Can I get a refund if my bank mis-sold me an insurance policy along with my loan?

Question

My bank forced me to buy an insurance policy while sanctioning my loan and did not properly explain the terms. How can I get my premium refunded? I would rather settle this without going to court if the law allows it, but I need to know my rights before I sign anything. Please tell me what to do first and what document to keep.

MyVakeel Legal Desk · Accepted Answer

Under Indian law, IRDAI (Protection of Policyholders' Interests) Regulations 2017 is the starting point for this banking law question. What follows is the position in substance, together with the steps that usually make the difference in practice.

Insurance products cannot be made a mandatory condition for loan sanction, and forcing a borrower to buy a specific policy amounts to an unfair trade practice under RBI's bancassurance guidelines.

Under IRDAI's policyholder protection regulations, the insurer and its distributor must clearly explain policy terms, free-look period, and premium details before sale, and failure to do so is a mis-selling violation.

Most insurance policies carry a free-look period of 15 to 30 days during which the policyholder can cancel the policy and claim a refund of the premium after deduction of proportionate risk charges.

If the free-look period has lapsed due to non-disclosure of this right at the time of sale, the policyholder can still seek redress from the insurer's grievance cell and IRDAI's Integrated Grievance Management System.

Deficiency in service claims combining the bank's coercive tying of insurance with the loan and the insurer's mis-selling can be pursued jointly before the Consumer Commission.

In practice, in this order: 1) Check your policy document for the free-look cancellation period and request cancellation immediately if still open; 2) File a written complaint with the bank and insurer citing forced tying of insurance with the loan; 3) Escalate unresolved mis-selling complaints to the IRDAI Grievance Cell through the Bima Bharosa portal; 4) File a consumer complaint for deficiency in service and unfair trade practice if refund is refused.

Timing matters here: IRDAI (Protection of Policyholders' Interests) Regulations 2017 works on limitation periods, so a insurance mis-selling bank claim that is right on the merits can still fail if it is brought late. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in banking law.