If you have purchased a standalone personal accident cover and accidental death rider along with your term life insurance plan, you might find a recent ruling by National Consumer Disputes Redressal Commission (NCDRC) interesting.
NCDRC has ruled that death due to malaria death is an accidental death. Most of us would consider a death due to malaria to be a natural death. Hence, any hospitalization or death due to Malaria wouldn’t be covered under a personal accident cover. After all, malaria happens due to a mosquito bite. And, you don’t consider mosquito bite as an accident, do you?
At least one of us didn’t agree that death due to malaria was not an accident death and took the case the consumer forum. After winning at district and state forums, NCDRC, the apex body, ruled in her favour too.
NCDRC took the view that a mosquito bite can be considered an accident. Therefore, death due to malaria can also be considered an accidental death.
Case Details
Debasish Bhattacharjee had purchased a plan “Bank of Baroda Home Loan Suraksha Bima” from National Insurance. The plan covered accidental death. He passed away due to malaria in Mozambique in 2012. When her wife filed for accidental death claim (or rather approached the bank to square off the home loan), her claim was rejected. The insurance company maintained that the mosquito bite was not an accident under the policy and that malaria was a disease.
Mrs. Mousumi Bhattacharjee (wife) challenged the decision in consumer forum and the district and state forums ruled in her favour. Subsequently, the apex consumer forum (NCDRC) ruled that the insurance company’s position is incorrect. According to the forum, mosquito bite is sudden and something that is not expected at all.
The definition of an accident in most policies I have seen goes like “An accident must be caused by a sudden, external and violent force”. According to the NCDRC, a mosquito bite qualifies as an accident and death due to malaria is an accidental death.
What does it do to the Insurance Company?
Personally, I feel the decision is a bit harsh on the insurance company. There is no way a death due to malaria was priced in the premium. However, in my opinion, insurance companies have denied many genuine claims and harassed customers for many years. I guess this is Karma.
And the decision opens up Pandora’s box for the insurance companies.
In our country, where hospitalization and deaths due to malaria, dengue or chikungunya are so common, this can be a serious problem for the insurance companies. And it does not stop at mosquito bites. This argument can be extended to all kinds of animal attacks and insect bites.
Many accidental insurance plans cover accidental hospitalization too. Therefore, for insurance companies, the hit is not just related to accidental deaths.
Pradhan Mantri Suraksha Bima Yojana provides cover of Rs 2 lacs for accidental death at a cost of Rs 12 per annum. With this precedent, you can expect deaths due to malaria or dengue to be covered under the aforementioned plan.
Awareness about this judgement can help many.
What to expect from Insurance Companies?
- You can expect the insurance company to challenge the verdict in higher courts. A court may still uphold the insurance company’s appeal, in which case malaria won’t be considered an accidental death. Back to square one.
- With standalone personal accident covers, the policy is renewed every year and hence the insurance company can change policy wordings next year to explicitly exclude such deaths or hospitalization through mosquito bites. However, for life insurance policies where policy holders have purchased accidental death rider for the long term, insurers can be in trouble.
- Even though this decision does set a precedent, this is still a one-off decision. The case specifics may have turned the forum’s decision in the favour of the policyholder’s spouse. Don’t expect the insurance companies to give the claim amount on the platter in similar cases.
- If higher courts deny the insurance company any relief, you can expect upside pressure on premium for accidental death rider and standalone personal accident covers. Insurance companies will have to price in this risk in the insurance premiums. This may not be good news for policyholders.
Biggest Learning: Personal Accident Cover is not a replacement for term life insurance
By focusing on the judgement alone, we are missing a much bigger issue. If the aforementioned insurance plan was sold to ensure that borrower’s home loan gets squared off in the event of death of the borrower, why was he sold a personal accident cover and not a regular term cover? Shouldn’t a home loan protection plan cover all eventualities of death?
National Insurance structured a poor plan. It was Bank of Baroda which pushed such a plan to the borrower. All of us are aware how banks coerce borrowers to purchase home loan protection plans by linking the purchase to loan sanction. By the way, such tactics are not permitted by RBI.
In my opinion, banks epitomize the “Commissions first” and “Customers can go to hell” approach. In this purpose case, Bank of Baroda is the biggest culprit. Insurance company was merely a partner in crime.
Had BoB (Bank of Baroda) sold a regular term life cover, the deceased’s family would have got the claim straight away. The money wouldn’t have taken away the emotional stress of loss of a family member but it would have been spared them the financial agony.
After all, insurance can contest whether death happened due to an accident. It can’t contest death.
I don’t know why the bank sold a plan that didn’t cover all reasons of death. Perhaps, the plan fetched bank a better commission than a term life plan. If the bank wanted to make more money, they should have sold a term plan and augmented it with an accidental cover. But as I have mentioned in various blog posts, banks don’t care about you.
Suggest you go through my post on ICICI Home Safe Plus. What good is a loan protection cover that does cover death due to all possible reasons? Can a borrower die only in an accident or due to a critical illness? Is there no other way a person can die?
Insurance companies are used to structuring stupid products. With an insipid regulator as IRDA, the insurers exercise almost free will. National Insurance is facing the music.
What about Bank of Baroda? Where is the accountability?
Customer beware.
Source/Credit
- MoneyLife: Accident Insurance: Malaria death ruled as accident
- Economic Times: Death by mosquito bite an accident, insurer must pay up
Disclaimer
I could not download a copy of judgement from the website of NSRDC. I have relied on information available in articles in various media publications.