Savings and investment plans are illegal as life insurance is a business to compensate the nominees in the event of demise of the policyholder and not on survival.
Gujarat high court, couple of days ago, demanded explanation from the Centre, IRDA and 19 insurance companies, including the Life Insurance Corporation (LIC) of India, over a PIL suspecting the legality of life insurance products offered by the companies.
Petitioner Kailash Maheshwari, a city-based chartered accountant, has asked for action against insurance companies for fooling customers and for criminal conspiracy and to try them under provisions of Prize Chits and Money Circulation Scheme (Banning) Act as well as under anti-corruption laws.
The petitioner has urged that the notification allowing the levy of service tax on the savings part of the premium be taken down and that service tax be allowed only on the risk premium part. The PIL also asked for stay on collection of savings as well as investments by the life insurance companies and to make endowment plans as illegal, and refund the premium.
As per Maheshwari, Savings and investment plans are illegal as life insurance is a business to compensate the nominees in the event of demise of the policyholder and not on survival.
The petition says that according to the law, life insurance business is only meant to be a business to pay an amount to the beneficiaries in case of death of the policyholder. Payment on survival is not the offering of life insurance. Therefore, all the savings as well as investment plans are illegal as the insurance companies do not have the rights to gather savings or investments.