LIC Rebuked for 'Shocking Insensitivity' After Sending Premium Reminder to Dead Policyholder: NCDRC Upholds Payout

In a case that lays bare the bureaucratic indifference of a state-run insurer, the National Consumer Disputes Redressal Commission (NCDRC) has come down hard on the Life Insurance Corporation of India (LIC) for sending a premium reminder to a man who had already passed away, and then using non-clearance of that premium to deny his widow's claim.

The commission upheld an earlier compensation order directing LIC to pay Rs 5 lakh to the deceased's family. The NCDRC's ruling, first reported by Moneylife, also expressed sharp displeasure over the way the matter was handled.

What was the case?

The policy in question belonged to the late Rajendra Prasad Tripathi from Pratapgarh, Uttar Pradesh, who had purchased a Rs 5 lakh life insurance policy for LIC.

He issued a cheque for the second premium instalment on 11 August 2003, well before the due date of 24 August. LIC claims to have received it on 29 August, just five days late.

Tragically, Tripathi died a month later, on 29 September 2003, before the cheque was cleared by the bank. The bank eventually returned the cheque, citing the reason: "drawer deceased."

When his family filed for the claim, LIC, rejected it outright, arguing that the premium had not been realised and the policy had lapsed. But both the district forum and the state commission disagreed. They held that LIC had, in fact, received the cheque in good time and had submitted it for collection, a clear indication that the insurer had accepted it. That meant it couldn't now claim the policy was defunct.

The NCDRC bench, comprising Dr Inder Jit Singh and Justice Dr Sudhir Kumar Jain, backed those findings and added that LIC's conduct was both unreasonable and insensitive.

What particularly drew the commission's ire was a letter issued by LIC on 24 December 2003, almost three months after Tripathi's death, addressed to him directly, demanding premium payment by 28 December and warning that proof of good health would be required if payment was further delayed.

"This kind of insensitivity is unacceptable from a public sector organisation tasked with securing people's lives," the NCDRC bench noted in its order. It also slammed LIC officials for issuing such a letter "without any application of mind" and noted that the very same letter even acknowledged Tripathi's death.

Commission's Ruling

The commission directed LIC to pay the widow Rs 5 lakh, which was the full insured amount, along with Rs 25,000 as litigation costs, upholding the compensation granted earlier by the Uttar Pradesh State Consumer Commission.

It also ordered that a copy of its judgment be sent to LIC's senior management (at the general manager level and above), asking them to initiate corrective action against those responsible.

The commission also clarified that the issue was not one of cheque dishonour due to insufficient funds. Since LIC had accepted and processed the cheque, it was obligated to honour the claim. The onus was on the insurer to follow up with the bank and ensure collection, not on the deceased or his family, the order stated.

The NCDRC also dismissed LIC's revision petition, signalling that such conduct, especially by an organisation tasked with safeguarding people's futures, erodes public trust and cannot go unaddressed.