Life Insurance Policies: Frauds and Illegality in the Industry

Udaipur: Life insurance policies operated by various companies in the country have become one of the largest fraudulent and illegal businesses, as these policies focus more on savings and investment plans than actual insurance. Despite the presence of 26 to 27 life insurance companies in India, they have failed to insure even 10% of the population.

These companies prioritize selling savings or investment plans and do not disclose how much of the premium is allocated to savings and how much to actual insurance. This lack of transparency hinders economic growth and creates distrust among policyholders.

Betrayal of Policyholders

Life insurance policies, which include savings components, do not refund the savings amount to the nominee in case of the policyholder's death. This practice, seen as a betrayal of widows and orphaned children, highlights the flaws in the system.

LIC’s Investments and Lack of Economic Contribution

The Life Insurance Corporation (LIC) has invested approximately ₹10-12 lakh crore in the stock market. However, this investment has failed to contribute to the economy significantly. Instead, it has fueled speculation without increasing production or creating employment opportunities. Experts argue that had this money been invested in manufacturing or irrigation sectors, India’s economy could have achieved double-digit growth.

Risk of 100% Foreign Direct Investment

The Indian government’s plan to allow 100% foreign direct investment (FDI) in the insurance sector, up from the current 74%, poses a severe risk to the country’s economy, potentially leading to economic subjugation.

Massive Wealth from Lapsed and Surrendered Policies

The All India Life Insurance Policyholders Association (Mumbai) revealed that by 2005, LIC retained a staggering ₹4,08,000 crore from lapsed and surrendered policies. Such practices highlight the company’s insensitivity toward claims filed against it.

Supreme Court’s Stance on Forfeiture Clauses

In 1987, the Supreme Court ruled in the Peerless GF & I Company Limited case that forfeiture clauses in all savings schemes, including life insurance policies, should be banned. However, these clauses still persist, underscoring the need for reforms.

Mission Great India: A Proposal for a Poverty-Free Rajasthan

CA Kailash Maheshwari, in a memorandum to Chief Minister Bhajanlal Sharma, introduced the "Mission Great India" initiative. The plan aims to eradicate poverty, unemployment, and inflation in Rajasthan. Key features of the proposal include:

Free Life Insurance: Coverage of up to ₹20 lakh without any premium.

Pension Scheme: Annual pension of ₹5 lakh for senior citizens without any payment.

Interest-Free Loans: Loans up to ₹2 lakh without security.

These benefits will be proportional to customers’ purchases of goods and services, lifting families above the poverty line and making Rajasthan a poverty-free state.

Employment Opportunities for Youth

Under this initiative, the state could generate employment or business opportunities for 2 to 5 lakh youth, making Rajasthan unemployment-free. The plan includes the establishment of a Customer Welfare Fund, managed by a committee comprising company and customer representatives, with a government nominee ensuring customer interests.

The government has been urged to support this fund to secure customer benefits and make Rajasthan a model state for inclusive development.