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Supreme Court Rules Against LIC’s Service Charge for Policy Transfer


The Supreme Court has ruled that the Life Insurance Corporation (LIC) cannot impose a service charge or fee for endorsing the assignment or transfer of a policy. This verdict came in response to a circular issued by LIC on April 24, 2006, which imposed a registration charge of Rs. 250 for each policy assignment. The circular was challenged in court, and the Bombay High Court had previously declared it invalid.

Background of the Case

The case revolved around the legality of LIC’s circular, which introduced a fee for policy assignment. Policy assignment refers to the transfer of a life insurance policy from the policyholder to another party. LIC’s circular had imposed a service charge of Rs. 250 for each assignment of a policy.

High Court’s Decision

Prior to the Supreme Court’s ruling, the Bombay High Court had already invalidated LIC’s circular. The High Court found that LIC did not have the authority to levy such charges and declared the circular null and void.

Supreme Court’s Confirmation

The Supreme Court’s decision affirms the Bombay High Court’s judgment, emphasizing that LIC lacks the entitlement to impose fees for endorsing policy assignments. This ruling upholds the principle that policyholders should not be burdened with additional charges for legitimate actions related to their insurance policies.

The Supreme Court’s verdict serves as a significant legal precedent, reinforcing consumer protection in the insurance sector by preventing insurers from imposing unwarranted fees on policyholders.


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