The Insurance Ombudsman has directed ICICI Prudential Life Insurance to pay ₹23 lakh as refund of premium, along with interest, to a Hyderabad-based customer for terminating his policy and refusing to review its decision.

Jai Prakash Agarwal had taken a Premier Life Gold Policy from ICICI Prudential Life for ₹1.3 crore for 19 years, with a three-year premium payment term. He had made a payment of ₹12.5 lakh.

However, after paying the first premium, he decided to exercise the option of reduction of premium amount to ₹10 lakh as per provisions of the policy.

Having brought down the amount, he paid the premium for two years at the revised rate of ₹1 lakh. The customer contended that thereafter there was no communication from the insurance firm.

However, on July 18, 2017, Agarwal received a letter from the insurer, along with a cheque for ₹93,791.85, stating that this was final foreclosure payout as per policy terms.

When Agarwal raised the issue with the insurance firm, he was told that since the functional value had fallen down to less than 110 per cent of the annual premium, the policy has been terminated automatically as per the policy terms and conditions.

Agarwal then approached the IRDAI, which directed him to approach the ombudsman. Taking up the matter, the ombudsman said that Agarwal was kept in the dark on the implications of the revision of the life cover when the premium was brought down, Mahesh Athasniya, who facilitated the petition, told BusinessLine .

I, Suresh Babu, Insurance Ombudsman for AP, Telangana and City of Yanam, in his order, ruled: “No sensible person would invest ₹12.5 lakh for nine years to receive ₹93,791.85. This has caused huge financial loss to the insured, which needs to be compensated.”

Accordingly, while allowing the complaint, it directed the insurer to return the amount paid by the insured, along with interest at 25 per cent on the actual premium paid. This works out to ₹23,42,928, which was paid by the insurance firm.