Insurance: The Devil’s In The Fine Print

When buying insurance, applicants are required to affirm that they have understood what they are signing up for and to vouch for the authenticity of the information they are providing the company. It won’t help you to skip the details and then blame your agent for not informing you adequately, says Jay Sampat

It is said that one of India’s biggest insurance companies earlier had a minimum target of 12 policies on 12 individuals a year for its agents. A few years ago, it altered the targets, and now requires agents to get 12 policies on a minimum 12 people, for which the first year’s premium is at least Rs 1 lakh, within the first three years. With stiff targets such as this, most agents are not as concerned about mentioning the policyholder’s details as they are about achieving their targets. As a result agents are often heard saying something to the effect of, “Simply sign at the pre-designated places and I shall do the rest.”

While this method has been used for years by agents to give investors the impression they are being rescued from the lengthy form-filling procedure, one must realise that this isn't the right approach to adopt given the fact that the insurance forms states that in the event of non-disclosure of all material facts, the onus will be on the policyholder.

A colleague of mine recalls how an insurance agent had convinced him to buy a policy. He handed over the form, asking him to fill it and get it back. Days after submitting the form, the agent asked him, “Why did you mark ‘Yes’ in the columns where they asked you about having medical treatment for more than 15 days and whether your weight had changed by 10 kg in the last year?” My friend replied that he was undergoing medical treatment for thyroid issues, which stretched above 15 days, and that he had lost a lot of weight last year as he went through a stressful time. The agent responded saying that the policy could not be booked as a result of this honesty in declaration, and a medical process would be needed, which would delay the process.

Such a scenario is just one of the reasons agents why promise to sign you up for insurance cover without medical tests. However, if you have signed wherever you have been asked to, you are agreeing to and abiding by the statements mentioned below in the insurance form such as: “I have not withheld any information”, “I have not provided false information in reply to any question”, “This statement and declaration shall be the basis of the contract of assurance between me and the insurer”, “I understand and agree to the various charges such as mortality charges, policy administration charges, premium allocation charges, which will be recovered by cancellation of units or deduction of premium”, “If there has been any non-disclosure of a material fact then the policy may be treated as void and all the premiums paid under the policy may be forfeited by the insurance company”, etc. Do you remember any agent ever telling you these details?

In addition to the policy document, an applicant is required to sign a premium and benefit illustration and a statement that he has understood the policy. The insurance form also mentions that if your health or occupation changes after you have filled the proposal but before you receive the premium receipt, you will inform the insurance company of the same. You also have to tell the insurer if any other insurance policy with any company was dropped, withdrawn or added during that period. The form says, “Any omission on my part to do so shall render the contract of assurance invalid.”

When the form is filled incorrectly – whether knowingly or unknowingly - then you are considered to be hiding facts. This could result in the insurance claim not being paid to you or your family if the insurer discovers you failed to mention the correct details in your proposal form. Ultimately, a verbal conversation between you and the agent can never be considered as proof. However, the insurance company can declare your insurance contract null and void as it has proof in hand by way of your signatures across the form.

Insurance is a legal contract like any other. Hence, read the proposal form like you would read any other agreement on a stamp paper and consult your agent at the very start in case you have any doubts. Make sure you sign the document only once you are convinced.