioner prayed that she has fully complied with the terms and conditions of the policy by paying the premium amount regularly, therefore, the insurer be directed to pay the surrender amount of the policy along with damages and the petition be decreed in the same manner.
3. In response of the notice, the insurer appeared and submitted its reply wherein admitted the issuance of the policy, however, contended that the petitioner paid six annual premiums and the petitioner after applying surrender request, received an amount of the Rs.1,16,908/- as the surrender value of the existing units; that the petitioner cannot claim the entire paid premium as section 90 of the Insurance Ordinance, 2000 debar him from claiming the said amount.
4. Out of the divergent pleadings of the parties, the following issues were famed:-
1. Whether the petitioner has no cause of action to file the present application? OPR.
2. Whether this petition is not maintainable under section 90 of the Issuance Ordinance, 2000 as the petitioner has already received the surrender value? OPR
3. Whether the petitioner has not come to the court with clean hands and application is liable to be dismiss with special costs under section 35-A, C.P.C? OPR.
4. Whether the petitioner is entitled to recover the entire amount deposited by him? OPA.
5. Whether the petitioner is entitled to recover liquidated damages under section 118 of the Insurance Ordinance, 2000 as prayed for? OPA
6. Relief.
5. The petitioner himself appeared in the witness box and stated that in the year 2018 he purchased insurance policy with sum assured of Rs.3,00,000/- with annual premium of Rs.30,000/- for the period of ten years but after six years he asked for return of the paid premium but the respondent company transferred an amount of Rs. 1,16000/ in his account despite receiving an amount of Rs.
1,80,000/-. On the other hand, the respondent/company produced only one witness namely, Haseeb Javed Claim Examiner and submitted the documents Exh.RW-1/1 to Exh.RW-1/5.
6. Learned counsel for the petitioner argued that the petitioner purchased the policy namely, Better Life Saving Plan and paid an amount of Rs.180,000/- on account of the premium within a period of 05 years, but the respondent/company instead of paying the total paid amount of Rs.180,000/- paid only Rs.116,000/- and refused to pay the remaining amount, which is violative of provisions of the policy. Further contends that the terms and conditions of the products at the time of sale were not conveyed nor fully explained to the petitioner, therefore, the respondent company at this stage is precluded by law to take the benefits of the technicalities of the policy documents. That at the time of selling the policy, the petitioner was not conveyed that the maturity claim will be paid according to the terms of the illustrative plan, which is only "Assumptive". Lastly, the petitioner during the currency of the policy was not communicated about the status of the policy and performance of the alleged "Chosen Fund" which is mandatory requirement of law applicable on the case, therefore, at this stage the respondent cannot be permitted or allowed to take the shelter of the technicalities.
7. In response thereof learned counsel for the respondent company reiterated the contents of the reply and submitted that the petitioner had duly signed the proposal form i.e. policy documents wherein it is clearly mentioned that the death claim or the maturity claim of the petitioner shall be dealt with in accordance with the terms of the proposal form and the petitioner in any case is not entitled to ask for the total paid premium of Rs.180,000/- which is not available anywhere in the documents. He further argued that the petitioner surrendered the policy and the respondent company after call back confirmation transferred an amount of Rs.116,000/- through bank in his account as existing surrender value of the units.
8. Six issues were framed in this case, onus of Issues Nos.4 and 5 is on.' the petitioner, whereas, that of issues Nos.1 to 3 is on the respondent/company. All the issues are interlinked, so we find it convenient to decide all these issues jointly.
9. Heard. Record perused.
10. Deeper appreciation of the record annexed with the pleadings reveals that there are certain admitted facts i.e. the issuance of the insurance policy in the name of the petitioner, complete payment of the premium and alleged payment of maturity amount (although not accepted by the petitioner) on approaching the petitioner on attaining the maturity of the policy.
11. No doubt, the petitioner purchased the policy and signed the proposal form wherein the terms and conditions qua the payment of the death claim and the maturity amount are mentioned. It is needless to mention that it is a special law introduced by the legislature to deal with the insurance matters, life and non-life and there are certain legal terminologies and technicalities, which are difficult to understand or to comprehend even by an educated person and for that reason, the legislature has created an office of the "Agent" to represent and act on behalf of the insurance company, and insurance company is legally bound to appoint the agent strictly in accordance with the criteria given in the law. The agent duly appointed by the company is supposed to explain in detail in a very simple Language the terms and conditions of the policy so that the prospective insured could understand the terms of the policy before obtaining the same.
12. Section 97 of the Insurance Ordinance, 2000, empowers the commission (SECP) to prescribe minimum qualifications for the person to be appointed as an Insurance Agent including the educational requirements, experience in the industry and membership of an approved trade or professional organization. The "Agents" has been defined in Rule 2(a) of the Insurance Rules, 2017, which states that an Insurance Agent is appointed by an insurer in accordance with the provisions of the Ordinance and the Insurance Rules, 2017. The qualifications required of an Insurance Agent are given in Section 97 of Insurance Ordinance, 2000 and Rule 34 of the Insurance Rules, 2017, which are as under:- Section 97 of Insurance Ordinance, 2000 "Minimum qualifications for agents. The Commission may prescribe minimum qualifications for persons appointed as insurance agents, which may extend to educational requirements, experience in the industry and membership of an approved trade or professional organization".
Rule 34 of Insurance Rules, 2017
(a) For persons holding license of insurance agent or certificate of employer of agents under the repealed Act, there shall be no prescribed qualifications; and
(b) For persons entering into agency contracts after commencement of the Ordinance, the minimum qualification shall be Matriculate or Secondary School Certificate, and in the case of a natural person, that person, or in the case of a body corporate, each director, or in the case of partnership, each partner, shall have the said qualification, and --
(ii) Agents operating in the life insurance business shall be required to complete a foundation course of three months duration, to be organized by the concerned insurance company.
13. In this particular case, which relates to the surrender claim of the policy, the policy holder, while appearing in the witness box, during the course of cross-examination replied in clear terms in response of a question put by the respondent/company that at the time of selling this policy to the policy holder, the petitioner was not properly explained the terms and conditions of the policy and in these circumstances the burden shifts to the respondent/company to rebut the assertions of the petitioner by adducing the confidence inspiring evidence. In this case, as appears from the record, the respondent/company has not produced in rebuttal the Insurance Agent along with the training certificates etc., therefore, there is hardly any reason to disbelieve the assertions of the petitioner.
Even otherwise, the agent is appointed by the insurer and acts on behalf of the insurance company thus the insurance company was legally bound to produce the said insurance agent, who sold the policy to the petitioner, irrespective of the fact of taking the objection by the policy holder in this regard.
14. According to the preamble, philosophy and scheme of the statute i.e. the Insurance Ordinance, 2000 and the Insurance Rules, 2017, the insurer in any circumstances, whether the policy holder denies or not the fact of not conveying the terms and conditions of the policy properly, according to the circumstances of the policy holder at the time of selling the product, is bound by law to prove this important aspect of the case through strong evidence for the reason, that mostly the policy holders, as we experienced during the proceedings of the cases, are not well educated or educated. It is also necessary to mention here, that the technicalities of the unit linked policies are so complex that even a well-educated and qualified person cannot understand the same properly if the insurer has not arranged the appointment of a well-equipped insurance agent and what to talk of an illiterate policy holder and women folk.
15. As regard the qualifications of an Insurance Agent (mentioned Supra) the agent having the qualification of matriculate or the higher secondary school (keeping in view the standard of education) can hardly, understand the nature of the bank assurance i.e. unit linked policy, creation of statutory funds and units and investment of the fund, therefore, it otherwise seems not possible for an agent having the said qualifications to explain this type of the technicalities to an educated person, what to say about an illiterate person.
16. In order to further highlight the mandatory duties and responsibilities of the insurer to sell its products to the prospective policy holders, it is appropriate and necessary to consult Rules 51, 54, 56 and 57 of the Insurance Rules, 2017. These rules are squarely applicable and would be helpful to resolve the controversies and anomalies involved in the cases of maturity and surrender. Rule 51 is mandatory and restrain the life insurer from any misrepresentation as to the financial condition of any policy holder for the purpose of inducing or intended to induce any such policy holder to enter into, allow to lapse, forfeit or surrender his insurance policy. Rule 51 is reproduced as under:- [R:51] "MISREPRESENTATION BY LIFE INSURERS".
(1) Subject to sub-rule (2), no life insurer shall--
(a) make, issue, circulate or cause to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the bonuses, shareholders, dividends or share of the surplus to be received thereon, or make any false or misleading statement as to the bonuses, shareholders dividends or share of surplus previously paid on similar policies or make any misleading representation or any misrepresentation as to the financial condition of any policyholder insured in any company for the purpose of inducing or tending to induce, such policyholder to enter into, allow to lapse, forfeit or surrender his insurance policy; or
(b) make, publish, disseminate, circulate or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated or placed before the public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster or in the electronic media or in any other manner an advertisement, announcement or statement with respect to the business of insurance, or the financial position of any insurer or with respect to any person in the conduct of his insurance business, which is false, untrue, deceptive, misleading or calculated to injure any person engaged in the business of insurance.
(2) Nothing contained in sub-rule (1) shall prevent an insurer from publishing any return in a form in which it has been furnished to the Commission or a true and accurate abstract from such returns.
Rule 54 relates to the liability of the insurance advice which is to be given in writing by the insurer or the agent of the insurer with regard to the circumstances of the person. Rule 54 is reproduced as under:- [R.54] "LIABILITY FOR INSURANCE ADVICE".
Where insurance advice is given in writing to a person by an insurer, an agent of an insurer or an insurance broker, that advice shall have regard to the circumstances of the person, and where that advice is not reasonable having regard to those circumstances, and where it is reasonable for the person receiving the advice to rely upon it, the person receiving the advice shall be entitled to recover (in the case of an insurer or an agent of an insurer), from the insurer or broker, as the case may be, any loss or damage directly suffered by him as a result of following or acting upon the advice in good faith. The burden of proving that due regard as given to the circumstances of the policyholder and that the advice was reasonable under the circumstances shall rest with the insurer of broker.
In the aforementioned rule the phrase "circumstances of the person" used by the low makers is most significant and important. In fact, this rule cast duty upon the insurer to advise the prospective policy holder according to the circumstances of the policy holder. The word circumstances is comprehensive in nature and it is the duty of the insurer or the agent of the insurer to advise the intended policy holder according to his circumstances i.e, financial, social, educational and family etc. Rule 56 speaks about the duty of the insurer to provide certain information. This type of duty, which is to be performed by the insurer has also been inserted by the regulator of the insurance companies in Regulation 18 of the Corporate Insurance Agents Regulations, 2020. For ready reference the same is reproduced as under:- Regulation 18. The sales, process business through corporate insurance agent.
Sales process for business through corporate insurance agent. The following requirements shall apply to all regular premium individual life insurance policies sold through corporate insurance agents.
(a) Bilingual documents to be provided to policy holder. All documents provided to the policyholder such as proposal form, marketing brochure, sales material, policy documents and any other pre-sale or post-sale document provided to the policyholder or the Prospective policyholder shall be bilingual both in English language and Urdu language written as line by line translation on the same page.
(b) Free look period to be mentioned at prominent place on policy document, policy schedule and marketing material. The insurer shall ensure that it is mentioned in bold font, at a prominent place on first page of the policy document. Policy schedule and marketing material that the policyholder can cancel the policy within fourteen (14) days of the receipt of the policy documents by the policyholder
(c) Audio-visual clip for guidance on proposal form and key product features. The insurer shall ensure that a brief audio-visual clip (in English or Urdu language), of at least too (2) minute duration is shown to the prospective policyholder prior to providing him/her the proposal form for filling. The audio visual clip shall cover at least the following:
(1) key features of the insurance product being Offered covering premium payment coverage extended, minimum financial component, free look period, surrender options and partial withdrawals etc.
(ii) contents of the proposal from its significance, duty to provide accurate information and implication of non-disclosure and/or material misrepresentation of material information on claim adjudication.
In the case of sale of regular premium individual life policies sold through telemarketing the requirement of showing audio-visual clip shall not be applicable: The insurer shall file with the Commission the audio-visual clips prepared under this clause, along with the confirmation required under sub-regulation (4) of regulation 1 to these Regulations.
COMMUNICATION DURING POLICY CYCLE:- 1) The insurer shall maintain continuous communication with the policyholder so as to provide him pertinent information about the policy and any ancillary matters related thereto, in a timely and effective manner through the communication channel, chosen by the policyholder, throughout the policy cycle. The insurer will, at the least, communicate with the policyholder in the following instances as follows: The aforesaid rules and regulations cost upon mandatory duties and responsibilities, which are to be performed by the insurer before selling the insurance policy, and throughout the policy cycle.
But in this case, as appears from the record, no such material was placed on record or got exhibited by the insurer to prove the compliance of these mandatory requirements, thus, it can safely be adjudged that the insurer has failed to perform its duty and it is clear case of mis-selling of the policy.
17. The aforementioned provisions and regulation 18 are mandatory and important in nature which cast a heavy duty upon the insurer to communicate the policy holder about the every step taken by the insurer about the Policy and any ancillary matter related thereto, in a timely and effective manner through the communication channel chosen by the policy holder, meaning thereby the insurer is bound by law and have no option but to communicate the policy holder the status of the policy, unit linked policy, statutory funds, creation of the statutory fund and units, allocation of the units to the policy holder and the most important is the details of Investment of the amount of the petitioner (premium) including the name of the company or the government securities as required by law. In this regulation the phrases "throughout the policy cycle" and any "ancillary matters" are very significant and purposely inserted by the law maker to safeguard and protect the rights and particularly the pecuniary rights of the policy holder, who is the only stake holder in the Insurance Business Needless to mention, that steps or proceedings required to be communicated to the policy holder shall be proved and established by the insurer, obviously through strong, reliable and cogent evidence. In this case, as earlier observed, the insurer has miserably failed to place on record the correspondence pertaining to the communications made by the company with the policy holder thus it is observed with grave concern, that the insurer has miserably failed to obey the mandatory requirements of law and this is sufficient to hold that this is glaring example of mis- selling of the policy. The Insurance Rules, 2017 also direct the insurer in the same manner and even otherwise, that the statutory fund and units are created by the insurer from the premium amounts of the policy holders and invested by the insurer, therefore the law has rightly held him responsible and liable to inform the policy holder the terms and conditions of the policy and all the steps taken by the insurer during the currency of the policy.
10. The petitioner has placed on record the copy of the insurance policy, whereas. RSV-1 also placed on record the policy documents along with the unit reports and the photocopy of information sent by the insurer to the policy holder on different occasions. Firstly, the policy documents were perused with the assistance of the learned counsel for the parties and found that there are two types of benefits mentioned in the policy schedule:- Benefit Assured:The benefit calculated in accordance with condition 5 of Standard policy conditions applicable to Amman Plan issued by the company, Maturity Benefit:The benefit calculated in accordance with condition 6 of Standard policy conditions applicable to Amaan Plan issued by the company.
Since in this case, the policy holder is surrendering the policy before its maturity as provided in Chapter XII of the Insurance Ordinance, 2000 and alleging that the insurer is paying the surrender value, which is much less than the premium paid by the petitioner and further the insurer has not complied with the relevant provisions of the Insurance Ordinance, 2000, Insurance Rules, 2017 and Corporate Insurance Agents Regulations, 2020, at the time of selling the policy and throughout the policy cycle, therefore, it is case of mis-selling of the policy.
19. We have, as appears from the preceding paras, surveyed the relevant provisions of law and the rules applicable on the subject but the judgment would be incomplete and spiritless if the most important and significant provision of Ordinance, 2000 i.e. Section 75 is not consulted and referred to meet the ends of justice.
20. Section 75, as appear from the language, states that an insurance contract is based on the sacred principle of utmost good faith and there shall be implied in every contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with utmost good faith. The act of utmost good faith of any party is to be assessed and gauged from the day first and till the maturity, or termination of the policy. It has already been observed in the preceding paras that on the day first of selling the product, the insurer shall inform, explain, illustrate and elaborate to the prospective policy holder about the terms and conditions of the policy in a very simple way in the language chosen by the policy holder and needless to mention that the prospective policy holder shall also disclose the true facts. The law, after selling the product to the policy holder has only bound and cast a heaviest duty on the insurer (not to the policy holder) to communicate each and ever step taken by the insurer throughout the policy cycle, the insurer will remain active and in contact with the policy holder till the maturity or termination of the policy to show utmost good faith. In this case, the insurer has failed to perform this sacred statutory dun: of utmost good faith at the time of sale and after selling the policy and failed to inform the policy holder about the status of the policy, thus, there is no cavil with the proposition to hold that the insurer has miserably failed to abide by this mandatory provision of law and it is a fit case of mis-selling, which entails serious consequences envisaged in section 76 of the Insurance Ordinance. 2000.
21. Section 76 of the Insurance Ordinance, 2000, is applicable in such like situation which states that the insurer shall not engage in misleading or deceptive conduct in the course of its business as an insurer. The aforementioned conduct of the insurer is not appropriate rather deceptive which offends the provisions of section 76. It is appropriate to reproduce terms of section 76: Insurance not to engage in misleading or deceptive conduct. i. "An insurer shall not, in the count of its business as an insurer, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. ii. The inclusion in an insurance policy of unusual terms tending to limit the liability of the insurer, without the express acknowledgement of the policy holder, shall constitute misleading or deceptive conduct. iii. Nothing contained in subsection (2) shall be taken as limiting by implication the generality of subsection (1). iv. Where a policy holder has relied upon any representations by an insurer or by an agent of an insurer which are incorrect in any material particular, inasmuch as it has the effect of misleading or deceiving the policy holder in entering into a policy, the policy holder shall be entitled to obtain compensation from the insurer for any loss suffered. v. Notwithstanding the provisions of the foregoing subsection, the Commission shall also have the power to levy a fine on the insurer which shall be equal to the lesser of twice the loss determined to be suffered by the policy holder under the foregoing subsection and ten million rupees".
22. In the aforementioned law, the law makers have taken the care of the policy holder and has gene to the extent that if the insurer in the course of the transaction of insurance business, is engaged in conduct that is misleading or deceptive, the insurer shall be liable to be fined, which shall be equal to the lesser of twice the loss determined to be suffered by the policy holder.
It is the requirement of law that while drafting the polity documents the insurer should use plain language and in case of ambiguities in the policy documents, the benefit of these ambiguities in the contract shall be given to the policy holder. Section 77, of the Ordinance, 2000, has taken care not only of the construction of ambiguities in the contract i.e. policy documents but also the misleading or deceptive conduct of the insurer. Section 77 is reproduced as under:
(2) An insurer or an insurance intermediary shall:
(a) When drafting policy documentation, make reasonable efforts to use plain language; and
(b) When drafting proposal forms and claim forms, make reasonable efforts to ensure that it identifies in those documents the usual information the insurer ordinarily requires to be disclosed; and that those documents are in plain language and provide instructions where necessary on how the questions should be answered; and comply with the law.
(3) Failure to comply with foregoing subsection shall be an absolute bar and shall preclude an insurer from refusing payment of a claim on grounds of non-compliance or non-disclosure by the policy holder, where it may reasonably be determined that the non-compliance or non-disclosure resulted from inadequate understanding by the policy holder of the language of the policy, proposal or claim form as a result of such failure".
As regard the provisions of section 77, it can safely be observed that it is a mandatory requirement of law to use plain language while drafting the policy documentation, so that the prospective policy holder can easily understand the terms of the policy, the benefits and the responsibilities of the insurer during the currency of the policy. In this section, it has clearly been mandated that failure to comply with the mandatory requirement given in the section shall preclude the insurer from refusing the payment of the claim on the ground of non-compliance or non-disclosure by the policy holder of any fact mentioned in the policy documents.
In this case, the insurer has offered two benefits i.e. benefit assured and maturity benefits. These benefits, as mentioned in the policy documents shall be given subject to the conditions Nos.5 and 6 of the standard policy documents. The standard policy document consists of 29 conditions and simply signed by the Managing Director (MD) of the insurance company. This document does not disclose or refer to any law which confers the authority, powers or the jurisdiction to the insurer to frame these standard policy conditions. Further even in the policy documents, nowhere is mentioned that the insurer is authorized to frame these standard policy conditions and so much so, it is nowhere mentioned that these conditions have been approved by the regulator of the insurer the Security and Exchange Commission of Pakistan (SECP). During the course of arguments, no such law was referred by the learned counsel for the parties, therefore, such type of document having no legal backing in any circumstances cannot be relied or accepted as a policy document.
23. Although, the insurer has placed on record the unit reports of different years but has not mentioned or referred that where the premium amount of the petitioner was invested i.e. name of the company etc. It is also pertinent to mention here, that this report was first time placed on record and came into the knowledge of the petitioner and prior to this no unit report was sent by the insurer to the policy holder, thus, this is also violation of the law whereby the insurer is legally bound to communicate the steps taken by the insurer during the cycle of the policy. Even otherwise, the insurer has not placed or submitted any material while appearing in the witness box to show that this report was communicated to the policy holder during the currency of the policy.
24. The insurer, in order to meet the objection and query as to whether the insurer communicated to the policy holder throughout the policy cycle, all the steps taken by the insurer qua the creation of funds, units and investment etc. the insurer has heavily relied upon a device called, Call Back Confirmation (CBC). Learned counsel submitted that through this CBC, the policy holder was informed from time to time and it was also confirmed by the policy holder. The important evidence i.e., the CBC (in USB device), which has been placed on record in different cases and noted that in all CBCs, stereotype questions were put to all the policy holders and no opportunity was given to the policy holder to raise any question or query qua the nature of the policy or the information being given. For ready reference, conversations of different CBCs in different cases are reproduced as under:- ((URDU TEXT}} The August Supreme Court of Pakistan has observed in a case that mere production of call data record (in this case CBC) without transcript of the calls or end to end audio recording could not be considered or used as evidence worth reliance. Besides the call transcripts, it should also be established on the record that callers on both the ends were the same persons whose call data was being used in evidence. While considering such type of evidence extra care is required to be taken as advancement of science and technology had also made it very convenient and easy to edit and make changes of one's choice. Reliance is placed on 2019 PLD 675 Supreme Court, 2021 SCMR 522, 2016 PLC (C.S.) 1219 Karachi and 2023 PCr.LJ 1394 Lahore. Needless to mention here that the call data record (CBC) containing audio voices has not been proved through forensic test of the laboratory and without forensic test of such audio or video recording cannot be read in evidence. No such report has been produced.
The insurer, as appears from the record has not proved the CBC in accordance with the terms of law declared by the August Supreme Court of Pakistan. Even otherwise, the conversation (CBC) recorded by the insurer cannot be termed as communication to the policy holder as the CBC is totally silent about the creation of funds, units and investment etc, therefore, this type of evidence as ruled in the esteemed judgments supra is not admissible in evidence.
25. In order to regulate the business of insurance industry and to protect the interests of the policy holders, the legislature introduced a law, namely, the Insurance Ordinance, 2000, and under this ordinance, this Tribunal has been constituted. It is said that the preamble is in fact the key to open the statute and in case of any anomaly in the statute, the preamble is to be consulted for guidance. Further, in fact the preamble of any statute shows the intention of the legislators to frame the law. Although, the findings have already been recorded referring the different sections of this ordinance and the rules framed thereunder (The Insurance Rules, 2017) but it is appropriate to also seek the guidance from the contents of the preamble. For ready reference, the same is reproduced as under: The Ordinance to regulate the business of the insurance Industry to ensure the protection of the interests of the insurance policy holders and to promote sound development of the insurance industry and any matter connected therewith and incidental thereto"
The Insurance Ordinance, 2000, as appears from the language of the preamble, has been enacted to regulate the business of insurance industry and to ensure the protection of the interests of the policy holder. The primary consideration along with others, of the law to ensure the protection of the rights of the policy holder, who is the only stakeholder in the business of insurance. Needless to mention, that if the rights of the policy holder are protected properly and strictly in accordance with law, the policy holders and general public will gain confidence and consequently the business of the insurance companies will promote, develop, and flourish. We have noticed while conducting the cases that the policy holder, because of the conduct of the insurance agents and the insurer are losing their confidence, which ultimately will affect the business of the insurance, so it is the need of the time to ensure the protection of the rights of the policy holder to enhance their confidence. Even otherwise, in Corporate Sector the client/policy holder is always treated as a favorite child to earn the good will among the public and also to earn the profit, therefore, it is always expected that the insurance Companies, who earn the profit in billion, will take special care of the policy holder by protecting their rights.
26. We have carefully perused the record and the law applicable i.e. the Insurance Ordinance, 2000, the Insurance Rules, 2017 and the Corporate Insurance Agents Regulations, 2020 and reached to the conclusion that the insurance companies are not performing their duties strictly in accordance with the aforementioned laws and as result thereof, the policy holder who is the only stake holder is suffering not only the monetary loss but also the mental agony. As earlier observed while going through the provisions of the preamble that although, the business of the insurance industry should be flourished and promoted but the paramount consideration is the protection of the interests of the policy holder. We have also noticed that almost in every case, the insurance companies in the matters of the unit linked policies on maturity or surrender offer a much less amount of cash value as against the premium paid by the policy holders, when a specific query was put to the legal advisor of the insurer, he submitted that the maturity amount or the surrender value is to be paid according to the performance of the funds, chosen by the policy holder and the cash value of the units, when confronted with the provisions of law pertaining to communication to the policy holder throughout the policy cycle, the learned counsel could not refer anything from the record in support of this arguments. In view of our foregoing reasons and findings, issues Nos.1 to 3 are decided against the respondent whereas, the issues Nos.4 and 5 are decided in favour of the petitioner.
BELIEF
29. In view of foregoing reasons and findings, this insurance petition is hereby decreed with costs and the respondent company is directed to pay the premium paid excluding the paid amount along with liquidated damages as laid down in section 118 of the Insurance Ordinance, 2000, from the date of surrender of the policy, till realization of the amount. Now this petition is converted into an execution petition, therefore, judgment debtor/company is directed to pay the decretal amount on or before the next date.
30. We could not restrain ourselves to observe at this stage, that bancassurance Unit Linked Policy is an enigma (URDU TEXT) wherein mostly the beneficiaries are the insurers and the SECP being the regulator is under a statutory and moral obligation to carry out strict audit and take stern action in case of violation, which should also be published for the general information of the public at large.
The SECP should also take special care while passing or approving the rules, regulations and policy documents (Life or Non-Life). Unfortunately, the performance of the SECP, who is the only regulator of the insurance companies is disma l, unsatisfactory and not up to the mark particularly while approving the brochures and policy documents of different products of the companies. In fact, the brochures and the policy documents are the only source for the policy holder to understand the nature of the transaction but both are so complex and confusing and even sometime the font size used by the companies to prepare and print these documents are so small which is not readable and understandable. The SECP being the regulator should had token notice much earlier that the insurer is not complying with the imperative and important duty imposed by law, whereas, the insurer is bound by law to communicate to the policy holder all the steps taken throughout the policy cycle and because of violative conduct of the insurer, many policy holders are suffering not only monetary loss but also the mental agony. For this purpose, a detailed judgment was written and sent to the SECP for taking action but all in vain. Although. in the presence of explicit provisions of law, there is no need to pass any direction to the insurance companies and the Security and Exchange Commission of Pakistan (SECP) but in order to protect the rights of the policy holders, the Insurance companies In future shall comply with the following directions which are otherwise, provided in law and the SECP shall also ensure their compliance:- DIRECTIONS
31. The qualified insurance agent(s) must be appointed by the insurers who have qualified courses, they must explain each and every aspect of the insurance policy including special terminology in simple words and in the language of the prospective policy holder. The video shall also be made wherein the advice of the insurance agent and queries raised by the intended policy holder shall be recorded. This record shall be submitted along with all the written replies of the insurance companies in the case of filing of insurance petition. The same video shall be given on demand to the policy holder.
32. The insurer shall communicate to the policy holder the full information regarding the policy and any ancillary matters relating thereto, nature of different funds. creation of the statutory funds, allocation of units and investment of the premium amount/fund in sound equity (including its name) so that the policy holder could know the value of his/her/its units timely in an effective manner throughout the policy cycle as provided in the Insurance Rules, 2017 and Corporate Insurance Agents Regulations, 2020. The insurer and the Corporate Insurance Agent shall provide a detail of the illustration to the prospective policy holder as per the format provided by the Commission from time to time with profit on maturity or surrender and the insurance agent shall ensure that the illustration plan given to the prospective policy holder as to stand alone document and shall also provide a reasonable time period to understand the illustration before purchasing the life insurance policy. The insurer shall also ensure that a specified person must carry out the insurance 'need analysis' of the prospective policy holder strictly in accordance with the terms given in regulation 18(f) of Corporate Insurance Agents Regulations, 2020.
33. In case the prospective policy holder is an illiterate, or individual person or is a lady whether educated or un-educated, the insurer or its agent shall ensure the presence of an independent educated advice preferably of the male member of their family, who shall also be a witness of the policy documents.
34. Although, in earlier judgment given by this Tribunal, it has also been ordered that the insurance companies will prepare/print bilingual policy documents (in Urdu and English) and shall use plain and simple language the same is reiterated, so that the policy holders if not much qualified could understand the nature of the plan sold by the insurer. The insurer shall strictly abide by the directions given in Rule 56 of the Insurance Rules, 2017.
35. In future all the Insurance Companies dealing in business of life insurance shall preferably invest the amount (of premium) after creating the fund chosen by the policy holder in a company at least hating the rating of AA+ issued by the Pakistan Credit Rating Agency to protect the interest of the policy holders and to safe the insurer from unnecessary litigations. The Pakistan Credit Rating Agency issue the rating of different companies from time to time and according to the afore-referred Rating Agency, AA+ company has the capacity of low expectations of Credit Risk and indicates from strong capacity for timely payment of financial commitment and this capacity is not significantly vulnerable to foreseeable events. Anyhow, the insurance companies in any circumstances shall comply with this important direction and violation of the same shall entail serious consequences.
36. The SECP and all the insurance companies must have universal phone numbers and websites, which should answer the FAQs and all the other questions arising in the minds of the policy holders.
37. The insurer shall also submit a complete record of the compliance of the mandatory provisions of law at time of filing of the insurance petition before this Tribunal.
38. Since the Security Exchange Commission of Pakistan (SECF) the regulator of all the insurance companies, therefore, the SECP shall ensure that the insurance companies are complying with these directions.