LAHORE: An insurance company has failed to challenge the powers of Securities and Exchange Commission of Pakistan (SECP) to take a cognizance of disputes between the insurer and policyholder.
According to details, a policyholder had approached the SECP against the said insurance company against its failure to inform him that the cash surrender value of Rs460,000 reflected in the illustration was an error caused due to computer software until the maturity of the policy.
The insurance company had also failed to provide the new cash surrender value of Rs282,194 to the policyholder. As a result, the policyholder being unaware of any change in the given illustration continued to pay the premium for 10 years.
Cash surrender value is the amount of money an insurance policyholder receives when they cancel a permanent life insurance policy or annuity before it matures. It’s the cash value of the policy minus any fees or loans that need to be repaid.
The aggrieved policyholder approached the Commissioner Insurance who issued direction to the insurance company to compensate the loss suffered by the policyholder besides imposing a penalty against the company.
The insurance company challenged the order on the ground that the Commissioner did not consider the fact that the Insurance Ordinance explicitly bars the SECP to take cognizance of disputes between the insurer and policyholder. The company was of the view that the past practice suggests that Commission forwards complaints to the insurance companies or the Insurance Ombudsman for their resolution. Therefore, the present direction is liable to set aside.
However, the SECP asserted that the preamble of the Ordinance clearly mandates it to safeguard the interests of policyholders. Moreover, it maintained that the certain provisions of the Ordinance empower it to issue directions to insurance companies; therefore, there was no illegality in the order challenged by the insurance company.
The relevant appellate forum declared that the contention of the insurance company that the Commission lacks jurisdiction to entertain the complaints of policyholders is misconstrued.
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