10 May 2010
By S Pushpavanam
Life insurance covers the risk to your life, but it is often treated as an investment and way to save tax. Life Insurance Corporation of India (LIC) is the biggest insurance company in India. Yet it is also the most–sued corporation in India, with a number of cases pending against it in consumer forums.
Often LIC rejects claims saying that the policy holder concealed a pre–existing disease, the policy is not in force, or that the employer’s failed to pay the premium. For instance, Santosh Kanwal’s wife claimed the sum assured after her husband died due to a liver tumour. LIC’s legal team is adept at bamboozling policy holders with abbreviations and technical terms. LIC rejected the claim saying that Kanwal had myalgia, URI, urticaria, pyrexia, amoebic colitis and anaemia for which he had taken treatment and claimed medical reimbursement.
The National Commission in its decision on September 9, 2008 held that myalgia (muscles pain), URI (upper respiratory infection), urticaria (skin rash), pyrexia (slight fever), amoebic colitis (inflammation of intestine) and anaemia (reduction in red blood cells) had nothing to do with the liver tumour. The commission said, in order to repudiate the policy, the holder must have suppressed material facts intentionally and must have been aware of the symptom before taking the policy. Kanwal, a teacher who had continuously attended school, had not suffered from these diseases and had not taken treatment for more than a week. LIC’s repudiation was held to be illegal. In such cases, the burden of proof is on the insurance company, and in several cases LIC had been told that the right of repudiation cannot be granted on flimsy grounds or sketchy evidence.
In another case on May 15, 2009, the Punjab state commission held that diabetes is a common health problem and, like hypertension, is not a material disease which is fatal in itself. Therefore, nondisclosure of diabetes does not entitle the insurance company to repudiate the claim.
Before the Karnataka state commission in LIC vs Dr J Madhavi, LIC said that the premium paid was not valid as it was paid by an agent, though paid on time. LIC was asked to pay the claim with interest. The private companies are no better and pull the same tricks quite often.
It is law that whenever there is ambiguity in terms of the insurance policy, the benefit of interpretation should go to the insured and the employer is liable if he fails to pay premium in salary savings scheme.
Consumers should demand the full policy with terms and conditions, and get an explanation on the finer points. Disclose all diseases before taking a policy so that they do not boomerang on you later. Never forget to pay the premium in time. Always keep a copy of the doctor’s report with you. Signing a full discharge voucher for a claim payment will not bar you from going to the district forum if you have written a letter of protest within a few days of signing.
The Insurance Regulatory and Development Authority must mandate plain English text for all policies – the LIC policy, one sentence runs to 14 lines – communication. It should also insist on the use of regional language and order a review of all cases before consumer forums. A protected consumer is a satisfied consumer and that is good for business.
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