Commission to enquire into LIC Micro Insurance scandal

State Consumer Dispute Redressal Commission will enquire into LIC’s Micro Insurance scandal, based on a complaint filed by Human Rights Protection Foundation (HRPF), Udupi.

HRPF President Ravindranath Shanbhag told mediapersons in the town on Tuesday that HRPF had been struggling for the past two years to protect Anganwadi volunteers and poor farmers in Chikkamagaluru district, who had been duped by agents appointed by LIC of India.

In 2009, LIC had come up with Micro Insurance Scheme with an object of extending the scope of insurance sphere to economically weaker sections of the society.

Thus “Jeevan Madhura” Micro Insurance’ (MI) product, floated by LIC, with a range from 5 to 15 years had the maximum sum assured of Rs 50000.

Unlike the conventional insurance process, in Micro Insurance product, a middleman, (Micro Insurance Agency) was appointed under Special Agreement and accordingly, authorised by the LIC to collect insurance and regular premiums from the policyholders.

Premiums to MIA

Thus policyholders were forced to pay their premiums to the Micro Insurance Agency authorised by the LIC.

On behalf of LIC, the Middleman /MI Agents made propagation about the MI benefits and collected huge business particularly in the rural areas of Chikkamagluru district.

Under the terms of policy, policyholders were entitled to a refund of the entire premium paid along with the accrued benefits/sum assured in case of death contingency.

‘Shocking truth’

In 2014, when an insurance claim (in view of death of the policyholder) was submitted before LIC, a shocking truth had come to light.

The claimants were told that Micro Insurance policy was inactive and the claim could not be entertained.

Policyholders on further enquiry were informed that the premiums collected from them were never handed over to LIC. They approached HRPF.

In a majority of cases, only one or two installments of premium had been paid to the LIC and the rest of the premium was misappropriated by the MIA.

‘Lack of supervision’

Thus, the illegal lapses of policies had happened owing to lack of supervision/follow-up of the policies, payments of premium etc., by the LIC.

“If LIC had closely monitored the scheme, the cheating of innocent people would have been avoided,” Shanbag said.

For no fault of theirs, poor consumers are forced to approach Court seeking justice. “In a way, these lapses of LIC had damaged its credentials too,” he added.