Family Receives Rs 50 Lakh from LIC for COVID-19 Policy Issuance Delay

A district-level consumer disputes commission in Kerala has mandated that Life Insurance Corporation (LIC), India's largest insurer, compensate a policyholder's family with Rs 50 lakh. The policyholder had succumbed to COVID-19, and the commission cited LIC's technical lapse as the reason for the fine.

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The Kottayam District Consumer Disputes Redressal Commission noted that LIC violated its own guidelines, which require policy issuance within 15 days of receiving the premium payment. In this case, LIC received over Rs 20 lakh as premium but refunded it only after nine months.

Policy Suspension During COVID-19

The commission 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. This omission denied the policyholder the chance to secure alternative coverage, which the commission deemed a grave service lapse.

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. 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 during the pandemic.

Refund Delays and Communication Failures

Unaware of the hold on his policy, 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 commission found that although the beneficiaries were ineligible for over Rs 2.5 crore insurance coverage due to the absence of a legally binding contract, LIC had 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 LIC accepted a Rs 20,72,565 premium on January 3 but left beneficiaries in limbo for nine months without communicating approval or rejection.

Commission's Verdict

The commission condemned LIC's decision to withhold the refund until January 2021, given that no policy was ever issued. It further held that LIC's failure to notify Jemon about the non-issuance of life insurance policy for non-resident Indians due to COVID-19 before his death denied him the opportunity to seek alternative coverage.

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 case 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.