CENTRAL INFORMATION COMMISSION
.....
F.No.CIC/AT/A/2008/00668
Dated, the 05th December, 2008
Appellant : Shri Shyam Lal Yadav
Respondents : Life Insurance Corporation of India
This matter was heard on 04.12.2008 in response to Commission’s notice
dated 08.10.2008. Appellant was absent, whereas the respondents were
present through Shri A. Swargiary, Secretary (RTI), Central Office and
Shri A.K. Podder, Secretary (Acturial), Central Office.
2. This second-appeal relates to appellant’s RTI-application dated
18.10.2007, in which seven queries were made directed at the CPIO and
Executive Director (Customer Relationship Management). All responses were
given except for query at Sl.No.4, which the respondents declined to divulge on
the ground that it was voluminous information disclosing which would lead to
diversion of the respondents’ resources and hence would attract Section 7(9) of
the RTI Act.
3. This query reads as follows:-
“How much amount the LIC has earned from the lapsed policies since last
few years? Provide this information in attached format.Divisional Earning from Earning from Earning from Earning from Office lapsed lapsed lapsed lapsed policies policies policies policies 2000-01 2001-02 2002-03 2003-044. Respondents have stated the following in defence of their position for not
disclosing information related to this query:-“In this regard we would like to submit before the Hon’ble Commissioner
that we couid provide total number of lapse policies for the period 2000-
01,2001-02, 2002-03, 2003-04, 2004-05,2005-06 and 2006-07 to Shri
Shyamlal Yadav as the Divisions of LIC offices generate this information
at the time of submission of D- return to the Central Office. However total
premium receive against these lapsed policies, as requested by the
Appellant , has never been generated and so it is not available with us . It
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will require to develop new programme to create information as regards
total premium collected against the lapsed policies . As has already been
informed to Shri Shyam lal Yadav that total number of lapsed policies
w.e.f 2000-01 to 2006-07 is 5,91,96,235 .it will be huge task to create the
above information . In doing so, it would disproportionately divert the
resources of the public authority. Hence information under point no 4 was
denied under section 7(9) of RTI Act, 2005.
It is also observed that Shri Shyamlal Yadav thinks that LIC has earned
from the lapsed policies. In this regards we would like draw your
attension [sic] to the following facts
1. The word “Earning” as defined by Mr. Yadav is misleading and
confusing since any premium received has associated with it many
items of expenses; for example collection cost, commission, cost of
death/morbidity cover where applicable and so on.
2. A lapsed policy can be revived within a stipulated period (usually
within the five years from the first unpaid premium); hence it is not
possible to say whether a policy has finally lapsed or not before the
expiry of that revival period.
3. LIC incur extra cost for policies where premiums are not paid within
the grace period; LIC sends default notice and final lapse intimation
notice to such policyholders apart from giving list of such policies to
the procuring agents and Development Officers. LIC also floats
Special Revival Schemes from time to time. How to account for these
costs while arriving at “Earning” as requested for?
4. Worldwide no life insurance company keeps record of such “Earning”
as such a data, even if generated, will be of little use. Any such
collection and compilation of useless data will involve extra cost; and
any cost is always effectually borne by policyholders only.
5. For unit linked policies concept of lapsation is different from that of
conventional policies. In many cases of linked policies lapsation bid
value of the remaining units are returned to the policyholders (subject
to fulfilling certain regulatory requirements)
6. For one year renewable group term assurance if premium is not
renewed every year the policy lapses
7. LIC does not provide for any lapsation in its product pricing and
hence the question of “earning from lapsation is irrelevant.
8. While talking about conventional individual policies LIC has two
types of policyholders, namely, with-profits and without-profits
policyholders. LIC carries out yearly regulatory valuation and any
surplus disclosed in the valuation is distributed to its with-profits
policyholders in the ratio of 95:5 (5% is given to the shareholder
i.e.GOI) after paying income tax as applicable.
9. In many lapsed cases where only one installment of premium is paid
by the policyholders and subsequent premiums are not paid the
expenses including commission incurred by LIC exceed the amount of
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premium received. Policy-wise calculation of such loss is extremely
difficult and costly (and not really needed for practical purpose).
Overall lapsation of a policy results into loss of expected profit that
would have been generated had the policy been in force for the full
term.
10. During the lifetime of a life insurance policy it acquires two values
namely, intrinsic value and time value. At early duration of the policy
its intrinsic value is small positive or may even be negative but time
value will normally be positive. This is the reason why at early
duration surrender value is zero (intrinsic value is negative or small
positive) but the policy may have positive auction value (positive time
value).
11. Finally, in life insurance even if the policyholder dies after paying only
one premium, he has to be paid the full sum assured. E.g. if one
insures for ten lakhs, and the first installment of Rs. 10000/- (Hly
mode), only is paid, and he dies in an accident, LIC pays TWENTY
LAKHS to the claimant/nominee. This loss is distributed among
surviving and continuing policyholders. In a given year, there will be
atleast 10 to 15 % in the proportion of such claim . This is the purpose
of insurance and hence, IN the first five years an insurance company
incurs loss for death claims, lapses and Surrenders. Therefore, there
is huge loss due to lapsed policies to LIC.
In view of the facts whatever stated above we would request your honour
to consider our decision and obliged.”
5. Respondents have persuasively argued how the information requested by
the appellant was not maintained in the form it was asked for and how its volume
is such that collecting and collating it cannot be done without diversion of
substantial resources of the respondents.
6. In view of the submissions of the respondents, which are credible, it is
directed that there shall be no disclosure obligation for the requested information.
7. Appeal disposed of with these directions.
8. Copy of this decision be sent to the parties.
( A.N. TIWARI )
INFORMATION COMMISSIONER
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