LIC seeks Rs 83,000 ‘arrears’ after 11 years of payments, consumer wins Rs 20,000

Underscoring that the insurer cannot penalise the consumer for an internal technical lapse, the District Consumer Commission of Chandigarh has ordered the Life Insurance Corporation of India (LIC) to pay Rs 20,000 compensation to a policyholder for wrongfully demanding Rs 83,541 in premium payment arrears when he attempted to surrender the policy.

Ordering the insurance corporation to pay the surrender value to the man with 6 per cent interest, a bench of president Amrinder Singh Sindhu and member Brij Mohan Sharma noted that no doubt the defence of the LIC is that due to a “technical error” in the system, the complainant’s premium was mentioned as Rs 2,042 per month instead of Rs 2,670.

They added that, “But the same has no merit because once they had issued the insurance policy bond, explicitly mentioning the monthly premium there as Rs 2,042 and also accepted the same from the complainant for 11 long years, without raising any objections or rectifying the alleged clerical error, it cannot subsequently suddenly wake up one fine day from its slumber and allege that the premium was wrongly charged, that too without any documentary evidence in support of the same.”

The commission noted that the opposite party (insurer) cannot penalise the consumer for an internal technical lapse at its end after nearly a decade of uninterrupted compliance, and the consumer cannot be made to suffer for the insurer’s own administrative negligence.

‘Unfair trade practice’

LIC had issued the policy in question, mentioning the commencement date as March 28, 2011, the maturity date as March 28, 2031, and the monthly premium as Rs 2,042.

It was further admitted that they had issued the letter, for the first time, informing the complainant regarding non-charging of Class IV Health Extra as decided by the competent authority in the premium calculation since inception and further demanded Rs 83,541 from the complainant on account of arrears of premium.

It is safe to hold that the act of the opposite party in demanding a lump sum arrear of Rs 83,541 from the complainant by treating the monthly premium as Rs 2,670 instead of the agreed Rs 2,042, at the time of surrender of the policy by him, certainly amounts to deficiency in service and unfair trade practice on its part.

The present consumer complaint deserves to succeed.

‘Rs 83,541 demanded after 11 years of payments’

The complainant filed the consumer complaint pleading that he submitted all the documents based on information provided by the LIC, upon which he was issued the Jivan Saral Policy for a period of 20 years.

The policy date commenced on March 28, 2011, the sum assured was Rs 5 lakh, and the monthly premium payable under the policy was stated to be Rs 2,042.

The complainant paid premiums till February 2023, totalling Rs 2.94 lakh, which was deducted from his account. In April 2022, he went to the opposite party to surrender the policy and to receive the benefits accrued till then.

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Thereafter, the complainant received a letter dated May 6, 2022, from the opposite party, in which it demanded arrears of premium amounting to Rs 83,541 on account of wrong calculation of premium since inception.

The complainant resisted the said demand of the opposite party and also issued a legal notice dated December 12, 2022, which was replied to by it on December 16, 2022, but his grievance was not redressed.

Alleging that this act of LIC in issuing letter and not releasing the surrender value amounts to a deficiency in service and unfair trade practice on its part, the complainant has filed the instant consumer complaint.

LIC’s stand

In its written version, LIC averred that the complainant had disclosed his health history, and keeping the same in view, he was told that he would not be able to get the policy at a normal premium.

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Due to Class IV Health Extra, his monthly premium payable shall be Rs 2,670, and he agreed to the same.

They submitted that, however, due to a technical error in the system, the complainant’s premium was mentioned as Rs 2,042 instead of 2,670. It was admitted that the letter dated May 6, 2022, was sent to the complainant directing him to deposit arrears of Rs 83,541.

It was denied that the opposite party refused the surrender value to the complainant

However, the outstanding premium has to be taken into account, whether by way of payment by the complainant or deduction from the surrender value.

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Significance

This judgment protects consumers by ruling that insurers cannot penalise policyholders for internal technical errors or administrative negligence after years of compliance. It establishes that companies cannot retroactively demand higher premiums for mistakes made at inception, ensuring consumers aren’t victims of unfair trade practices.

For consumer-related grievances, individuals may contact the consumer helpline in their respective states (Chandigarh helpline: 0172-2700183) or call the National Consumer Helpline at 1915 for assistance.