Chandigarh: In a ruling for insurance policyholders, the Chandigarh district consumer disputes redressal commission has held that a consumer cannot be penalized for an insurer’s own administrative lapse, directing an insurance company to pay the surrender value of a policy along with interest and compensation to the policyholder.The commission’s observation came while deciding a complaint filed by Sanjay Mehta, a Panchkula resident currently based in Canada.The case stemmed from a policy purchased in March 2011. According to the policy document, Mehta was required to pay a monthly premium of Rs 2,042, which he continued to pay regularly for more than 11 years.The dispute arose in 2022 when Mehta approached the company to surrender the policy and claim the benefits accrued till then. Instead of processing the surrender value, they informed him that there had allegedly been a technical error in its system since the inception of the policy. The insurer claimed that due to a health-related loading, the actual premium should have been Rs 2,670 per month and demanded Rs 83,541 as arrears before settling the policy.Mehta challenged the demand, arguing that he had paid exactly what company specifications were in the policy bond and that the insurer could not retrospectively alter the terms after accepting premiums without objection for over a decade.Agreeing with the complainant, the commission noted that the company had itself issued the policy mentioning the premium as Rs 2,042 and had continued to accept that amount for 11 years. It observed that the insurer failed to rectify the alleged mistake during this period and produced no convincing documentary evidence to justify the sudden demand.In its order, the commission remarked that the company now cannot “wake up one fine day from its slumber” and seek recovery of arrears arising from its own internal lapse. It held that the consumers could not be burdened with the consequences of errors committed by an insurer’s administrative or technical systems.The commission concluded that the insurer’s action amounted to deficiency in service and an unfair trade practice. It directed them to pay the surrender value of the policy along with 6% annual interest until payment. The insurer was also ordered to refund any premiums paid after that date, again with 6% interest along with a Rs 20,000 compensation.The ruling is likely to be closely watched by insurance consumers, as it reinforces a key principle of consumer law: policyholders who have complied with the terms communicated to them cannot later be penalised for mistakes made by the insurer itself.
