State Consumer Dispute Redressal Commission to enquire ‘LIC Scandal on Micro Insurance’

State Consumer Dispute Redressal Commission to enquire ‘LIC Scandal on Micro Insurance’

Udupi: The Karnataka State Consumer Dispute Redressal Commission heard a Complaint filed by Human Rights Protection Foundation (HRPF) Udupi, against LIC of India for deficiency in Service. The commission found that it is a fit case for admission and accordingly has passed orders to issue a notice to LIC to submit their objection if any. The matter is posted for submission of objections by LIC on 31-07-2019.

Speaking at a press meet on July 9, Dr Ravindranath Shanbhag, President, Human Rights Protection Foundation said,  the Udupi HRPF has been struggling for the last two years to protect the innocent Anganavadi Teachers and Poor farmers of Chikkamagaluru District who have been duped by agents appointed by LIC of India.

In 2009 LIC of India came-up with insurance policy under Micro Insurance Scheme with an objective of extending the scope of Insurance sphere to economically weaker sections of the society and thereby reach the unreached. Thus the LIC floated the “JEEVAN MADHURA” Micro Insurance’ (MI) product, which ranges from 5 to 15 years, with the maximum sum assured of Rs 50,000/-.

Unlike the conventional insurance process, in Micro Insurance product, A Middleman, (the Micro Insurance Agency) was to be appointed under Special Agreement (between the insurer LIC & NGO as MI Agency) and accordingly, authorized by the LIC to gather insurance and collect regular premiums from the policyholders. Thus, the policyholders were compelled to pay the premiums to the Micro Insurance Agency authorized by the LIC. On behalf of LIC, the Middleman /MI Agents made propagation about the MI benefits and garnered huge business in the rural areas of Chikkamagluru district.

Thereafter, as prescribed by LIC, the premiums were collected by the sub-agents from the policyholders and handed over to the MI Agents i.e., to the NGO appointed in this behalf. As per the policy terms, the Policyholders are entitled to the refund of the entire premiums paid along with the accrued benefits/sum assured in case of death contingency.

However, in 2014 when an insurance claim (in view of the death of the policy-holder) was made before LIC, an astonishing development came to light, they said that the MI policy was not alive and hence the claim could not be allowed. On hearing this shocking news, the policyholders started enquiring thoroughly, which revealed that the collected premiums were not at all remitted to LIC! Holders suspected the sub-agents to have misappropriated the collected premiums.

The policyholders on approaching the Middleman, MIAs, Sub-Agents and local LIC office have tried to sort out the issue of refund of their premium amount along with the accrued benefits. However, they could not manage with the bureaucracy which led them to approach the President of HRPF, Udupi seeking legal guidance and legal help.

Thus, as an authority holder, the HRPF tried its best to approach the Management of LIC and officials of the Finance Ministry. To get justice to the Policyholders and also to the innocent sub-agents.

HRPF initiated an investigation to find out what had gone wrong and the following facts emerged:

1. The LIC in this region has issued 58,086 nos. Micro Insurance (Jeevan Madhura) policies through 3 NGOs, namely, Mukkanneshwari Yuvati Mandali Arasikere, Samanvaya H.E.&D.S. Tiptur and Shubhodaya Chikkamagalur as Micro Insurance Agents(MIAs).These three MIAs appointed number of villagers as Sub –Agents, most of them are poor Anganwadi Teachers getting a meagre salary and looking for some additional source of revenue for their living;

2. These Sub-Agents canvassed and literally pooled large number of policies for the poor economically vulnerable sections, regularly collected the premium from time to time and promptly remitted the same by way of cash or demand drafts favouring LIC and handed over the cash and or DDs along with the relative lists of details of policies etc. to the MIAs. The MIAs issued receipts with the logo of LIC to the policyholders Apparently, everything was working fine until a few people lodged claims with LIC for risk covered by the policy.

3. The LIC rejected these claims on the ground that the policies had lapsed for non-payment of premium. What has become clear is that the cash paid by the Sub-Agents for transmission to LIC was not remitted to the LIC by the MIAs and the DDs favouring LIC collected from the Sub-Agents were misused by them (MIAs). Thus, the MIAs have misappropriated huge sums of premium money and defrauded the LIC, the policyholders and Sub- Agents together.

4. However, unrepentant LIC classified the concerned policies as lapsed policies for non-payment. Similar cases have been reported from Belgaum, Bangalore and Mysore. A rough estimate indicates that the extent of misappropriation might be to the tune of at least Rs. 20 crores. Only a detailed investigation may reveal the complete facts of this humongous fraud. As a result of the above action by the NGOs, 99.63% policies (57,873 out of the total of 58,086) have been considered as lapsed for non-receipt of premium by LIC. This is as per the information furnished by LIC. Strangely, despite regular payments by the policy-holders to the Sub-Agents and by them in turn to the NGOs/MIAs, only a meager 213 policies –just 0.37% of the policies issued remained in force.

5. In the majority of cases, only one or two installments of premium were paid to the LIC by the MIAs and the rest of the premium was misappropriated by them.

Thus, this whole-sale illegal lapsation of policies happened sheerly for want of required supervision/follow-up of the policies, payments of premium etc., by the LIC. Had the LIC monitored to the desired extent this mishap could have been avoided. Further, for no fault, the poor consumers are made to move around the Court for getting their contractual right. In a way, these lapses of LIC have damaged its credentials too.

It is pertinent to note here that one of the NGOs, with a glossy name, Shubhodaya Health & Rural Development Society, Chikkamagaluru were congratulated for collecting 1,300 policies in a single day i.e. on 11th July 2011.