For any insurance policy, timely payment of premium is a must or else the policy will lapse. But there have been many cases where the policy holder or the nominee has failed to get the insured amount only because someone else who promised to pay the premium failed to do so. This someone could be a bank that has financed a vehicle (in the case of vehicle insurance) or even an employer in the case of Small Savings Schemes.

Unfortunately, in both types of cases, the Supreme Court has held that the affected consumer cannot get relief. In the case of vehicle insurance, for example, the Supreme Court has pointed out that the vehicle owner has the responsibility to ensure that the vehicle has a mandatory third party insurance. Since plying a vehicle in a public place without such an insurance is an offence under the Motor Vehicles Act, the consumer cannot point to the bank and say that it failed to pay the premium.

Similarly, in respect to Small Savings Schemes, where an employer pays every month the premium on behalf of the employee, the Supreme Court has held that consumer courts cannot take cognisance of such complaints as it involves a dispute between an employer and an employee, which is outside the purview of the consumer courts.

However, in the case of General Manger, Hotel Kanishka vs Smt Saroj Attal, the National Consumer Disputes Redressal Commission gave a ray of hope to widows denied the insured amount in such cases by holding the insurance company (in this case the Life Insurance Corporation or LIC) liable for failing to send a monthly statement showing the premium payable under each policy.

Again in a recent case, the commission has held the LIC guilty of not keeping the insured informed of the default on the payment of premium. At the same time, the Railways, as the employer was also liable, it has said. (The Divisional Personal Officer, South Central Railways vs Smt Thollabandi Nagalakshmi (RP No 3333 of 2010, decided on January 13).

One has to see how the Supreme Court will respond to the second part of the order, directing the employer (the Railways) too to pay. Whatever the outcome, this order should force insurance companies to take their responsibility in respect to collecting the premium and keeping the policies alive, more seriously. This applies to employers too.

Having said that, I would still advise all those who take insurance policies under the Salary Savings Scheme (or any other policy for that matter) to always make sure that the premium is paid without fail and without any delay.