Bank Held Liable for Silence on Failed Debit After Insurance Cover Lapsed Before Death
Insurance cover may be at risk when a premium debit fails, but a bank’s failure to inform the customer can raise questions of liability.
Insurance cover can lapse when a premium debit fails, but silence from the bank may still have consequences.
Insurance Cover: The amount that stood between one family and an insurance payout was Rs 106.58.That was the gap between the Rs 330 premium a bank tried to collect from a young woman’s account for her government-backed life insurance and the Rs 223.42 sitting in it. The debit did not go through, the bank reversed the entry, and, according to the record before the consumer commission, nobody told her. She later died in a road accident. When her father approached the bank to claim the benefit, he was told the policy had lapsed.
The Amritsar District Consumer Commission has now ordered the bank to pay the family Rs 1.5 lakh in compensation, plus Rs 10,000 towards litigation costs, holding that the bank failed in its duty to inform its customer.
Insurance Cover: What the complainant said
The complaint was filed by the woman’s father. His daughter held an account with the bank and was enrolled in the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), the Centre’s renewable one-year life insurance scheme. Her annual premium was collected automatically from the account each year.
Also Read: Pashudhan Bima Portal Launched: Now Insure Your Cow, Buffalo, Goat Online
After her death, he approached the bank to claim the insurance and was told that the premium for 2021-22 had never been paid, so the cover had ended. He then obtained her bank statement. It showed that the bank had tried to debit the Rs 330 premium, but the account held only Rs 223.42, leaving a shortfall of Rs 106.58. The bank reversed the debit entry.
He said his daughter later deposited Rs 1,000 in the account, yet the bank neither renewed the policy nor informed her that the deduction had failed.
The bank accepted that the deduction failed because of insufficient funds. It argued that keeping enough balance was the account holder’s responsibility and that the insurance company had not received the premium.
Insurance Cover: Why the commission rejected the argument
A bench of President Jagdishwar Kumar Chopra and member Mandeep Kaur noted that the woman had opted for automatic premium deduction and relied on the bank to deduct and forward the amount on time. Once a bank takes on the auto-debit facility, the commission said, it cannot escape responsibility by pointing to a computer-generated system failure.
The bench observed that the bank knew the balance was insufficient when it attempted the debit, and knew the entry was later reversed. In those circumstances, it said, the bank had a duty to tell the account holder that the renewal had not gone through. Failing to do so, it concluded, showed a lack of reasonable care and amounted to deficiency in service.
The commission directed the bank to pay Rs 1.5 lakh as compensation and Rs 10,000 as litigation costs.
