‘Insurer only interested in premiums’: Punjab consumer body orders Rs 35 lakh relief to widow after claim denied wrongly

“In the given circumstances of the present case, the said judgment is fully applicable because it reveals from the act of the OP (the opposite party company) that they were only interested in earning the premiums and at the time of its liability, they had repudiated the claim on baseless grounds, having no justification. In the present case also, the OP was not having any justified reasoning to repudiate the claim of the Complainant,” the Punjab consumer commission said April 28.

“The reasoning of the insurer while repudiating the claim is not justified,” the consumer commission held, concluding that the complainant was entitled to the full insurance amount along with interest.

Death, claim, rejection

• Mangat Rai had purchased a life insurance policy, ‘BSLI Protect @ Ease Plan’ from the insurer on November 12, 2016, with a sum assured of Rs 35 lakh.
• He died just four months later, on March 13, 2017, due to drowning in the Bhakra Canal near Sirsa.
• Following his death, his widow filed claims under two policies.
• While the insurer settled an earlier policy issued in 2007, it rejected the claim under the 2016 policy through a letter dated July 6, 2017.
• The company alleged that the insured had failed to disclose existing insurance policies taken from other companies, which, according to it, amounted to suppression of material facts.
• Reeta Rani contested this, stating that her husband had not concealed any information and that the proposal form had been filled by the insurer’s agent without properly explaining its contents.

Remand, fresh consideration

The dispute first resulted in a partial victory for the complainant in July 2020, when the state consumer commission directed payment of the claim.

However, both parties challenged that order before the national consumer commission, which remanded the case in June 2025 for fresh adjudication, specifically on whether there had been deliberate concealment.

During the rehearing, both sides filed additional affidavits and evidence.

Was non-disclosure ‘material’?

• The insurer argued that insurance contracts are based on the principle of utmost good faith and that failure to disclose multiple policies influenced its decision to issue the policy.
• However, the Punjab consumer commission found that this argument did not hold up.
• It noted that the proposal form was computer-generated and did not clearly establish whether the answers had been provided by the insured himself or filled in by the company’s representative.
• It also observed that most entries were marked mechanically as “No” or “NA.”
• Importantly, the consumer commission pointed out that the insurer itself had issued an earlier policy to the deceased and had full knowledge of it, yet did not acknowledge this while alleging concealment.

Financial capacity, nature of death

• The Punjab consumer commission further held that the insured’s financial capacity was never in doubt.
• Records showed that he was running a small, makeshift shop and earning over Rs 3 lakh annually, and that he had consistently paid premiums on all policies.
• It also rejected any suggestion that multiple policies indicated foul play, noting that the death was accidental and undisputed.
• It can never be assumed that somebody had “purchased so many insurance policies to commit suicide after two to three years,” the Punjab consumer commission observed.

Reliance on Supreme Court ruling

In reaching its conclusion, the Punjab consumer commission relied on a recent Supreme Court judgment in Mahaveer Sharma vs Exide Life Insurance Company Limited (2025), which clarified that non-disclosure of other policies does not necessarily amount to suppression of material facts in life insurance cases, particularly where the death is accidental.

Applying this principle, the Punjab consumer commission held that the omission, even if assumed, did not materially affect the insurer’s decision to underwrite the policy.

Strong words for insurer

The Punjab consumer commission also made a broader observation on industry practices, noting that insurers often readily accept premiums but later look for reasons to deny claims.

It found that the company had “no justified reasoning” to reject the claim in this case.

Final directions

Allowing the complaint partly, the Punjab consumer commission directed the insurer to pay Rs 35 lakh under the policy, provide all applicable benefits, pay interest at 7 per cent per annum from November 28, 2018 (the date of filing the complaint) until realisation, and comply with the order within 45 days.

The order was reserved on March 3 and pronounced on April 28, bringing closure to a prolonged legal battle that travelled through multiple forums before finally being decided in favour of the consumer.

Why widow won Rs 2 crore payout, but apex consumer body rejected second life insurance claim

On April 6, the National Consumer Disputes Redressal Commission (NCDRC) partly allowed a complaint filed by a widow seeking Rs 4 crore under two life insurance policies, and directed the insurer to pay Rs 2 crore with interest while upholding the rejection of the second policy claim.

A bench comprising AVM J Rajendra (Retd) (presiding member) and Justice Anoop Kumar Mendiratta (member) was hearing a consumer complaint filed by the widow of the insured person against Aditya Birla Sunlife Insurance Company Limited.

The woman alleged deficiency in service and unfair trade practice after the insurer rejected a Rs 4 crore death claim, citing suppression of material facts, including alleged non-disclosure of disability and prior insurance policies.

“The failure of the DLA (deceased life assured) to give a complete disclosure in this regard cannot be ignored since the correct disclosure of having already obtained earlier policies would have enabled the insurer to take a considered decision based on the egregious risk,” the consumer commission said.