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Unclaimed insurance money
- 1. Unclaimed Insurance Money Divya Adhikari Amity University, Mumbai
- 2. What unclaimed money in insurance is and what you can do to claim it?
- 3. Unclaimed amount is money that is due to policyholders or beneficiaries in the form of death claim, maturity claim, survival benefits, premiums refunds or indemnity claims- including accrued interest- but has not been claimed for more than 6 months since the settlement date. Insurers can invest this money in debt products like money market instruments, liquid mutual funds and fixed deposits; and the investment income needs to be paid to the policyholder or the beneficiary if she makes a claim in the future. Penalty, if any, can be adjusted against this investment income. The insurer can deduct a charge from this fund to manage it, but the costs are capped at 20 basis points. In order to make your job easier, insurers now allow you to spot your unclaimed money on their websites, where you need to look under the tab titled unclaimed amount of policyholders. To save the insurers the trouble of putting out details of very small claim, the rules allow companies to publish details only if the unclaimed amount is Rs1,000 or more.
- 4. Rs. 15,167 crore unclaimed money of policyholders lying with insurer According to Insurance Regulatory and Development Authority Of India (IRDAI) data, as much as Rs 15,167 crore amount of policyholders is lying unclaimed with 23 life insurance. Out of the total unclaimed amount of Rs 15,166.47 crore, as on March 31, 2018, insurance behemoth Life Insurance Corporation (LIC) is sitting on Rs 10,509 crore, while the 22 private sector insurers account for the remaining Rs 4,657.45 crore. Among the private insurers, ICICI Prudential Life Insurance Co has 807.4 crore of unclaimed insurance claims followed Reliance Nippon Life Insurance (Rs 696.12 crore), SBI Life Insurance Co (Rs 678.59 crore) and HDFC Standard Life Insurance Co (Rs 659.3 crore).
- 7. Why unclaimed insurance money is piling up?
- 8. The reasons why there is such a big number attached to the total unclaimed money are listed below: Unaware nominees Contact details not updated Dependencies on cheque for funds transfer
- 9. What happens to the premium money that is unclaimed?
- 10. As per the new rules, if no insurance claim is made for a period of 25 years after the transfer, you will have to forfeit the money and it will belong to the Government. According to Insurance Regulatory and Development Authority of India’s (IRDAI) circular (released on 25th July), unclaimed moneys of insurance companies will move to Senior Citizens Welfare Fund after lying unclaimed for 10 years from the date it was payable to the policyholder or the beneficiary. The government had created this fund through the Finance Acts, 2015 and 2016, to promote the welfare of senior citizens, in which notified institutions have to transfer unclaimed monies. These institutions include: postal savings scheme and Employees Provident Fund schemes. In an amendment in April this year, the government also added insurance companies to this list.
- 11. Once you have identified the money, you can approach the insurer directly or follow the steps listed on the website. To reduce unclaimed amounts, the regulator has made electronic payments mandatory with the exception of small premium ticket size of up to Rs10,000. Also, the rules make it clear that even after 10 years, insurers will need to display information about any unclaimed amount of Rs1,000 or more on their respective websites. However, policyholders and beneficiaries are eligible to claim the unpaid dues (unclaimed money) up to 25 years from the date of transfer of the same to the Senior Citizen’s Welfare Fund. NOTE: If no claim is made for a period of 25 years after the transfer, you will have to forfeit the money and it will belong to the government.
- 12. How is unclaimed money disclosed by insurance companies?
- 13. According to a reply in the Lok Sabha recently by Minister of state (Finance) Nirmala Sitharaman, Insurance Regulatory and Development Authority (IRDA) has directed all insurance companies to disclose unclaimed amounts as a separate line in their financial statements. The companies have also been asked not to appropriate/write back the unclaimed amounts under any. The Minister, in her reply to the Lok Sabha, also said that the authority (IRDA), has mandated the settlement of dues of policyholders through electronic mode and display of unclaimed amounts on their websites with an option for ‘Search/ Find’ for the convenience of the policyholders/ nominees/ assignees. A circular issued by IRDA said the increase in unclaimed amounts is largely because of dependents not being aware of existence of a life insurance policy. Among other reasons that the IRDA said is leading to growing unclaimed amount are delay in settlement of claim and change in address of the insured.