Policy Lapsed After Payment Reversal: Kerala Woman Wins Rs 3.50 Lakh From Insurer

A Kerala woman whose insurance policy was declared lapsed following a series of payment reversals has secured relief from a consumer commission. The Una District Consumer Disputes Redressal Commission directed the insurer to pay her Rs 3 lakh, along with Rs 50,000 towards compensation and litigation expenses.

The commission observed that the woman had attempted to pay the premiums, but the amounts were returned to her bank account. The insurer could neither explain the reversals nor establish that she had violated the policy conditions.

Premium Payments Returned To Bank Account

The woman had purchased the policy in 2017 after paying around Rs 2.99 lakh. The policy was issued on October 26 that year.

In March 2019, she reportedly handed over a premium cheque to an employee of the insurance company. She was subsequently told that the cheque had been lost and was asked to issue another one in April.

The second cheque, for approximately Rs 2.93 lakh, was deposited and the amount was debited from her bank account on May 2, 2019.

However, it was credited back to the account six days later. When she contacted the insurer’s officials, she allegedly did not receive a satisfactory explanation, according to a recent report by Indian Express.

She was later asked to deposit about Rs 5.87 lakh towards premiums for the following two years. Although the payment was made, the money remained with the insurer for more than three months before being returned in October 2020. The Kerala woman was then informed that her policy had lapsed.

She approached the consumer commission, alleging deficiency in service. She also claimed that the policy had been sold to her on promises of substantial benefits, without complete information being provided.

Insurer Cites Free-Look Period

The insurance company denied the allegations. It maintained that the application form and policy documents had been supplied to the woman. It also argued that she could have cancelled the policy within the 15-day free-look period but had not exercised that option.

The commission, however, noted that the insurer had not explained why the premium payments were returned. It also found that no letter had been issued showing how the policyholder had failed to comply with the policy terms.

Commission Finds No Fault With Policyholder

The commission held that the Kerala woman could not be blamed when the instalment was supposed to be deducted automatically. Even payments made through cheque had initially been accepted and subsequently reversed without an adequate explanation.

The insurer was ordered to refund Rs 3 lakh within 30 days. It was also directed to pay Rs 30,000 for the mental strain and harassment caused to the woman, besides Rs 20,000 as litigation costs.

The ruling underlines the importance of retaining bank statements, premium receipts, and correspondence with an insurer. If a premium is reversed, policyholders should immediately seek written confirmation about the policy’s status instead of relying solely on verbal assurances.

FAQs

1. Can an insurer declare a policy lapsed after reversing premium payments?
An insurer must provide a valid explanation for reversing payments and establish that the policyholder failed to comply with the policy terms.

2. What should policyholders do if a premium is returned to their bank account?
They should contact the insurer immediately, seek written confirmation of the policy status, and retain bank statements, receipts, and correspondence.

3. What relief did the consumer commission grant in this case?
The commission ordered a refund of Rs 3 lakh, along with Rs 30,000 for mental harassment and Rs 20,000 towards litigation costs.