Common Mistakes & Disputes — Misreadings, Fraud Allegations & Complaints

Reading more into the section than it says

Errors with MWP policies can come from reading more into section 6 than it says. The section is narrow and exact. The policy must be effected by a married man on his own life, and it must be expressed on its face to be for the benefit of his wife, or his wife and children.

The frequent slips follow from forgetting one of those words. A policy on the wife's life is not within the section. A parent or sibling cannot be a beneficiary. A nominee cannot be named, because section 39 of the Insurance Act does not apply to a section 6 policy. And 'Form A' and 'Form B' are insurers' own labels, not forms laid down by the Act.

Adding MWP wording later

A common assumption is that MWP wording can be added to any existing policy at any time. Section 6 speaks of a policy effected and expressed on its face to be for the wife or children, and it does not say whether the wording can be added after issue. It cannot be assumed that it can be added afterwards; the question is one to put to the insurer in writing.

When a creditor alleges fraud

The protection is not unlimited. Section 6 keeps a creditor's right to be paid out of the proceeds where the policy was effected with intent to defraud creditors.

Intent is the test. The section fixes no period before a default within which a policy is presumed fraudulent, so a policy is not caught merely because it was bought shortly before the husband ran into difficulty. Timing may be part of the evidence, but it is for the creditor who alleges fraud to show the intent on the facts. Where it is shown, the creditor may be paid out of the proceeds; the Indian section does not limit that to the premiums paid.

Where a complaint goes

A complaint about a claim goes first to the insurer, which is required to resolve it within 14 days. If the complaint is rejected, not answered within a month or answered unsatisfactorily, the complainant can approach the Insurance Ombudsman within one year. The Ombudsman charges no fee, and awards are capped at ₹50 lakh; older material quotes ₹30 lakh, the limit before 10 November 2023. An award is binding on the insurer, which must comply within 30 days.

A consumer commission under the Consumer Protection Act, 2019 is an alternative route, with a two-year limit from the cause of action. Which commission hears a case depends on the consideration paid, that is the premium, not the claim amount: the District Commission up to ₹50 lakh, the State Commission above ₹50 lakh and up to ₹2 crore, and the National Commission above ₹2 crore. The same matter cannot be before the Ombudsman and a consumer commission at once.

Rules at a glance

Key points

• Section 6 covers only a policy on the married man's own life, expressed on its face to be for his wife or children.
• Section 6 does not say whether MWP wording can be added after issue, so it cannot be assumed.
• A creditor may be paid out of the proceeds only where the policy was effected with intent to defraud creditors.
• The section fixes no period that makes a policy presumptively fraudulent; the creditor has to show intent on the facts.
• A complaint goes first to the insurer, then to the Insurance Ombudsman (awards up to ₹50 lakh) or a consumer commission, not both at once.

Common misunderstandings

• MWP wording cannot be assumed to be available on an existing policy: section 6 speaks of a policy effected and expressed on its face for the wife or children and does not say whether the wording can be added later.
• A policy is not presumed fraudulent because it was bought shortly before a default: the section fixes no such period, and intent has to be shown.
• A consumer commission's jurisdiction does not go by the claim amount: it goes by the consideration paid, that is the premium.

Questions people ask