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Insurance is an agreement between two parties, insurer, who indemnify (provides protection) the insured in case of any financial loss, according to the terms and conditions of the contract. If the insurance company defrauds or due to negligence of the company, the loss has been incurred by the insured, then the insurer can be sued.

CPA has the objective of providing cheap and expeditious redressal of grievance to the consumer affected by the non – performance on the part of the person providing services for a consideration.

  • Case: The Divisional Manager, LIC v. Uma Devi (1991) - It was held that the nominee of insured is a consumer and entitled to maintain dispute under CPA.
  • Case: Vellithody Ramkrishnan Vazhikkadavu v. Divisional Manager, M/S. New India Assurance Co. Ltd. (1992) - It has been held that the complainant getting his house insured against fire is a consumer.

Insurance Policy with Personal Accident Benefit

In Bhagchand Jain v. LIC of India and another, the insured complainant suffered injuries when travelling by bus, which got hit by a truck. The claim was rejected on the ground that disability was not of total and permanent nature.

The District Forum solely relied upon the opinion of the medical board of medical college hospital and allowed the claim. However, the State Commission set aside the order. In the instance case, the medical board specifically mentioned in its report that the petitioner sustained multiple fractures of lower extremities and had developed permanent disability in totality.

In revision petition, the National Commission held that the State Commission committed legal error by not taking into consideration the report of the medical board, and rejecting certificate issued by the doctor and the order passed by the District Forum.

Beneficiary of Insurance Policy Are Consumer, even if they are not Party to the Contract

Case: Canara Bank V. United India Insurance Co. Ltd. & Ors. (2020)

In this case, the farmers had kept their farm product (Byadgi chilly crops) in a cold storage facility (Sreedevi Cold Storage), financed by loans from Canara Bank. The cold storage, which was insured by United India Insurance, experienced a massive fire on January 13–14, 2014, destroying the produce.

The insurance company rejected the claims, arguing that the goods were not covered and that the farmers were not the insured parties. In response to the objection made by the farmers over the insurance company’s denial of claim, the State and the National Consumer Forum awarded redressal. The insurance company argued in its appeal that there was no privity of contract between the farmers and the insurance company. Because the cold storage company, not the farmers purchased the policy, they cannot be referred to as “consumers”.

The bench of Justice S. Abdul Nazeer and Justice Deepak Gupta made references to the definition of consumer under Section 2(d) (CPA, 1986) / 2(7) (CPA, 2019) of the act and noted that it was very broad and included not only the person who hires or avails the services for consideration, but also the beneficiary of those services is considered as a consumer.

In light of these facts, the bench decided that the beneficiaries who can profit from the insurance that the insured has purchased, are included in the concept of the consumer. According to CPA, a recipient of the services who is not the insured, is considered a consumer. The Supreme Court affirmed that farmers holding warehouse receipts are beneficiaries of the insurance service provided to the cold storage and have the right to claim insurance, making them "consumers" under the Consumer Protection Act. The insurance company was ordered to pay the claim amount, which would first be applied to satisfy the farmers' loan dues with Canara Bank.

Importance of Consumer Protection and Insurance Services

Anybody who purchases goods or services for their own consumption without planning to resell is considered a consumer. Together, these individuals make up the largest economic group and are impacted by practically every economic decision made by the public and private sectors. Listening to their needs and complaints is essential. Insurance can be thought of as a contract in which one party deposits a particular amount and the other agrees to pay the other back for specific types of losses, should they arise. Any nation's economy greatly benefits from a robust and growing insurance industry. The demand for consumer protection has grown as a result of the insurance industry's expansion and sophisticated marketing and sales techniques. The Indian Constitution's union list includes insurance.

Mostly these consumers are layman and lack understanding of important jargons and end up in problems. These customers frequently struggle to comprehend the insurance's terms and conditions and have trouble interacting with big businesses. Both public and private entities are involved in the insurance industry. A lack of standard operating standards could result in consumers spending the majority of the insurable amount in legal proceedings and engaging in protracted legal battles with large insurance companies. This is the point at which consumer protection becomes necessary. Consumers' interests are safeguarded and their right to consumer remedy is granted under the IRDAI Act and the Consumer Protection Act of 2019. It would give customers rights to shield them from unfair business practices and fraud when they purchase insurance.