Insurance claim is an emotional process and if it gets entangled in the web of rules and regulations, it can be really painful to the rightful claimant.
Unclaimed amount of policyholders of 23 life insurers as on March 31, 2018 Rs15,166.47 crore. Life insurance as on March 31, 2017 was Rs10,471.51crore and Rs897.46 crore for general insurance according to Insurance and Regulatory Development Authority of India (IRDAI).
Some do not have the time to follow up with the insurance firm, others are not aware that they are a beneficiary and many fail to produce the required documents, as a result, lumpsum amounts of policyholders’ often remain unclaimed.
Ignorance about insurance procedures can be counterproductive. Instead of offering financial protection to the survivors, it can be a reason for frustration.
An unclaimed amount is the money which insurers owe to a policyholder or the nominee. It includes payments like maturity claims, premium refunds, survival or surrender benefits that has not been claimed for more than six months since their settlement date. Nomination in life insurance helps the insurers to settle the claim quickly.
Imphal-based businessman Dinesh Kangjam (45) understands the importance of nomination and also keeping the family aware of the insurance policies he has taken. “I always share the policy details with my family. I believe that they should know about insurance as this will give them financial security in future”, says Kangjam.
Many have faced the bitter experience of their claims being rejected. Some simply did not know how to claim their due amount, as a result they did not receive the benefit. To them, insurance is meaningless and just another nightmare eating up all their hard-earned money.
“There are several reasons that lead to unclaimed insurance amount. Policyholders many a times change address and forget to update the details with the insurer. At times, they misplace documents or do not raise claim against their cover due to lack of knowledge, which also leads to the policy remaining unclaimed”, says Anil Kumar Singh, Chief Actuarial Officer, Aditya Birla Sun Life Insurance.
Individuals buy life insurance policies to provide financial security to their family and as a risk management tool. However, due to lack of awareness and lackadaisical approach many policyholders do not share the details of the insurance policy with their family and nominee. In case of death, claims are not processed, until the legal nominee or legal heirs initiate the claim.
Another reason for beneficiary not initiating claims is unavailability of documents. In such a case, the beneficiary would not file the claim despite the death of the policyholder, leading to unclaimed amounts.
Subrat Mohanty, COO of HDFC Life, points out that unlike general insurance, life insurance is a long-term contract and it is quite likely the address and contact details of the customers change over the years. Unfortunately, policyholders do not update their details with insurers on a regular basis and it takes a huge effort to track them. This often result in accumulation of unclaimed amount.
The problem exists even in general insurance. “Cheques are deposited in court for motor third liability cases based on court award to satisfy the judgment of the court. The claimants need to appear before the court for a hearing. If the court is satisfied, it releases the payment to the claimants. The cheques are not released if the claimants delay appearing in court,” says Rakesh Jain ED and CEO of Reliance General Insurance.
To minimize the unclaimed insurance amount, Singh explains, it is important to update accurate details of the customer like name, address, nominee details, Aadhaar and Permanent Account Number (PAN) and bank account details in the know your customer (KYC) form.
Rejection of claims means going through dilemmas without getting benefit from an insurance policy. Thus proper nomination has to be filed to avoid rejection and helps ease to process the claim.
Claims get rejected only when the terms and conditions of the policy are not met like material non-disclosure or mis-statement of facts in the proposal form, misrepresentation of age and submission of invalid documents. Falsification of facts about income and job could also result in rejection of claims.
For example, many people purchasing a second hand vehicle do not register it or opt for insurance.
“It is necessary to get both changed. The insurance policy condition specifies that the transfer in insurance should be put to effect within a period of 14 days from purchase of, vehicle. Claims may get denied if the documents are not valid as on the date of loss”, says Jain.
It is imperative that policy holders disclose the facts at the time of proposal to settle the claims quickly.
“As a life insurance company, our primary focus lies in settling all due claims of our customers at the time of their need. If all the documents are in order, the claims are processed within three days”, says Kayzad Hiramanek Executive Vice President, Operations, Bajaj Allianz Life.
However, there is a ray of hope for easy insurance claims, with introduction of technology in the sector. Now, many of the insurers offer the options of online claim processing system where claimaints have to fill the mandatory details or just call the toll free number.
“Claim settlement is now a hassle-free procedure. We generally pay the claim proceeds via electronic fund transfer. Payout is made to the nominee on obtaining the necessary KYC and a bank detail from the nominee”, says Hiramanek.
Yet many are not conversant with technology and depend on traditional methods of operating premium payments and insurance claims. Further, rejection of claims implies going through problems without receiving benefits of the insurance policy. Thus, proper nomination has to be filed to avoid rejection and easy settlement of claim.
The IRDAI as well as the companies have taken cognizance of the issues and are working towards resolving this. The regulator has asked insurers to make several disclosures such as the amount which remains unclaimed for more than six months from the date of settlement, nature of the unclaimed amount, details of action taken for payment by the insurer and the status of the unclaimed amount.
According to a 2017 circular issued by IRDAI, any such amount lying unclaimed for over 10 years will be moved to Senior Citizens’ Welfare Fund (SCWF). The fund which has been created by the government will be used for welfare of senior citizens.
The beneficiary, however, would still be eligible to claim the unpaid amount up to 25 years since the transfer to SCWF. One would lose the money if no claim is made during 25 years and the money would then belong to the government. To make the process of identifying unclaimed amounts easier for the policyholders or the nominees, IRDAI has instructed the insurers to provide the information easily on their websites.
All you need to do is to visit the insurers’ website and locate the page which provides the information about the unclaimed amounts. The policyholder or the nominee would be required to provide certain details including the name and date of birth of the policyholder—which is mandatory. Other details like policy number, PAN and Aadhaar number could also be required. Insurers update the unclaimed amounts’ data on their websites on half-yearly basis. They are also required to provide information about any unclaimed amount above `1,000 on their respective websites. Enquiry regarding unclaimed amount can also be made through a call or an email to the customer care of the insurer. A policyholder or the nominee can extract the details from the branch of an insurer after proper validation.
After identifying the unclaimed amount on the website of the insurer, the claimaint can receive the payment by directly approaching the company or by following the instructions provided on the website.
If you are planning to buy a new life insurance or already have one, make sure to share the details with your family or nominee. Any further changes pertaining to address or a change in nomienee must be updated with the insurer as it will come handy when you need to claim your insurance amount. Its your right. Claim your insurance!
nirmala@outlookindia.com