Bank failed to alert customer about missed insurance premium, told to pay Rs 1.5 lakh

The complainant claimed that the bank failed to inform the account holder regarding the failed debit transaction or insufficiency of funds.(Image generated using AI)

The Amritsar District Consumer Commission has directed a bank to pay Rs 1.5 lakh as compensation to a man whose daughter died in a road accident after her insurance cover under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) lapsed due to a failed premium deduction.

President Jagdishwar Kumar Chopra and member Mandeep Kaur held that the bank was deficient in service for failing to inform the account holder that the annual insurance premium could not be deducted due to insufficient funds.

“This Commission finds that the opposite party bank failed to exercise reasonable care in ensuring that the account holder was informed about the failed premium deduction. Such omission amounts to deficiency in service…” the order read.

Why did the Commission award compensation?

According to the complaint, the complainant’s daughter was maintaining an account with the opposite party bank and she was enrolled in the central government-backed life insurance scheme. The annual premium was deducted automatically from her account.

The complainant approached the bank after his daughter’s death to claim the insurance. However, he was informed that the premium for 2021-22 had not been paid and the policy had consequently lapsed. On obtaining his daughter’s bank statement, the complainant found that the bank had attempted to deduct the annual premium of Rs 330. However, the account had only Rs 223.42, resulting in a shortfall of Rs 106.58. The bank thus reversed the debit entry. The complainant said that his daughter deposited Rs 1,000 into the account, but the bank neither renewed the policy nor informed her about the failed premium deduction.

The bank admitted that the premium deduction had failed due to insufficient funds. However, it argued that the account holder was responsible for maintaining a sufficient balance and that the insurance company had not received the premium.

The commission stressed that the complainant’s daughter had been enrolled in an automatic premium deduction scheme and relied upon the banking system for timely deduction and remittance of the premium. It noted that once the bank undertakes the responsibility of operating the auto-debit facility, it cannot completely absolve itself merely by stating that the computer-generated system failed to deduct the amount.

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“The bank was admittedly aware that the account had insufficient funds at the time of attempted debit. It was also aware that the debit entry had subsequently been reversed. In such circumstances, it was the duty of the bank to intimate the account holder about the failed renewal transaction,” the commission added further.

Holding the bank liable for deficiency in service, the commission directed it to pay Rs 1.5 lakh compensation along with Rs 10,000 as litigation cost.

Takeaway

Banks must inform account holders when an insurance premium auto-debit fails, especially when the failure could result in the loss of insurance cover.

Consumers facing similar grievances may contact the consumer helpline in their respective states (Punjab helpline: 1800–425–1082) or dial the National Consumer Helpline at 1915 for assistance.

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Ashish Shaji is a Senior Sub-Editor at The Indian Express (Digital), where he specialises in legal journalism. Combining a formal education in law with years of editorial experience, Ashish covers court developments and key cases for the audience. Expertise Ashish is a law graduate (BA LLB) from IME Law College, CCSU. His work at The Indian Express focuses on translating the often-dense proceedings of courts into clear, legal content. He also runs liveblogs from the Supreme Court and various High Courts. Industry Experience: With over 5 years in the field, Ashish has contributed to several niche legal and professional platforms, honing his ability to communicate complex information. His previous experience includes: Lawsikho: Gaining insights into legal education and practical law. Verdictum: Focusing on high-quality legal news and court updates. Enterslice: Working at the intersection of legal, financial, and advisory services. ... Read More