Issue: It’s imperative that service providers obtain the explicit consent of consumers before activating a service.

Time and again, we come across complaints where, without obtaining an explicit/written consent and just after a phone call, a service is activated or a product sold and amount deducted from an individual’s account. Then, it becomes a menial task for the affected person to contact the appropriate personnel and make them understand, in order to set things right.

Recently, the Banking Ombudsman dealt with a case in which the bank had issued six insurance policies based only on a telephonic conversation and debited the premium amount from the complainant’s card account.

The complainant contented that the policies were issued without his written consent and refused to pay the premium. The bank continued to levy non-payment fees and other financial charges for non-receipt of the insurance premiums.

The complainant demanded immediate cancellation of the policies and credit of the total amount debited from his account, including the amount debited towards the policy premiums. The bank cancelled the policies as requested, but re-credited only the financial charges. The bank’s claim was that since the complainant had not applied for cancellation of the insurance policies within the “Free Look Period” of 15 days, he was not entitled for the refund of the insurance premiums.

Refund possible

The Insurance Regulatory and Development Authority (IRDA) allows every policy holder a Free Look Period of 15 days to take a look at the terms and conditions of the insurance policy and reverse the decision of buying if it is found to be unsuitable. Free Look Period starts from the day the policy holder receives the policy and the onus of proof of date of receipt lies with the policy holder. There are certain conditions though. If the policy is cancelled within the specified period, the insurance companies may deduct the cost of medical tests, stamp duty and service charges and the proportionate mortality charges for the period on cover and refund the balance.

Thus, after considering the submissions made by both the parties, the Ombudsman observed that it was a case of mis-selling as the policies were issued in an unfair manner through telemarketing by the bank without obtaining the consent of the complainant in writing. Moreover, the complainant was not informed about the “Free Look Period” or its significance in cancellation of the insurance policy. Accordingly, the Ombudsman ordered the bank to refund the entire amount of premium to the complainant and also to reverse all the financial charges debited to the complainant’s account.

Similarly, in another complaint filed before the Banking Ombudsman, the complainant said that without his permission, an amount of Rs.515 per month was being deducted from his account as premium for an insurance policy. The bank claimed that the policy was processed only after confirmation from the complainant and produced the recording of the telephonic conversation with the complainant as evidence. On listening to the audio recording in full, it was obvious that it was a case of mis-selling as the bank had never sought the confirmation of acceptance from the customer.

Hence, based on the decision of the Ombudsman, the bank agreed to refund the entire premium amount deducted from the customer’s account, along with interest.

Thus, it is imperative that all service providers, be it financial institutions or insurance companies, activate a service only upon obtaining the explicit consent of consumers and be more transparent in their approach.

(The writer works with CAG, which offers free advice on consumer complaints to its members. For membership details / queries contact 2491 4358 / 2446 0387 or