Times of India
13 September 2010
By Jehangir B Gai
Subject, India

Government of Maharashtra approaches the consumer fora for deficiency in insurance services for a scheme to provide accident insurance coverage to farmers.

Backdrop: It is well known that the common man is often harassed by insurance companies for settlement of claims. But here is a case of how ICICI Lombard has forced the Maharashtra government to knock on the doors of consumer courts for justice.

Case Study: As a social welfare measure for farmers, the Maharashtra government wanted to insure them against accidents. Offers were invited from various insurance companies. After considering various proposals, the government felt that the one given by ICICI Lombard would be the most suitable.

According to the scheme, the government pays the premium for a Group Personal Accident Insurance Policy where beneficiaries under the scheme are farmers, their heirs and legal representatives. In case of accidental death, disability, loss of limbs, loss of eyes, etc., compensation is payable.

The policy covers about 1 crore farmers registered with the Maharashtra government, for a Rs 1 lakh sum insured per farmer. A premium of Rs 1.62 crore was paid by the state government to ICICI Lombard for issuing this policy.

About 4,038 claims were lodged under the policy for death and disabilities sustained by farmers, but about 70% was arbitrarily repudiated on flimsy grounds. This became a major political issue and questions were raised in the state legislature. Government officials tried to sort out the matter with ICICI Lombard.

Initially, the insurance company gave false hopes by assuring that the matter would be sorted out, but later they became uncooperative. All these facts were documented by the government in the minutes of the meetings between government officials and officers of the insurance company.

The state government then took up the matter with the Insurance Regulatory Development Authority (IRDA) by lodging a complaint on October 17, 2006. The IRDA sent a reply dated November 16, 2006, stating that the matter had been taken up with ICICI Lombard and that they would revert. Thereafter, IRDA simply failed to respond. The IRDA’s approach even to a complaint by the state government speaks volumes about its functioning as a regulatory authority as well as its ability to resolve grievances.

The state government then appointed an insurance consultant to follow up with ICICI Lombard and try to resolve the matter, but it only resulted in a rejection of most of the pending claims. The claims were rejected on the basis of the general policy terms and conditions, ignoring the special condition governing the policy stipulated in a government resolution forming part of the policy terms and conditions.

A three-member committee–comprising a government official, the insurance consultant and an officer of ICICI Lombard–was then constituted to conduct an audit, which found that 2,232 claims had been wrongly rejected. Yet the claims were not settled.

Ultimately, driven against the wall, the state government issued a legal notice to ICICI Lombard and then filed a consumer complaint (no. 27 of 2008) before the National Consumer Disputes Redressal Commission, seeking a direction to the insurance company to pay Rs 1 lakh to each of the 2,232 farmers, totalling Rs 22.32 lakh.

Advocate Uday Wavikar appeared for the state and senior advocate Sudhir Chandra Aggarwal along with advocate Shibhashish Mishra appeared for ICICI Lombard. After hearing the parties, a bench of the National Commission comprising of Justice M B Shah and Rajyalakshmi Rao observed that the state government had committed a mistake of paying such a large premium to a private insurance company.

The commission further observed that most of the claim had been rejected by taking a technical plea that the claim had not been lodged within 30 days as per the terms of the policy. The commission disagreed with the insurance company that the period of lodging the claim has to be adhered to strictly as it forms part of the terms governing the contract of insurance.

Accordingly, interim orders were passed directing ICICI Lombard to settle the genuine claims by paying the claim amount along with interest at 12% per annum. The complaint is now pending consideration only in respect of the disputed claims.

Impact: Farmers have been committing suicides due to drought, floods and other reasons. The family members may not even be aware of the scheme for their benefit.

The claims lodged may not include all those who are entitled to compensation under the scheme. It is up to the media, particularly the Marathi newspapers, to try and spread awareness so that farmers entitled to compensation can lodge their legitimate claims.