LIC Jeevan Shanti: Another Case of Mis-selling?
Recently, in September 2018, Life Insurance Corporation of India (LIC) launched a new pension policy named ‘Jeevan Shanti’ and it has been gaining popularity ever since. Can it deliver on the promises that are mentioned on the illustrations that have been floating around? Or is it just another case of mis-selling akin to LIC’s Jeevan Saral? Read on, to find out.
 
Jeevan Shanti is...
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J&K cancels Reliance’s Medical Insurance Policy for State Employees, Pensioners; Calls it “Full of Fraud”
Following strong protest and criticism, Satya Pal Malik, governor of Jammu & Kashmir, has cancelled the state employees' group mediclaim health insurance scheme, a contract of which was awarded to Reliance General Health Insurance Company Ltd. The insurer however claimed that it had not received any information from the state government on cancellation of the contract.
 
Speaking with media, Mr Malik, the governor, alleged that the contract for this policy was cancelled as it was 'full of fraud' and its implementation across the state was 'erroneous'.
 
He also claimed that the tenders for the policy were opened ‘secretly on a holiday to suit a particular company.’ 
 
According to a report from The Wire, soon after its implementation, several loopholes were pointed out in the contract. It says, “It came to the fore that the government had ‘deviated’ from set practice, and instead of floating the tender online and giving it wide publicity, it allowed advertisement through a broker, Trinity Reinsurance Brokers Ltd, in some newspapers.”
 
“Another clause in the original tender – that companies which enter the bidding process should have experience of working in the state – was removed from the new contract. Besides, another requirement that only insurance companies with a turnover of Rs5,000 crore in 2017-18 would be eligible for participation in the competition had also been done away, allegedly to the pave way for Reliance General Insurance,” the report says.
 
In September, the J&K government had issued an order stating that the policy has been tied with Reliance General Health Insurance on an annual premium of Rs8,777 and Rs22,229 for employees and pensioners, respectively from the state. 
 
After initial criticism over awarding of contract, Reliance General Insurance also issued a statement claiming that the company won the contract after a “rigorous and transparent competitive tender process”.
 
The scheme was mandatory for government employees, autonomous bodies and universities and optional for pensioners and accredited journalists and other category of employees. At present there about 4.5 lakh state government employees in J&K while the number of pensioners varies between 1 lakh to 1.25 lakh.
 
The insurance scheme was challenged in the J&K High Court as well. 
 
In a statement, the insurer said, "The policy has commenced on 1 October 2018. Reliance General Insurance has not received any subsequent intimation with regard to the policy till date."
 
"Reliance General Insurance won the J&K government group mediclaim policy through an open, transparent and competitive process in which seven insurers participated," the company said.
 
The tender process involved both technical and financial evaluation, and Reliance General Insurance's winning bid was almost 30% lower than the second best quote, the insurer claimed.
 
There have been cases of rampant fraud in group insurance policies, especially in non-corporate groups such as professional, religious, cultural groups or organisations.
 
Earlier in 2014, the National Consumer Disputes Redressal Commission (NCDRC) ordered Reliance General Insurance and Alankit Health Care Ltd to jointly pay Rs3.5 lakh to Bangalore-based GR Yoganarsimha, for denying his mediclaim. 
 
We, at Moneylife, have repeatedly raised questions about the pricing of group health insurance, which no other media has dared to ask. Our warnings were vindicated when Jain International Organisation (JIO) suffered a claims ratio (ICR) of 300% in a year. It led to National Insurance Co Ltd turning away at the time of policy renewal. 
 
But did National Insurance sack any employee or did Insurance Regulatory and Development Authority of India (IRDAI) take any action against National Insurance for underwriting the group policy at a throwaway price? Unlikely; but it is certain that taxpayers’ money was wasted by the government insurance company insuring a rich community at a ridiculously low premium. (Read: Health Insurance: IRDAI Is Silent as Group Health Insurance Bleeds Taxpayers
 
One of the fraudulent cases Moneylife found was that premium payment is made to the non-corporate organisation and not directly to the insurance company. The non-corporate organisation collects the premium from subscribers to buy group insurance. (Read: Health Insurance: Group Health Insurance Peril: “No Policy Underwritten
 
However, insured persons find out that the insurance company never issued the policy, as it never received the premiums from the non-corporate organisation. It could be due to various unknown reasons but the end result is that the subscriber is duped.
 
Another case is from the insurer’s side where group insurance policies are issued to certain organisations at throwaway premium prices, including cover to pre-existing diseases from the first year itself.
 
National Insurance Co Ltd gave such a cheap mediclaim policy to Jain International Organisation (JIO) for covering the Jain community. The premium for family floater of Rs5 lakh covering proposer, spouse, two dependent children and two parents up to age 80 years was Rs7,200. The comparable cost for retail policyholders would be a premium of Rs30,000 or so. Moreover, the product covered pre-existing diseases (PED) from the first year itself. 
 
As attractive as it sounded, the public insurer suffered a claims ratio of 300% in a year. It led to National Insurance turning away at the time of policy renewal.
 
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Jeevan Saral: LIC asked to respond to Moneylife Foundation's Memorandum
The Insurance Regulatory and Development Authority of India (IRDAI) has asked Life Insurance Corporation of India (LIC) to submit a comprehensive response on 'serious' allegations made by Moneylife Foundation in a memorandum on how the Jeevan Saral policy has rampantly mis-sold with the claim that it would offer excellent returns, while in fact, older policy holders stand to lose a big chunk of the principle invested over 10 years. 
 
Moneylife Foundation had sent a copy of the Memorandum to the Finance Minister as well as the insurance regulator. The financial services department in the ministry, which looks after insurance matters, on 28 September 2018, forwarded the Memorandum to IRDAI asking its chairman to take appropriate action. It has also asked IRDAI to inform the ministry about action taken (on the Memorandum) with regard to the Jeevan Saral policy and inform both, Moneylife Foundation and the ministry.
 
Moneylife Foundation has also received a one-line reply to its memorandum from the LIC chairman VK Sharma today, which says, "We appreciate the concerns raised by you in your letter dated 1 October 218. It will be dutifully looked into."
 
 
In addition to these actions, a Right to information (RTI) application had been filed with the insurance regulator to check for action on the Jeevan Saral Memorandum. In response, IRDA has  provided its letter to LIC which says, "The allegations made by the complainant (on behalf of Moneylife Foundation) are of serious nature. Therefore, you are directed to submit a comprehensive response addressing all the issues mentioned in the complaint on or before 5 October 2018."
 
All this holds out some hope for Jeevan Saral policyholders who have been running from pillar to post for redress. Following a comprehensive and hard-hitting cover story by Moneylife magazine (Read: Will LIC Be Made To Pay for the Horrible Mis-selling of Jeevan Saral?several policyholders have been writing to us to take up their issues. Some have approached consumer courts and obtained orders against LIC. However, as is the drill, LIC tends to drag all matters to higher forums including the national commission. This is a time consuming process and many policyholders are beginning to lose heart and exploring the possibility of a class action against LIC. 
 
The Jeevan Saral product, which gobbles 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. It remains to be seen if it will now be pushed to do the right thing and recall a bad product that has deliberately cheated policyholders.
 
In the memorandum sent to IRDAI on 18 August 2018, Moneylife Foundation pointed out that Jeevan Saral (with profit), a traditional policy, has caused senior citizens to lose as much as 65% to 70% loss of the money invested over 10 years. 
 
From the Memorandum, IRDAI, highlighted four points in its letter to LIC and termed them as being of a 'serious nature'. These are:
 
1. The proposal form did not have any provision to mention the (lower) maturity sum assured; instead it had a provision only for the higher death benefit.
 
2. The maturity benefit was not printed on even the policy documents.
 
3. The agents, as well as some LIC officers were not aware of the plan in general, and the fact that customers may get lesser money than the total premium paid.
 
4. The prospective customers were not informed at the time of sale that the higher insurance coverage provided by the product would lead to poor (negative for those in the higher age group) returns.
 
 
The higher insurance cover provided by Jeevan Saral policy essentially worked as a good sales pitch. The buyers were not informed that the product would give poor returns due to the same reason as the investment component was low. To make matters worse, the product gives negative returns for those in the higher age group, although said person would have purchased the product for investment purposes. Even a younger person will barely get premiums back at maturity; hence, Jeevan Saral is a bad investment product.
 
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 toxic product. In fact, Jeevan Saral was a traditional product that could make your premium (money paid) disappear! It happens during policy 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. 
 
"For example," the Memorandum said, "A 58-year-old person, paying half-yearly premium of Rs4,076 for 12 years, had paid a total of Rs97,824. The maturity sum assured, which was paid to him after 12 years, was a mere Rs24,575 plus bonus, amounting to Rs34,405. Even though the maturity amount was mentioned in the policy document, it was missing in the proposal, which only specified the death sum assured of Rs1.25 lakh. As the proposal did not mention the pathetic maturity sum assured, it tantamount to mis-selling by LIC itself. The policy was sold with inaccurate and misleading proposal form!"
 
Taking advantage of gullible Indians blindly buying LIC’s products, the behemoth sold a toxic product, with the misnomer Jeevan Saral (meaning ‘life simple’), which became a hot-selling insurance product for agents, until it was withdrawn in December 2013. The product ran for nine years selling almost 50 million policies. 
 
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COMMENTS

Sajal Maity

2 months ago

My father-in-law who is a retired govt employee, shocked last week when he received the letter from lic on Jivan Saral policy maturity. He paid quarterly premium of 3000 for last 10 years. Now on maturity next month May,2019 he will get 47000/- only ( 39k maturity SA + loyalty amount). All his hard earned money from pension is just getting vanished due to wrong selling of LIC product.

I see many older people are getting suffered and money life is leading the case with IRDA.

Please guide what should be done now for this case?

Thanks!

Kulbir Verma

5 months ago

Mr. Bhaskar its very good that you are connected to LIC for 2 decades but when we can see LIC becoming more transparent with respect to their policies like online purchase of policies etc. like other insurers.
LIC was having good reputation but of late they have started duping the customers badly. Either they have no control on their agents or LIC itself is encouraging agents to sell or mis-sell their policies at any cost whether it is good for customers or bad. As long as LIC is benefitted its fine with them.
I bought two Jeevan Saral policies and agent showed me a table showing more returns that a Post Office RD. But now i have found that LIC is not recognising that table itself. That means agents are printing their own table booklets just to make their money and cheating the customers who have faith in LIC.
Please tell me what LIC is doing about it if you have any update.

Varun Bhandari

5 months ago

Is there any update from IRDA on Jeevan Saral policy (SCAM)?

Kulbir Verma

7 months ago

IRDAI should ensure that policyholders should not get cheated by LIC or any other insurance company which used to happen before IRDAI was not on the scene but if the same thing is happening now then it is very regrettable. In my view IRDAI should pass instructions to LIC and compensate Jeevan Saral policyholders immediately since they were cheated when selling the product which is an offence.

Binay Sinha

8 months ago

Premium deduction for the balance period in completion of year in case of death claim does exist with all Insurers. Actually the premium is supposed to be paid in yearly mode only but for customer's convenience it is also charged in monthly, quarterly, and half yearly modes. Hence is a person dies in between, the premium for the rest of the year is deducted from the claim amount paid to the benificiary.

Raghavendra Kamath

8 months ago

Dear Bhaskar,

I appreciate your generosity in defending LIC as you are a LICian from last two decades.

Tell me abt LIC's practice of writing heaps of cheques without claim papers and posing them as claim paid for all the purpose?

PRAVIN BANKER

8 months ago

Like IL&FC, LIC itself carries lots of bad assets. They have a habit of absorbing and covering up bad loans like their acquisition of IDBI. IDBI is loaded with bad loans. As far back as 2007 they tried to unload on our Fund bad loans made to relatives of then Minister Chiddambaram relatives as well as "repeatedly rescheduled" loans to Younger Mittals various "mis-adventures".

Uchit Kumar Jha

8 months ago

Lic plan 165 Jeevan Saral for 10 years their matuty comes less than paid premium. What do i do to get higher premium.

Vikaas Omer

8 months ago

Same thing happened in bima account and wealth plus policies

V.Krishnamoorthy

8 months ago

LIC is not collecting true premium from the subscribers. The annual premium, is collected in instalments --monthly,once in three months, six months and yearly. In the case of death cover paid, they deduct the unpaid instalment premium due under the policy.I do not understand why the unpaid instalment premium should be deducted when there is no unpaid premium due. eg. Let is presume dt. of commencement is 01-04--2017 with quarterly mode of premium payments. The pre.due 1-4-18 is paid and the policy holder dies on say 5-6-18. when the calim is settled, they deduct the premium due on 1st of July18, october'18 and january 2019 and pay the balance to the beneficiary. why should they do so?
v.krishnamoorthy

REPLY

Bhaskar S

In Reply to V.Krishnamoorthy 8 months ago

Whatever Sri Krishna Murthy sir told above is absolutely wrong, there is no such practice in LIC where premia is collected after the Date of Death, I do not understand where these propaganda arised, if at all provide with any particular policy details we will pursue the matter with IRDA

Sun Day

In Reply to V.Krishnamoorthy 8 months ago

Premium is paid in advance for a year. So even premium mode is Mthly , qly or hey premium for one year will be deducted in death claim.

Bhaskar S

In Reply to Sun Day 8 months ago

Even then there is no practice of receiving the premia after the Date of Death....I am with LIC FOR more than two decades, No such practice exists

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