SBI Ordered to Pay Rs 2.10 Lakh to Accident Victim’s Mother for Failing to Renew Insurance Despite Sufficient Account Balance

The District Consumer Disputes Redressal Commission in Aligarh, Uttar Pradesh, has directed the State Bank of India (SBI) to pay Rs 2.10 lakh to the mother of a man who died in a road accident. The commission found that the bank failed to deduct and transfer the renewal premium for his accident insurance policy despite sufficient funds being available in his bank account.

In its order dated October 9, the commission, comprising President Hasnain Qureshi and member Purnima Singh Rajpoot, held SBI responsible for deficiency in service. The bank has been directed to pay Rs 2 lakh towards the insurance claim, Rs 5,000 as compensation for harassment and Rs 5,000 towards litigation expenses.

The case relates to an SBI account holder who opened his bank account in 2014 and enrolled in an accident insurance scheme that provided coverage of Rs 2 lakh against an annual premium of Rs 100. The bank deducted the premium for the first year but failed to collect the renewal premium for the next policy period, which was scheduled to run from October 18, 2015, to October 17, 2016.

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The account holder died in a road accident on January 11, 2016. His mother, who was the nominated beneficiary under the insurance scheme, subsequently approached the insurance company to claim the insured amount of Rs 2 lakh. However, the insurer denied the claim, stating that it had not received the renewal premium and had not issued a policy covering the date of the accident.

Following the rejection of the claim, the mother approached the consumer commission and sought Rs 2 lakh as insurance compensation, Rs 50,000 for harassment and Rs 10,000 towards litigation expenses. Despite receiving notice of the proceedings, SBI did not file a written response before the commission.

During the proceedings, the commission examined the account records of the deceased. It found that he had deposited Rs 500 into his account on October 15, 2015, and that the account balance remained above Rs 100 until November 22, 2015. The records indicated that sufficient money was available for the bank to deduct the annual insurance premium of Rs 100 and transfer it to the insurer.

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The commission observed that SBI was required to deduct and remit the renewal premium on October 18, 2015, or within the following month. Since the required amount was available in the account, the bank had sufficient opportunity to complete the renewal process but failed to do so.

The commission held that the bank could not avoid responsibility for its failure to renew the insurance coverage when adequate funds were available in the customer’s account. It concluded that the bank’s negligence had resulted in the policy not being renewed and amounted to deficiency in service.

Holding the complainant entitled to compensation, the commission directed SBI to pay Rs 2 lakh towards the insurance claim, along with Rs 5,000 for harassment and Rs 5,000 for litigation expenses. The total amount payable by the bank is Rs 2.10 lakh.

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The ruling highlights the responsibility of banks to properly process insurance premium deductions and transfers when customers have enrolled in such schemes and sufficient funds are available in their accounts. In this case, the commission held SBI accountable for the failure to process the renewal premium, which resulted in the denial of the insurance claim following the account holder’s death.

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