The Insurance Regulatory & Development Authority of India (Irdai) has revised the master circular regarding unclaimed policyholder funds, prompted by an increase in unclaimed amounts that have raised regulatory concerns among insurers, according to an Irdai circular issued on February 16.
Insurers are also encouraged to step up their efforts in locating rightful recipients of overdue payments and ensuring fast fund distribution. As per the Irdai circular, discussions with insurers have revealed that one of the factors contributing to the increase in unclaimed amounts in situations where consumers can be traced but insurers are unable to disburse claims due to various reasons, including:
Litigation under an insurance policy.
Competing claims or unresolved title issues.
Government agencies freezing or blocking insurance policies.
Benefits become payable during the policy term, either through reduced or fully paid-up policies on the due date, but remain unclaimed due to a six-month payment window.
Consumers not claiming annuity options and maturity proceeds from pension and insurance products.
Consumers residing outside the country, lead to delays in settling proceeds.
Here are the suggested modifications by the IRDAI from the Master Circular no. IRDA/F&A/CIR/Misc/202/11/2020 dated 17th November 2020:
Here are the suggested modifications by the IRDAI from the Master Circular no. IRDA/F&A/CIR/Misc/202/11/2020 dated 17th November 2020:
Clause 2(1)(c) of the Master Circular is updated as follows:
"Due date" now refers to the date on which any amount or claim is scheduled for payment by the terms and conditions of the insurance policy and/or the current regulatory framework.
Clause 2(1)(f) of the master circular is amended as follows:
"Unclaimed Amounts" now encompasses any funds held by an insurer, intended for consumers, including accrued income, when consumers cannot be reached through any means and remain unpaid for more than twelve months beyond the due date of such funds. However, irrespective of the contact ability status, pending amounts due to the following reasons shall be categorized separately under the sub-heading "Litigation and others" within unclaimed amounts until payments are resolved:
Arising from litigation under an insurance policy.
Stemming from conflicting claims or unresolved title issues.
Resulting from the freezing or blocking of insurance policies by any government agency.
Moreover, the amounts payable under annuity policies and all in-force insurance policies, including reduced paid-up and fully paid-up policies on the due date, in respect of claims initiated by consumers, shall not be considered unclaimed amounts.
The term "Consumer" in this circular now refers to the proposer, policyholder, life assured, nominee, beneficiary, or any other person with a financial interest in the policy as per the terms and conditions of the insurance policy.
It is recommended to remind current policyholders to update their contact information, bank account details, nominee data, etc., at the time of paying the renewal premium, either online or offline.
Corresponding agents, middlemen, group master policyholders, and other distribution channels should be held responsible for customer tracking requests and updating contact information, bank account details, etc.
Ongoing KYC for current rules and re-KYC of minors upon reaching adulthood should be completed immediately.
Mobile numbers and email addresses of existing and new consumers should be automatically validated to ensure they do not belong to distribution channels.
Fool-proof systems should be implemented to automatically validate mobile numbers and email addresses of existing and new consumers to prevent them from being distribution channels.
Engaging with credit bureaus, account aggregators, CSC/POS, and e-commerce portals for tracing consumers is recommended.
Advertising in print and digital media to reach out to consumers who are not traceable is suggested.
All communications should include a footnote advising consumers to update contact details, nominee details, and bank account details in case of any change.
Providing an option to update contacts, including email IDs, bank details, and nominee details, at the website/portal/app is recommended.
Advance notifications regarding maturity claims and survival benefits should be sent at least six months in advance through all possible modes.
Customers who have not responded should be sent follow-up notifications every two months, advising them to provide KYC/Bank details.
Developing an online tool for processing and payment of unclaimed amounts once consumers identify the amounts due to them on the insurers' websites is suggested.
Implementing appropriate systems and controls to address fraudulent claims and practices is recommended.
