Bank of India Pulled Up For Auto-Debit Failure, Told To Pay Insurance Claim

In a rare consumer-friendly order, the district consumer forum in Ghaziabad has held the Bank of India responsible for failing to honour an insurance premium auto-debit mandate and directed it to release Rs 1 lakh to the nominee of a deceased policyholder, according to a recent Times of India report. The forum has also asked the bank to pay an additional Rs 5,000 towards litigation costs and compensation for the harassment caused.

Claim Rejected After Policyholder’s Death

The case goes back to 2018, when Sarvoday Nagar resident Jagdish Kumar lost his wife while she was undergoing treatment. She had enrolled in two government-backed insurance schemes through her savings account in the bank’s Ghaziabad branch—Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY). While both policies were linked to the account and the annual premiums, Rs 330 for PMJJBY and Rs 12 for Suraksha Bima would get deducted automatically every year.

After her death in June 2018, Kumar approached the bank to claim the assured sum of Rs 2 lakh under each scheme. However, he was told that the Jeevan Jyoti policy had lapsed because the bank had not debited the premiums in 2017 and 2018. The Suraksha Bima claim was also turned down because it covered only accidental death or disability, whereas his wife had died of illness.

Forum Holds Bank Responsible

Frustrated, Kumar moved the consumer forum in early 2019. The insurers—Star Union Dai-ichi Life Insurance and New India Insurance Company—were also named in the complaint. They defended their position by saying that no valid claim could be made once a policy had lapsed, and that the nominee had not even informed them of the death within the time limit mentioned in the rules.

The forum, however, took a different view. It was noted that the policyholder had done her part by giving standing instructions to the bank for premium deductions. If the bank chose not to carry out that mandate, the lapse could not be blamed on the customer. Interestingly, the records showed that while the bank had debited the small premium for the Suraksha scheme in 2016, 2017, and 2018, it had skipped the deduction for the Jeevan Jyoti policy. This inconsistency, the forum ruled, amounted to negligence.

“The consumer had every right to assume that her insurance coverage was active once an auto-debit mandate was in place. The bank’s failure to honour it directly deprived the nominee of rightful benefits,” the forum observed in its order. It then directed Bank of India to pay Rs 1 lakh under the Jeevan Jyoti scheme and an additional Rs 5,000 as compensation within 45 days.

The order is expected to act as a warning for banks, which often encourage customers to opt for auto-debit facilities but fail to bear responsibility when these systems break down. For policyholders, it is also a reminder to keep a close eye on their bank statements, as a small technical lapse can sometimes cost an entire insurance claim.