Holding IndiaFirst Life Insurance Company Ltd deficient in service for cancelling her late husband’s housing loan insurance cover without notice, the national consumer disputes redressal commission (NCDRC) has directed the insurer to pay Rs17.37 lakh along with 7% annual interest to Suman Soni, widow of late Dilip Kumar Soni. NCDRC observed that the insurer’s conduct—retaining the premium for ten months before refunding it without any intimation to the insured or Andhra Bank—amounted to a clear deficiency in service.
In an order last month, the NCDRC bench of air vice-marshal (AVM) J Rajendra (retd) and justice Anoop Kumar Mendiratta says, "The deficiency in service on the part of IndiaFirst Life Insurance, after having received the complete premium in advance is manifest. Considering the circumstances stated above, it is very reasonable for late Mr Soni to believe that he has been provided with the insurance cover with respect to the loan account in question. There is nothing on record to indicate that he was aware of IndiaFirst Life Insurance refunding the insurance premium into his loan account. Therefore, the contention of IndiaFirst Life Insurance that the policy never came into force is untenable."
"It is undisputed that the complete premium for both the policies was paid on the same day i.e. 5 October 2013. Mr Soni was eligible for the policy and did not suffer any disqualification whatsoever. Therefore, the insurance contract stood complete as on the date when IndiaFirst Life Insurance received the documents, membership form and complete premium as full consideration. In the absence of any communication to the contrary within reasonable time, the issue of policy was an administrative procedure. IndiaFirst Life Insurance’s failure to notify Andhra Bank the transaction and reason thereto, while refunding the premium after ten months makes the deficiency in service further manifest," the bench says.
The case originated in October 2013, when the late Mr Soni, an assistant engineer with the Chhattisgarh State Electricity Board, jointly availed a housing loan of Rs21 lakh with his wife, Suman Soni, from Andhra Bank, now merged with Union Bank of India. The Bank facilitated a group credit life insurance policy through IndiaFirst Life Insurance under a master policy for a 20-year tenure from 5 October 2013 to 5 October 2033. A total premium of Rs2.41 lakh was paid upfront—Rs1.56 lakh for Mr Soni’s life cover and Rs73,947.30 for his wife’s cover.
On 27 January 2017, Mr Soni died and his wife lodged a claim expecting the outstanding home loan to be settled under the insurance cover. To her shock, IndiaFirst Life Insurance informed her that the policy in her husband’s name had been cancelled in 2014 and a new one had been issued only in her name. The insurer refused the claim and refunded Rs1.21 lakh to the joint loan account, stating that no valid policy existed for the deceased.
Ms Soni filed a complaint before the Chhattisgarh state commission in 2017, alleging that the insurer and the bank had arbitrarily cancelled her husband’s cover despite having collected the full premium. She sought repayment of the entire housing loan amount of Rs21 lakh with interest, Rs1 lakh as compensation for financial and mental distress, and Rs25,000 towards litigation costs.
IndiaFirst Life Insurance denied liability, arguing that the proposal form submitted by Mr Soni was incomplete because he had not signed the first page of the membership form and had left a question in the declaration of good health unanswered. The insurer claimed that the insurance cover could not take effect without proper documentation and that the premium had been refunded in August 2014, long before the insured’s death.
Andhra Bank, for its part, maintained that it had only sanctioned the loan and facilitated the insurance, without knowledge of the insurer’s internal cancellation, and had merely credited the refund received from IndiaFirst Life Insurance to the couple’s loan account.
In March 2018, the state commission ruled partly in favour of Ms Soni and directed IndiaFirst Life Insurance to pay Rs18.50 lakh to Andhra Bank towards the due loan balance, Rs9,617.50 to Ms Soni, Rs50,000 as compensation for mental agony, and Rs10,000 as litigation costs. The state commission held that the insurer had accepted the premium and membership form without notifying any deficiency or cancellation, thereby creating a binding insurance contract.
IndiaFirst Life Insurance appealed against the ruling before NCDRC, contending that the state commission had erred in concluding that the contract was formed merely upon payment of premium. The insurer maintained that no valid policy had been issued due to incomplete documentation, and that the refund of Rs1.21 lakh in August 2014 proved that no coverage existed. It further argued that the complaint was barred by limitation as the cause of action had arisen in 2014.
Counsel for Ms Soni countered that the insurer never informed her husband or her about any deficiency or cancellation and had retained the premium for ten months before refunding it. This conduct, he says, amounted to implied acceptance of the proposal. Counsel for Andhra Bank, now Union Bank of India, reiterated that the Bank had been exonerated of any liability by the state commission and had no role in the insurer’s failure to communicate.
After examining the records, the NCDRC bench held that IndiaFirst Life Insurance’s conduct was arbitrary and negligent. The commission found that Mr Soni had completed all formalities and paid the full premium, and that the insurer’s only objection was that he had not signed the first page of the membership form, even though no indication was provided for such a signature.
It noted that IndiaFirst Life Insurance never issued any communication asking Mr Soni to complete this formality nor informed him that the absence of a signature could result in cancellation. “It is extremely difficult to believe that the insurer did not even contact Mr Soni to obtain his signature if that was considered so necessary,” the commission observed.
The bench also found that the insurer had refunded the premium to the couple’s loan account after ten months without informing either the borrower or the Bank. “Had the insurer informed the bank or the insured, corrective steps could have been taken,” the order stated.
NCDRC held that the insurer’s silence for 10 months created a reasonable belief that the policy was in force and that its later attempt to deny coverage was unjustified. It further observed that once the premium and documents were received, the contract of insurance stood complete, and any administrative delay in issuing the policy could not absolve the insurer of liability.
The commission directed IndiaFirst Life Insurance to pay Rs17,37,887.80 (after deducting the refunded premium) to Ms Soni, along with simple interest at 7% per annum from the date of claim rejection until payment, and Rs50,000 as litigation costs. The earlier award of Rs50,000 towards compensation for mental agony was set aside. The company was ordered to comply within two months, failing which the payable amount would attract interest at 10% per annum for the delayed period.
NCDRC’s ruling reinforces that insurers cannot arbitrarily cancel or reject policies after accepting premiums. It emphasised that insurers must communicate deficiencies or cancellations promptly and transparently to both the insured and the lending institution. The case of Suman Soni vs IndiaFirst Life Insurance Co Ltd and Andhra Bank highlights that retaining a premium without proper communication amounts to acceptance of a contract, making insurers liable for claims even if a formal policy document was not issued. The decision serves as a reminder that silence or administrative negligence cannot be used by insurers to escape their obligations under consumer protection law.
(First Appeal No801 of 2018 Date: 25 September 2025)
