The state consumer commission on Wednesday asked Life Insurance Corporation of India (LIC) to approach the authorities appointed under the Insurance Act to get approval for their formula to calculate surrender value for lapsed policies.
The commission dismissed an appeal filed by the LIC challenging the order of the district consumer commission directing it to pay a consumer the value as per general calculations with interest.
As per the case, Anandrao Salunkhe bought a policy in 1993 of Rs75,000 for a period of 25 years. He had also taken a loan of Rs15,000 against the said policy. The policy lapsed as Salunkhe failed to pay premium from August 2002, and he applied for release of surrender value.
Salunkhe alleged that while he should have been paid Rs29,888, LIC offered to pay only Rs2,268 as final settlement. Salunkhe refused to accept the amount and filed a complaint with the district consumer forum at Sangli, which directed LIC to pay an amount of Rs29,888 with 9% interest.
LIC challenged the order in the state forum. Advocate for LIC, AS Vidhyarthi contended that since the policy had lapsed the calculation of the surrender value has to be calculated using a standard formula, according to which the amount payable is Rs2,268.
The commission, however, observed that the formula has not been approved by the authorities set up under the Insurance Act. “As a word of caution, LIC is advised to seek approval of competent authority for surrender value formula as provided under the Insurance Act, 1938, to deal with such cases in future,” the commission observed.
Upholding the district forum’s order, it said: “In the absence of any approved formula to calculate surrender value, we need not interfere at this stage in the judgment passed by the district forum.”