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Case Review: Banking
Summary of some of the decisions made by the Mediators on some of the complaints received by FMB.
This summary is for information only and should not be used for other purpose. [Previous]………[Next]
MORTGAGE REDUCING TERM ASSURANCE (Reference no : 6-100))
Borrower BS secured a loan from LM Bank to purchase a land in 2003. The loan was approved with a precondition that BS must purchase an MRTA the premium for which was RM8,028. The tenure of the loan was for a period of 10 years. BS was required to furnish 24 post dated cheques of installments prior to the acceptance of the Letter of Offer (LO).
The LM Bank submitted the insurance proposal form to its sister Insurance Company in April 2003, the delay was due to the amendments in the Letter of Offer. The Insurance Company wrote to BS to make arrangements to undergo paramedical examination, a copy of the letter was extended to LM Bank. As a result of non receipt of the letters by BS, the Insurance Company finally arranged for BS to under-go paramedical examination on the 02/06/04 at his residence.
In the interim on the 26/05/03 LM Bank disbursed the premium to the Insurance Company at the same time it drewdown the loan amount in order to avoid penalty interest. Instalments were encashed vide the post dated cheques.
The Paramedical report stated that BS was "healthy at the time of the examination" and that there was no reason to believe that BS is a "higher than average risk". However the Insurance Company wrote to BS requiring him to produce a medical report from the University Malaya Medical Centre (UMMC). Unfortunately the letter arrived after the demise of BS on the 26/09/04.
The widow wrote to the bank to claim the MRTA in full settlement of the claim. The Insurance Company rejected the claim on the basis of non compliance.
The Insurance Company subsequently on the 21/12/04 refunded part of the premium totaling RM7,226.14 (having deducted a nett commission of RM801.84). LM Bank credited BS' account with the refund and required the widow and the estate of BS to settle the loan.
The Widow as administratrix of the estate of BS referred the dispute for mediation.
At mediation it was admitted by the Insurance Company that no commission could be earned unless there was a policy issued. Both LM Bank and Insurance Company decided to reconsider their positions. On the 22/10/05 the Insurance Company refunded the commission of RM801.84 to LM Bank.
The Insurance Company thereafter approved coverage with a loading of 200% on medical. Therefore the amount to be refunded subject to the premium of RM8,027.98, was RM47,215.08. Whilst this was on going, the Widow as administratrix received a copy of the Certificate of Assurance dated 16/12/05, stating that BS (deceased) is insured under the MRTA scheme effective 27/05/03.
As it now came to light the existence of the policy of insurance, the award was for the bank to claim the amount from the Insurance Company pursuant to the MRTA and to refund such monies paid in excess to the estate of BS (deceased).
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