Jeevan Saral: LIC Wants to Know How Many Policies Are Flawed. Asks Officers to Finish the Task Before 31st July
Following a public interest litigation (PIL) filed by Moneylife Foundation in the Supreme Court, the Life Insurance Corporation of India (LIC) has undertaken, on a war footing, a verification drive for correcting "printing" mistakes in maturity sum assured (MSA) under its Jeevan Saral policy. An internal circular (CO/CRM/PS/2019-20/153) issued on 9 July 2019 (a copy of which is with Moneylife) by executive director of customer relationship management (CRM) for payments asks officers to complete the task before 31 July 2019 with daily reporting.
LIC says in the circular that its software development centre (SDC) has devised a program to identity Jeevan Saral policy bonds wherever printing mistake had occurred in matured sum assured-MSA. "The program has been designed to extract all Jeevan Saral policies of the division, with status 21 (in force) and 31 (reduced paid up) where MSA is less than death sum assured (DSA). The initial step is to run extraction option. This one time job is to be done immediately, after office hours," the circular says.
It also contains step-by-step instructions for officials of LIC to carry out desired changes in the Jeevan Saral policies. This program allows the officer to check and make correction in cases where MSA is not printed or incorrect, where enterprise document management system (EDMS) image (of the policy) is not available and where MSA and DSA are interchanged.
The manager for CRM at divisional level is asked to submit daily report to regional manager (CRM) on number of policies left for checking and options submission. "This task has to be completed before 31 July 2019. Progress of the task is to be monitored on a daily basis," the circular says.
One may wonder why all of a sudden LIC want to verify and correct the "printing" mistake in Jeevan Saral policies now. There are two reasons. One was the PIL filed by Moneylife Foundation in the Supreme Court against LIC on Jeevan Saral issue. And last and most important a September 2014 judgement from the Insurance Ombudsman, Hyderabad.
Hyderabad ombudsman's order procured under right to information (RTI) Act reveals that during the hearing, representative of LIC stated that non-specifying of the correct maturity benefit was a typographical mistake that occurred during the printing of the policy document.
"...there is nothing on record to show that during the entire policy term of 10 years, the insurer had made any effort to bring the so-called typographical error to the notice of the insured; leave alone making an effort to correct the same. As a result the insured was allowed to continue with the belief that the maturity value would be Rs1 lakh. This being the case, the insurer cannot, at this stage of claim of maturity value, make lower payment by invoking the theory of typographical error committed 10 years back...Having held out a promise that a particular amount would be paid on maturity and having allowed the policyholder to live with that belief for 10 long years, the insurer has no option but to honour the contractual obligation," the order said.
The ombudsman ordered LIC to pay Rs1 lakh to the insured.
LIC, however, decided to challenge the order before the Karnataka High Court. The HC too on 15 December 2015 rejected the petition filed
by LIC. It said, "...this Court feel that the order passed by the LIC Ombudsman appears to be just and proper under the facts and circumstances of the case. Therefore the question of quashing the same in this writ petition does not arise. Accordingly the same is dismissed imposing cost of Rs10,000 payable by the petitioner LIC corporation to the respondent member for having unnecessarily driven him to a litigation before the LIC Ombudsman at first place and thereafter in forcing him to participate in this proceedings which is initiated by LIC."
As highlighted by Moneylife, LIC's Jeevan Saral, which used to be a hot-selling insurance product for agents, until it was withdrawn, is a controversial product. In fact, Jeevan Saral was a traditional product that could make your premium (money paid) disappear! This can happen in many policies during surrender or making it ‘paid-up’, but, in the case of Jeevan Saral, it has happened even at policy maturity.
A senior citizen couple got just one-third of the premiums paid over the years.
The Jeevan Saral product, which has gobbled up hard-earned savings of policyholders (especially senior citizens) have also agitated LIC agents and their association. Despite innumerable letters, protests and objections, LIC has not budged so far.
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