Case Study: Consequences for Employees When Employers Delay Insurance Premium Payments


Is an Employee Liable if Their Employer Misses the Insurance Premium Payment Deadline

Should an employee suffer if the employer has not made the renewal payments on time? This was the question examined by the National Consumer Dispute Redressal Commission (NCDRC). The facts of the case are one Mrs. Pittala Pochamma has as. Pittala Pochamma has approached the Life Insurance Corporation of India (LIC) to settle the claim of her husband who had passed away. The life insurance company has rejected her claim stating that the life insurance policy of her husband was not renewed and therefore they are not liable to pay the claim.

Aggrieved by this decision Mrs. Pochamma approached the district and state consumer dispute redressal commissions which have ruled in her favor. But, LIC was not satisfied with the judgment and approached the NCDRC. The national consumer commission has noted that the deceased (husband of Pochamma) has taken a voluntary retirement from the company he was working and therefore the company has not paid the renewal premium for him. LIC has contended that since it has not received the premium, it cannot be held liable for claim settlement.

However, NCDRC has ruled in favor of the policyholder stating that the “employer is to be considered as the agent of the insurance company and the deviation committed by the employer should not result in penalizing the employee”. NCDRC has referred to the Supreme Court’s decision in the case LIC of India vs Rajiv Kumar Bhaskar, which highlights that an employer should act as the agent of the insurer and any employee should not be penalized for the lapses or omissions made by the employer.

Furthermore, the commission has also highlighted that LIC has not provided any evidence to counter the argument or challenge the current position. Therefore, NCDRC has rejected LIC’ s appeal and held both LIC and the employer responsible for paying the Rs.4.7 lakh death claim to Mrs. Pittala Pochamma.

What’s on this page?


The main takeaways from this case are that :- 

  • Employers are supposed to act as the agents of the insurance company. 
  • Any errors or omissions committed by the employer would be the responsibility of both the employer and the employee.

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Susheel Agarwal