Honouring commitments: LIC vs Private Life Insurance Companies in India

 

 

LIC - Life Insurance Corporation of India was formed with a Social cause in mind. The cause of ensuring Continuity of Income for the Society, for families that may be faced with the uncertainties of financial future due to loss of life of the earning member of the family.

Looks like, on the contrary, Private Life Insurance Companies (PLIC) were formed with the sole intention of profit maximization for those companies.

The maximum profit that is shown / published by PLICs is actually the residual money accrued from Lapsed policies. Let us look at an example --

100 individuals enrol for a Life Insurance Plan with PLIC by paying an annual premium 1,000/-  So the total premium collected by them is 100*1,000 = 1,00,000.

Now after seeing the performance and reliability of PLICs, the policy holders realized that the PLICs cannot in any ways give them the returns that were promised in the beginning. Many of them discontinued their policies. As they may have discontinued before completion of 3 years of the policy, the PLICs are under no obligation - legal or social - to return the money. And such policy holders were far more than a few.

Lapsed policies are a fact even for LIC. But the difference is that for LIC the lapsed policies comprise of less than 1% of total policies taken in a year. Whereas for PLICs that number goes far beyond 30-40% of total policies taken in a year.

The end result is simple and clear. PLICs can call these premium collected as part of their profits. Coz against that premium collected they do not have to pay anything to the policy holders. No liability. No responsibility. Loss to the policy holder. Profit to the PLICs.

LIC works on a Win-Win situation. LIC want to see her customers happy and facing fewer financial burdens.

LIC, at times, even honours claims for lapsed policies taking into consideration the social angle. Considering the hardships that the bereaved family would have to undergo if they do not get any financial support.

Why, even in accidental death cases where it is very clear that the deceased violated a traffic rule and hence met with an accident resulting in death, the claims for Life Insurance have been honoured.   

A classic case in point is of a police officer who had taken two Term Life Insurance policies of 25 lakhs each.  One from LIC and the other from a PLIC (which is promoted by a leading Private Bank).

This police officer lost his life while fighting terrorists in an attempt to save a number of innocent civilians’ lives.

LIC honoured the claim and settled it in a record 5 days.

The PLIC rejected the claim saying that the police officer should not have risked his life by fighting the terrorists.

Sad but it is true. LIC is the only Insurance Company in India which understands her citizens and works for their betterment and well-being and honours her commitments. …  

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SABH: Save And Be Happy!

Think +ve, Be +ve

Ajit Vidyadharan

Certified Wealth Manager / Financial Advisor
Certified Trainer, Certified Leadership & Performance Coach
Sabhav Wealth Management Services
+919664966416