LIC Ordered to Pay Rs 50 Lakh Compensation for Service Lapse

In a significant ruling, the Kottayam District Consumer Disputes Redressal Commission in Kerala has directed the Life Insurance Corporation (LIC) of India to pay Rs 50 lakh in compensation to the family of a policyholder who died of COVID-19. This decision highlights a serious lapse in LIC’s service, as the insurer failed to follow its own guidelines.

The Case Background

Jemon, an expatriate living in London, had purchased a Jeevan Umang life insurance policy from LIC in January 2020, paying a premium of Rs 20.72 lakh. Despite completing all necessary medical examinations, his policy application was put on hold due to LIC’s temporary suspension of policies for non-resident Indians amid the COVID-19 pandemic.

Unfortunately, Jemon was unaware of this suspension and passed away in London. His family, left behind with a wife and daughter, found themselves in a tough spot. LIC initially denied their claim, arguing that no legally binding contract existed. However, they did refund the premium in January 2021.

Key Findings of the Commission

The consumer commission found several critical issues with LIC’s handling of the case:

1. Violation of Guidelines: LIC’s guidelines mandate that policy issuance should occur within 15 days of receiving the premium payment. In Jemon’s case, LIC not only delayed processing but also took nine months to refund the premium.
2. Lack of Communication: LIC failed to inform Jemon about the temporary suspension of policies for non-resident Indians due to COVID-19. This lack of communication deprived him of the chance to secure alternative insurance coverage.
3. Delayed Refund: The commission criticized LIC for withholding the refund until January 2021, despite not issuing any policy.

The Commission’s Verdict

Given these lapses, the Kottayam District Consumer Disputes Redressal Commission, led by President Advocate V. S. Manual and members Advocates R. Bindu and K. M. Anto, ordered LIC to pay Rs 50 lakh in compensation with 9% interest to Jemon’s family. The payment is to be made within 30 days.

If LIC fails to comply with this order, they will be required to pay the amount with 12% interest, in addition to a penalty of Rs 10,000 for court expenses.

This ruling underscores the importance of adhering to procedural guidelines and ensuring transparent communication with policyholders, especially during challenging times like a pandemic.