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LIC is a Social Welfare Institution

LIC penalized for dealing Insurance claim in a standard way

As per the law, Life Insurance Corporation of India is not a Private Company but a nationalized Corporation established as a social welfare institution. Apart from terms and conditions, the management of LIC should be prompt, efficient and in favor of the requirement of people.

Before rejecting any insurance claim, the management of LIC of India should bear in mind that it is easy to find out technical objections in any contract. However, endeavor of such social welfare institution should be to find out ways and means to do justice to the insured or his family members on the ground of social welfare.

In one of the cases, LIC of India vs Anuradha, the Hon’ble Supreme Court of India decided:

The Life Insurance Corporation is a social welfare institution, more so when it has been nationalized and the service  is not available in the private sector,  should think of devising a policy available in insurgency-afflicted regions which would take care of the insured and his family members in such areas. The insurance policies with terms and conditions suited to the requirements of people inhabiting insurgency – or militancy-affected areas need to be devised and propagated.

Similarly in another case LIC of India Vs. Smt. Asha Goel the Court observed and decided:

In course of time the Corporation has grown in size and at present it is one of the largest public sector financial undertaking. The public in general and millions of policyholders particularly look forward to prompt and efficient service from the organization. Therefore, the authorities should keep the credibility and reputation in mind, which depends on its prompt and efficient services. Therefore, the approach of the Corporation in such matters should be handled with extreme care.

An exemplary example of Moga (Punjab) has been quoted here, in which LIC, India rejected an Insurance Claim.

Mr. Ishwar Chand purchased a policy for himself. He paid the premium and got the receipt from LIC. Unfortunately, Mr. Chand passed away on 1st March,1998 in an accident. His wife filed the Insurance Claim.

Her claim was rejected because the Insurance Policy was not made effective and Mr. Chand passed away before the acceptance of proposal date hence his wife who was the Beneficiary – Consumer approached the District Consumer Disputes Redressal Commission, Moga (Punjab), by filing a Consumer Case.

Her complain was honored and the LIC had to pay her due amount along with the interest @10% per annum from the date Mr. Ishwar Chand’s demise. LIC also had to pay her a compensation of Rs.10,000 for harassment and Rs.2,000 for additional costs.

Further to that, LIC made an appeal before the State Consumer Disputes Redressal Commission, Punjab for the following points:

(i) As the proposal submitted by the deceased was not concluded till 1st March, 1998, i.e. on the date of the death of the insured, it cannot be held that the contract between the parties was concluded; and

(ii) The deceased did not disclose that he was a patient of diabetes and that he died due to ailment and not by accident.

Both these contentions were rejected by the Punjab State Commission. The State Commission observed that the proposal was accepted and the insurance policy was issued much before the death of the insured. Therefore, the contract was concluded and LIC had to complete the formalities within a reasonable time. With regards to the second contention, it was observed that there was no evidence on record that Mr. Chand died due to diabetes or natural death and not because of any accident.

The Hon’ble State Commission, Punjab dismissed the Appeal of LIC of India and denied their interference in the order, passed by the District Forum, Moga (Punjab).

The LIC of India again filed a Revision Petition before Hon’ble National Consumer Disputes Redressal Commission, New Delhi.

The Hon’ble National Consumer Disputes Redressal Commission, New Delhi again dismissed the revised petition after going through the decision of the Hon’ble Supreme Court of India.

Also, LIC of India was considered inefficient in their services and NCDRC penalized the organization an additional cost of Rs.10,000 payable to the wife of insured.

Let us all be empowered with our Consumer Rights like Mrs. Chand who was aware of her consumer rights.

Have you been a victim or suffered due to inefficient services of Life Insurance Corporation of India? Let us know. Pose your complaint on our Power to Consumer website today and help us spread the word.