Policy Revival Requires Fulfilling All Conditions, Not Just Premium Payment; Claim on Lapsed Policy Dismissed: State Consumer Commission - 2025-08-29

State Consumer Commission Upholds Insurer's Rejection of Claim, Rules Premium Payment Alone Cannot Revive Lapsed Policy Without Fulfilling Medical Requirements

Jaipur, Rajasthan - The State Consumer Disputes Redressal Commission has dismissed a complaint filed by a widow against ICICI Prudential Life Insurance Co. Ltd., ruling that an insurance policy that has lapsed due to non-payment of premium cannot be considered revived merely by depositing the overdue amount. The Commission emphasized that the policyholder must fulfill all revival conditions, including mandatory medical examinations if required by the insurer.

The bench, comprising Judicial Members Mr. Nirmal Singh Medatwal and Mr. Kedar Lal Gupta, held that the insurance company was not deficient in service for repudiating a death claim made on a policy that was in a lapsed state at the time of the insured's demise.

---

Background of the Case

The complaint was filed by Archita Yadav, whose late husband had purchased a life insurance policy for a sum assured of ₹50,00,000 from ICICI Prudential in November 2012. The policy lapsed after the premium due on November 10, 2016, was not paid. The complainant stated that due to the 2016 demonetization, her husband was unable to deposit the premium on time.

In October 2017, the policyholder attempted to revive the policy by submitting a revival form and paying the overdue premium of ₹20,356, including a penalty, which the company initially accepted. The policyholder passed away on January 29, 2018. Following his death, Ms. Yadav filed a claim for the sum assured, but the insurance company did not process it, leading her to file a consumer complaint alleging unfair trade practices.

Arguments from Both Sides

Complainant's Arguments: Ms. Yadav’s counsel argued that since the insurance company had accepted the overdue premium for the fifth and sixth years, the policy should be considered automatically revived. The subsequent rejection of the claim, despite the premium payments, was arbitrary and constituted a deficiency in service.

Insurer's Arguments: ICICI Prudential's counsel countered that the policy had lawfully lapsed in November 2016. As per Clause 3.2 of the policy terms, revival required not only the payment of arrears but also the submission of satisfactory proof of continued insurability, which in this case included a Medical Examination Report (MER).

The company submitted evidence showing they had repeatedly communicated this requirement to the policyholder through letters dated October 30, 2017, November 23, 2017, and January 29, 2018, as well as numerous SMS alerts. Despite these reminders, the policyholder failed to undergo the required medical examination. Consequently, the premiums paid towards revival were refunded to him on two separate occasions, first on January 16, 2018, and again on March 19, 2018, after he re-deposited the amount without completing the medical formalities. The company argued that since the policy was not validly revived during the insured's lifetime and had remained lapsed for over two years, it was automatically terminated on November 10, 2018. The claim was therefore rightfully repudiated on June 13, 2019.

Commission's Pivotal Observations

The Commission meticulously reviewed the documentary evidence, including the policy conditions, correspondence, and SMS records. The judgment highlighted several key findings:

"The evidence proves that for the revival of a lapsed policy, the procedure is different from that of a new policy, and it requires a health declaration as well as a medical examination... The deceased policyholder did not appear before any authorized medical practitioner of the insurance company for a medical check-up to provide the related documents."

The Commission noted that the insurance company had diligently informed the policyholder about the pending requirements. The records of SMS messages sent between 2016 and 2018 clearly showed reminders for premium payment, notifications of the policy's lapsed status, and specific instructions to undergo a health check-up for revival.

The bench observed a suspicious element in the policyholder's failure to undergo the medical examination before his death on January 29, 2018:

"The evidence shows that the policyholder died on 29-01-2018, which raises a suspicion that the medical examination was not done because the policyholder was suffering from a serious illness and could not have obtained a positive medical certificate."

Final Judgment and Implications

Concluding that the complainant failed to prove any deficiency in service or unfair trade practice by the insurance company, the Commission dismissed the complaint. The final order stated:

"In our humble opinion, the complainant in this case has not been able to prove her claim that the opposing insurance company committed any kind of service deficiency or unfair trade practice in rejecting her claim for the ₹50,00,000 policy. Therefore, the complaint is found to be not maintainable and is liable to be dismissed."

The judgment serves as a critical reminder to policyholders that reviving a lapsed insurance policy is not an automatic right upon payment of arrears. It is a contractual process where the insured must comply with all conditions set forth by the insurer, which often include proving their current health status to re-establish insurability.