Consumer Commission Holds LIC and UCO Bank Liable for Surrendering Insurance Policies Without Consent

The Raipur District Consumer Commission has held the Life Insurance Corporation of India (LIC) and UCO Bank liable for deficiency in service and unfair trade practices after LIC paid ₹87,827 from three insurance policies to the bank without obtaining the policyholder’s written consent.

The commission, presided over by Dakeshwar Prasad Sharma, with members Nirupma Pradhan and Anil Kumar Agnihotri, directed the two institutions to pay ₹15,000 as compensation and ₹10,000 towards litigation costs. The order was passed on September 30.

The complainant had purchased three LIC policies — Bima Gold, Jeevan Anand and Jeevan Astha — between 2006 and 2008. He alleged that he regularly paid the premiums and discovered in December 2015 that the policies had been surrendered before maturity.

According to the complaint, LIC transferred ₹11,555 under Bima Gold, ₹47,156 under Jeevan Anand and ₹29,116 under Jeevan Astha to UCO Bank on October 14, 2015. The amount was reportedly adjusted against dues arising from a loan taken by Srishti Plywood, whose account had become a non-performing asset.

The complainant maintained that he had neither pledged the policies as security for the third party’s loan nor consented to their surrender. He alleged that the institutions acted without informing him or seeking his approval.

LIC argued that the complainant had voluntarily assigned the policies to UCO Bank in August 2013 and that the surrender payments were made according to his instructions. The bank also maintained that the policies had been assigned as collateral security for Srishti Plywood’s loan.

However, the commission observed that the institutions had failed to provide adequate documentary evidence supporting their claims that the policyholder had been notified about the proposed payment or had consented to it.

The commission held that making payments under the policies without establishing valid consent amounted to deficiency in service and unfair trade practices.

The ruling underscores the importance of obtaining proper authorisation and maintaining documentary evidence before surrendering insurance policies or transferring policy proceeds to recover loan dues.