Unpaid insurance money is an increasing headache in India with several billion rupees sitting as unclaimed and unutilized in the insurance companies. This situation arises when the insured or their beneficiaries fail to exercise a claim for the benefits due to ignorance, unavailability of documents, or inability to keep the insurance company updated with changes in contact details.
This article will elucidate the reasoning behind unclaimed insurance money, how one can avoid losing it, and the way to go about claiming it.
IRDAI Guidelines and Transfer to Senior Citizens Welfare Fund
According to “The Sunday Guardian”, an unclaimed insurance figure of INR 25,000 crores was resting with multiple insurance companies across the nation as per the report of the Insurance Regulatory and Development Authority (IRDAI) in 2022.
The IRDAI specifies a set of regulations that must be followed by insurers regarding claims on unclaimed policy funds. Gradually, there has been an increase in unclaimed money, with the IRDAI issuing various directives in recent times aimed at enhancing further regulatory scrutiny. All these directives were clubbed together and released in a master circular dated 17 November 2020.
As per the said directives, the unclaimed policy amounts which have been held by the insurers for over ten years as of the end of 30th September of each year should be transferred to the Senior Citizens Welfare Fund (SCWF). The SCWF is created by the Government of India under the provisions of the Finance Acts of 2015 and 2016. Post-transfer of funds to the Senior Citizens’ Welfare Fund, policyholders and beneficiaries will have a period of 25 years to claim all unpaid dues.
The Scale of the Problem
Every year, the amount of unclaimed insurance money in India has been rising. Of the total unclaimed money in the country by 2022, the Insurance Regulatory and Development Authority of India (IRDAI) reported INR 25,000 crore.
The table below shows the amounts of unclaimed policies against the major insurance companies in India according to their disclosures for Q1 2023-24.
Unclaimed Policy Amounts for Major Life Insurance Companies (Q1 2023-24)
Life Insurance Companies
Policyholder’s Unclaimed Amount
- Life Insurance Corporation of India (LIC) 15,75,334 Lakhs
- ICICI Prudential Life Insurance 91,580 Lakhs
- Reliance Nippon Life Insurance 29,940 Lakhs
- SBI Life Insurance 25,573 Lakhs
- Max Life Insurance 10,574 Lakhs
General Insurance Companies
Policyholder’s Unclaimed Amount
- ICICI Lombard 50,684 Lakhs
- United India Insurance 21,715 Lakhs
- New India Assurance 17,592 Lakhs
- National Insurance 16,664 Lakhs
- Oriental Insurance 10,636 Lakhs
Reasons for Unclaimed Insurance Claims
The following are the reasons for the surge of Unclaimed Insurance Claims:
- Economic downturns or natural disasters affecting policyholders’ capacity to claim benefits
- The absence of an industry-wide database of unclaimed amounts
- Passing away of policyholders without their deaths being recorded within the company’s databases
- Policyholders and beneficiaries lacking awareness of the policy’s terms and conditions
- Incomplete documentation /lengthy claim process
- Updated beneficiary’s contact and bank account details without notifying the company
Evolution of Regulations on Unclaimed Amounts in the Financial Sector
1977 – 1989: The Reserve Bank of India (RBI) issued guidelines requiring banks to segregate inactive deposit accounts that had been dormant for over two years. Banks were instructed to track these accounts and monitor their customers or legal heirs if the accounts remained unclaimed. This initiative marked the beginning of efforts to address unclaimed amounts.
2008: Banks were required to take proactive measures by crediting interest to inactive savings accounts to prevent them from becoming dormant.
2012: Banks were mandated to advertise deposits that had remained unclaimed for ten years and to develop clear policies for classifying such accounts. This move aimed to enhance transparency and improve tracking.
2014: Under Section 26A of the Banking Regulation Act, the Depositor Education and Awareness Fund was established, which requires unclaimed deposits over ten years old to be transferred to this fund.
2015: The establishment of the Senior Citizens’ Welfare Fund was introduced. Any unclaimed balances from accounts or deposits that had been inactive for seven years would be directed toward this welfare fund.
2017: The Insurance Regulatory and Development Authority of India (IRDAI) mandated that insurers transfer unclaimed amounts from policies overdue by more than ten years to the Senior Citizens’ Welfare Fund, aligning with banking regulations.
2020: The IRDAI amended regulations concerning the investigation and reporting of unclaimed amounts in the insurance sector to ensure stronger oversight and compliance.
This timeline highlights the evolution of regulations aimed at managing unclaimed amounts in the financial sector. The amendments have progressively shifted the focus from reactive complaint handling to the establishment of priority systems, emphasizing preventive measures, enhancing transparency, and ultimately utilizing unclaimed amounts for public welfare.
Also Read: How to Claim Unclaimed Dividends from Listed Companies?
How to Avoid Losing Your Money to Unclaimed Insurance Claims?
It is important to make sure that you don’t let your hard-earned money go to waste due to Unclaimed Insurance Claims. One should stay proactive and follow the given steps to avoid losing money to Unclaimed Insurance Claims:
Keep Your Contact Details Updated
Keep your contact details, including phone numbers, email addresses, and your residential address, up-to-date with your insurance provider. This will help in reaching you if the insurance company wants to reach out to you and avoid situations of your policy becoming inactive due to missed communications.
Inform Beneficiaries of Your Policies
Inform your beneficiaries regarding your insurance policies and provide each of them with necessary details, such as the policy number and terms and conditions, so it can be easy to claim the said benefit after your death.
Regularly Review Your Policy Terms
Review and understand the terms and conditions of your insurance policies. Know the critical details about the duration of your policy, the claim process, and special instructions needed to keep the policy going (e.g., premium payments or updates on documents).
Make Your Premium Payments in Time
Missed premium payment can buy an inactive policy. Always make timely premium payments and discuss with your insurance provider if you are encountering financial constraints about making some other payment arrangements.
Timeline for Follow-Up on Unclaimed Insurance
Check back regularly with the insurance company’s website or call them to check for any unclaimed amounts based on your name or the names of your family members. Sometimes, unclaimed policies are even published through insurers after being inactive for a certain period of time.
Be Aware of IRDAI Guidelines
Multiple steps can be followed to minimize the risks of money being lost in unclaimed insurance policies and to allow for easy benefit access to yourself or your beneficiaries. Be on the lookout for IRDAI guidelines. Before ten years elapse, unclaimed policy amounts go into the Senior Citizens Welfare Fund. Do make sure that you or your beneficiaries lay claim to them before that time elapses because one may still demand such amounts, which are now being diverted to that fund, within 25 years from the date of their diversion.
Don’t Delay in Making the Claim
Insurance claims should not be delayed. If you or someone else is entitled to the money, you should file the claim posthaste with all necessary papers and information. A delay may cause many problems in situations of insufficient paperwork or difficulty locating relevant information.
Proper Documentation
Store your policy documents safely and in good order. Build a structure whereby you or your beneficiaries may easily access the documents in the event of a claim. Insurance claims are generally unclaimed because the documents are incomplete or are missing altogether.
Stay Informed About Any Regulatory Changes
Be aware of changes in laws and regulations affecting the insurance industry, particularly concerning unclaimed amounts. The insurance regulator IRDAI has, over the years, issued several guidelines directed toward the smoothening of the path to reclaiming unclaimed insurance money and being aware of them should help you follow through with these changes well.
Monitor Your Policy Status Regularly
You should also keep track of the status of your policies regularly through the insurer’s customer portal or by updates made available by the insurer. This helps to catch lapses and wrongful information about the policy before being lost toward a rightful claim.
To Wrap Up
Unclaimed insurance claims in India are a significant issue, but with awareness and timely action, policyholders and beneficiaries can avoid losing money. Keeping documents updated, informing family members, and staying proactive in claiming your insurance benefits can help prevent this issue.
To get expert assistance in claiming your unclaimed insurance claims, visit https://investorlink.in/. Now, let’s dive into some frequently asked questions to help you understand unclaimed insurance claims better.
FAQs
Unclaimed insurance money refers to funds owed to a policyholder or their beneficiaries but was never claimed for one reason or another, such as the death of the policyholder, the beneficiaries being unaware of the policy, failure to submit claim documents, or the insurance department has no record of the policyholder’s latest contact details. Due to this reason, billions of rupees are still unclaimed in the vaults of insurance companies.
In India, unclaimed insurance money poses an impending major headache since billions of rupees are lying unused in the coffers of insurance organizations. Many policyholders or their families fail to claim their insurance benefits due to reasons like ignorance of policy terms, lack of knowledge about filing claims, or negligence in updating contact details. This not only ends up causing losses to beneficiaries financially but also puts their monies to be transferred by the government into welfare schemes, for example, the Senior Citizens Welfare Fund (SCWF).
According to a report from the Insurance Regulatory and Development Authority of India (IRDAI), the total amount of unclaimed insurance money as of 2022 in India was INR 25,000 crores. This figure represents the unclaimed amounts concerning life insurance and general insurance for various reasons.
IRDAI has issued guidelines for the settlement of unclaimed policy amounts. The insurers are required to transfer amounts lying unclaimed for more than ten years to the Senior Citizens Welfare Fund (SCWF). These guidelines were seriously directed toward utilizing unclaimed funds for public welfare, especially in the case of senior citizens. However, the policyholders or their beneficiaries can still claim these unclaimed amounts for twenty-five years from the date they have been transferred to the fund.
Unclaimed insurance money may be quite disadvantageous to beneficiaries. Oftentimes, family members of the deceased policyholder or the dependents may not even be aware of the policy’s existence, or if they are, they may not claim the insurance due to a lack of information. A situation like this would only lead to the beneficiaries’ financial insecurity since they’re being denied access to the money that is legitimately theirs.
In the event of any default in the premium payment, the policy may lapse whereby the insured stands to lose the cover under the policy or the benefits thereunder. It is preferable to keep paying the premiums on time or inform the insurance company of your difficulties so that an alternative like rescheduling the payments or a reduction of the premium may be explored.
Yes, you may claim the unclaimed amount of insurance after its transfer to the Senior Citizens Welfare Fund. The policyholder or beneficiaries may request the insurer to retrieve the unclaimed amount, but the claim should be made within 25 years of the transfer to SCWF.
To find out your Unclaimed Insurance Policies, ask your insurer or check out the insurer’s online portal. In addition, inquire with your family members concerning any policies that they might know about. The Insurance Information Bureau of India also registers unclaimed amounts, so you may check with them too if you’re unsure.
In most cases, the insurance amount can be claimed only by the listed beneficiary. However, one can pursue the amount as a legal heir when the beneficiary has passed away or if the beneficiary cannot be found, but here, it would depend on the policy of the insurer and the legal documentation that you produce.
Yes, providing that one is a beneficiary or policyholder under the policy in question to redeem any unclaimed proceeds from an insurance company. Given that the Claim procedure depends on the insurer’s policies and the documentation that must be provided to substantiate the claim, contact the specific insurance company directly for instructions.
Life insurance policies, especially endowment plans and term life policies, are at the risk of being most unclaimed. These policies tend to be unclaimed when the policyholder dies without notifying the beneficiaries of the policy or when the policyholder just ignores the payment of premiums.