The Andhra Pradesh State Consumer Commission has directed Life Insurance Corporation (LIC) to release a Rs 50 lakh policy claim to a widow, ruling that the insurer improperly rejected the payout over alleged non-disclosure of her late husband’s income and occupation.
A bench comprising Presiding Member (Non-Judicial) CVS Bhaskaram and Member (Judicial) B Srinivasa Rao dismissed LIC’s appeal against a previous lower forum order. The commission affirmed that insurance companies must provide concrete proof to justify rejecting claims. Alongside the primary claim amount, the panel ordered LIC to pay Rs 50,000 in compensation for deficiency in service and Rs 5,000 toward legal costs.
Background Of The Claim
The dispute involves two policies obtained by the deceased policyholder in early 2019. The first policy, secured on April 22, carried a sum assured of Rs 20 lakh with a premium of Rs 7,900. The second policy, dated May 3, provided coverage of Rs 30 lakh with a premium of Rs 20,190.
The policyholder passed away on August 15, 2019, while receiving medical treatment at a hospital in Visakhapatnam. Following his demise, his widow submitted a claim for the full Rs 50 lakh sum, which LIC formally rejected on March 31, 2021.
Insurer Allegations And Legal Findings
LIC justified its refusal by claiming the policyholder had concealed key financial and professional details when applying. Specifically, the insurer pointed to a proposal form for the Rs 30 lakh policy in which the applicant was listed as a construction worker earning Rs 10 lakh annually.
Upon reviewing the submitted documents and income tax records, the state commission found that the policyholder earned a substantial income. The bench observed that while one proposal form from April 19, 2019, listed an annual income of Rs 10 lakh, a subsequent proposal form dated April 22, 2019, recorded an annual income of Rs 6 lakh.
Finding LIC’s allegations unsubstantiated by the record, the state panel determined that the rejection lacked legal merit. The August 14 ruling upheld the December 5, 2022 decision of the Visakhapatnam District Consumer Commission, which had ruled partially in favor of the widow.
