LIC ordered to pay Rs 50 lakh to Covid policy premium payer's family

A district-level consumer disputes commission in Kerala has ordered Life Insurance Corporation (LIC), India's largest insurer, to pay Rs 50 lakh in compensation to the family of a policy premium payer who succumbed to COVID-19, citing the insurer's technical lapse.

The commission fined LIC Rs 50 lakh for violating its own guidelines, which require policy issuance within 15 days of receiving premium payment. In this case, LIC received over Rs 20 lakh as premium, but refunded it only after nine months.

The Kottayam District Consumer Disputes Redressal Commission further observed that LIC failed to inform the applicant about the temporary suspension of life insurance policies for non-resident Indians during the COVID-19 pandemic, prior to his demise.

 

This omission denied him the chance to secure alternative coverage, constituting a grave service lapse, it said.

According to an official release here, Jemon, a London-based expatriate, had purchased a Jeevan Umang life insurance policy from LIC in January 2020, paying a premium of Rs 20.72 lakh rupees.

Despite complying with medical examination requirements, Jemon's application was put on hold due to LIC's temporary suspension of policies for non-resident Indians, implemented in response to the COVID-19 pandemic.

Unaware of the hold, Jemon died in London, leaving behind a wife and daughter.

LIC denied their claim, citing the lack of a legally binding contract, but refunded the premium in January 2021.

The Consumer Commission, after probing the complaint, found that though the beneficiaries were ineligible for the over Rs 2.5 crore insurance coverage due to the absence of a legally binding contract, LIC had concurrently violated its own guidelines.

These guidelines mandate that policy applications be processed and applicants informed of the decision within 15 days.

The commission found that the LIC accepted a Rs 20,72,565 premium on January 3 but left beneficiaries in limbo for nine months without communicating approval or rejection.

The commission also condemned LIC's decision to withhold the refund until January 2021, given that no policy was ever issued.

The commission further held that LIC's failure to notify Jemon about the non-issuance of life insurance policy for non-resident Indian due to COVID-19, prior to his death, denied him the opportunity to seek alternative coverage, constituting a grave service lapse.

Considering these findings, the Kottayam District Consumer Disputes Redressal Commission, comprising President Advocate V S Manual and members Advocates R Bindu and K M Anto, ordered LIC to pay Rs 50 lakh with 9 per cent interest to Jemon's wife and children within 30 days.

In the event of default, the commission directed LIC to pay the amount with 12 per cent interest, along with a penalty and court expenses of Rs 10,000.