To tackle the steep increase in unclaimed money lying with insurers, the sector regulator has announced some key steps.
Come May, a policyholder or his/her nominee can check online any unclaimed money pending with an insurance company. Further, for all new policies, the insured must mention bank account details in the proposal form itself to ensure faster maturity/claim settlement.
The Insurance Regulatory and Development Authority (Irda) has said the rising amount of unclaimed money with insurers is a matter of concern. In fact, data with the regulator show between 2009-10 and 2012-13, there has been more than a three-fold rise in it.
Delays in settlement of claims, lack of awareness and failure to intimate a change in address on the part of dependents are some of the reasons that have pushed up the amount from Rs 1,373 crore in 2009-10 to Rs 4,866 crore in 2012-13.
In contrast, RBI data show that unclaimed money worth Rs 2,474 crore is lying in one crore bank savings accounts as on end-December 2012.
For smooth transfer of policyholders unclaimed money, Irda has now advised companies to take bank account details of the insured at the time of filling out the proposal form.
Insurers will also be required to collect proof of the bank account, such as a cancelled cheque, to ensure authenticity. The insured can change the bank account without any charge.
In case of a death claim, the insurer will take the bank account details of the nominee.
Insurers will remit claims, maturity payments and any other amount due to policyholders only through the electronic mode, such as NEFT, Real Time Gross Settlement, Interbank Mobile Payment service or any other e-mode approved by the RBI.
Insurance companies will have to display on their websites information about unclaimed amount beyond six months from the due date.
Irda, in a circular issued in 2010, had said that insurers cannot appropriate the unclaimed amount of policyholders and must disclose the amount separately as current liabilities in the balance sheet. Insurers now have to show age-wise analysis of the unclaimed amount.
Analysts attribute the spurt in unclaimed amount to several factors. First, claims settled by insurers may not have been paid to policyholders because of litigation. Second, the insurer might not have refunded, at the time of claim settlement or maturity payment, any excess premium collected from the policyholder. At times, even policyholders forget to encash cheques issued by the insurer, or these might misplaced in transit.
Irda has now said that the policyholder protection committee of the board of insurance companies will have to ensure timely payouts of dues. The audit committee of the board will look into the unclaimed amount and oversee compliance. Every six months, the insurer will have to file with Irda details of the action taken and status of the unclaimed amount. Policyholders, on their part, must notify the insurer about any change in address.
Analysts say policyholders should convert all their life insurance policies into dematerialised format, which will be held with an insurance repository. At present, the facility is not available for general and health insurance. The repositories will enable policyholders to make changes in nominee or address details and also act as a single point for all policy related servicing.
One of the major advantages of keeping insurance policies in the electronic form is safety, as there is no risk of loss or damage of the policy bond. As all policies can be electronically held under a single e-insurance account, the policyholder can access them from anywhere.
A single change-of-address request made to the insurance repository can update policies issued by multiple insurers, thus reducing paperwork.
Moreover, an e-insurance account holder will be spared the trouble of submitting know your customer (KYC) details each time a new policy is taken.
Every year, the repository will send a statement of account to the e-insurance account holder with details. Single view of all policies will be made available to an authorised person in case of death of the e-insurance account holder, which will help in faster claim settlement.
Insurance firms will send an insurance information sheet with basic details of the policy when a new electronic policy is issued. Repositories will enable a platform where policyholders can get the facility of online premium payment and claim settlement.
The e-insurance account holder will have an option to shift from one repository to another.
Irda has also made it clear that repositories will not sell or solicit policies and they will be authorised only to maintain policies in electronic form and provide service record. Each e-insurance account will have a unique account number and each account holder will be granted a login ID and password to access his policies online.