LIC fined for turning down widow’s claim

The South Mumbai District Consumer Disputes Redressal Forum held Life Insurance Corporation (LIC) of India guilty of “deficiency in services” for rejecting a claim made by a widow and asked the insurer to pay the litigant 75% of the claim amount for 15 policies with 4% interest, beginning from 2015. LIC has also being asked to pay ₹10,000 to the widow towards litigation cost.

The insurer had rejected the woman’s claims on the ground that her deceased husband had furnished false information while obtaining the policies in 2009 and that the statements of his income and other documents were fake.

But the forum pulled up the insurer for failing to scrutinise the insurance proposal before accepting the premium from the man. Questioning the LIC stand, the forum said, “Why did LIC keep quiet and not follow the IRDA (Insurance Regulatory and Development Authority) guideline which states that insurance proposals need to be scrutinised before issuing the policies and accepting the premium from a consumer.”

According to the complaint filed by the widow, three months before his death, the woman’s husband had obtained 15 policies of ₹10 lakh each in May 2009 and had paid quarterly premium of ₹2.98 lakh. On August 10, 2009, the woman’s husband died after he was hit by a running train at Mira Road station around 10.30pm.

After his death, the widow approached LIC and claimed the insurance amount. After three years of investigation through a chartered accountant, LIC rejected her claim in September 2012. According to LIC, its investigation revealed that the deceased had submitted a fake permanent account number (PAN) number containing 11 digits, while PAN cards have 10-digit numbers. LIC thus claimed that the deceased had made a false declaration.

The forum however, noted that LIC in all their communication with the widow, never mentioned about the false declaration nor did they question the authenticity of the PAN card or income-tax records.

The forum further noted, that as per IRDA regulations, opposite parties (in this case LIC) are supposed to scrutinise the proposal form within six months and raise objections if any, before accepting the amount of premium from the consumer. The forum observed that LIC failed to implement this rule. “The objections raised by the opposite parties (LIC) when the complainant claimed insurance amount after the death of her husband on August 10, 2009, seems to be an afterthought. Thus, LIC purposefully delayed the payment of claim of the insurance to the complainant,” the forum held.