Lawsuit challenges SBI’s life insurance scheme

LUCKNOW - The Lucknow bench of the Allahabad High Court Friday issued a notice to SBI (State Bank of India) Life Insurance on a public interest litigation (PIL), challenging the firm’s scheme of deducting a hefty premium against any housing loan taken from the bank.

Seeking the court issue a writ of mandamus to the Insurance Regulatory and Development Authority (IRDA) for cancelling the agency license issued to SBI Life Insurance, the lawsuit contended that such a scheme was being carried out in blatant violation of Section 4 B of the Insurance Act, 1938.

Advocate Dhruv Kumar in his petition sought to draw the court’s attention to the fact that the SBI was not only the promoter of SBI Life Insurance but was also working as an “agent” of its own insurance subsidiary, whose four directors were substantive officials of the SBI.

Issuing notice to the insurance company, a bench of Justice Pradeep Kant and Justice Rituraj Awasthi raised specific query - whether the State Bank of India was an agent of SBI Life or not?

counsel for the bank prayed for some time, following which the court gave him two weeks’ time to file a counter-affidavit.

Earlier, while arguing the case, Dhruv Kumar alleged that SBI, being an agent of its own company, was exploiting the borrowers of the bank and a “predatory priced” policy is being sold by the bank.

He cited a case where a sum of Rs.436,000 was suo moto deducted by the bank as premium without even seeking the consent of the loan applicant. He also cited that insurance for the same amount of a housing loan could be obtained directly from SBI Life Insurance for a premium of just Rs.180,000.

Dhruv Kumar claimed that SBI Life Insurance was responsible for duping more than 15,000 borrowers in this manner.