Insurance premium ‘not deducted’, SBI told to pay Rs 2 lakh after UP man dies in accident

A consumer commission in Uttar Pradesh’s Aligarh recently directed the State Bank of India to pay Rs 2 lakh to a woman whose son died in a road accident after the bank failed to renew his insurance cover despite sufficient funds in his account.

President Hasnain Qureshi and member Purnima Singh Rajpoot observed that the bank should have deducted a premium of Rs 100, but it failed to do so.

“The OP bank was under obligation to make payment of the premium Rs 100 to the insurance company from the bank account on 18.10.2015 or thereafter within a month. But the OP bank has failed to discharge its obligation which amounts to negligence…and thereby OP bank committed deficiency in service,” the October 9 order read.

Rs 2 lakh payout ordered

According to the complainant, her son had opened a bank account in 2014 and subscribed to an insurance policy providing a cover of Rs 2 lakh for a premium of Rs 100. The premium for the first year was deducted from his account.

Her son died in an accident on January 11, 2016. His mother, who was the nominee under the insurance policy, sought the insurance amount after his death. The complainant said the bank had failed to deduct the premium for the 2015-16 policy year despite sufficient funds being available in her son’s account. She sought the insurance amount of Rs 2 lakh, Rs 50,000 as compensation for harassment and Rs 10,000 towards litigation expenses.

The insurance company contested the complaint, stating that it had neither received the premium nor issued a policy covering the date of the accident. The bank, however, did not file its written response despite being served notice.

The commission examined the bank statement and found that the complainant’s son had deposited Rs 500 into his account on October 15, 2015, and that the balance remained above Rs 100 until November 22, 2015. It held that the bank was obligated to deduct the premium for the next policy year, which ran from October 18, 2015, to October 17, 2016, and remit it to the insurance company on the due date or within a month thereafter.

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“Complainant is entitled for insurance claim Rs 2,00,000 with compensation for harassment and cost of litigation. The question formulated is decided accordingly in favour of complainant,” the order read.

The commission held the complainant entitled to the insurance claim and directed the bank to pay the insurance claim amount of Rs 2 lakh. It also directed the bank to pay Rs 5,000 as compensation for harassment and Rs 5,000 towards litigation expenses.

Takeaway

Banks must ensure that insurance premiums are deducted and remitted on time when customers have sufficient funds in their accounts, failing which they may be held liable for deficiency in service if the policy lapses.

For consumer-related grievances, individuals may contact the consumer helpline in their respective states and union territories (Uttar Pradesh: 1800-180-030) or call the National Consumer Helpline at 1915 for assistance.

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