Irdai tells insurers to step up efforts to trace rightful recipients as unclaimed funds pile up

The increase of unclaimed funds within the insurance sector has become a pressing regulatory concern, prompting a thorough examination of its underlying causes.

To address such issues, the Insurance Regulatory and Development Authority of India (Irdai) advised insurers to enhance efforts in tracing the rightful recipient of unpaid amounts and ensure efficient disbursement of the same. The regulator has suggested certain measures for the reduction of existing unclaimed amounts.

Through discussions with insurers, it becomes apparent that various factors contribute to this surge despite consumers being traceable. Instances, where claims cannot be promptly settled due to litigation, rival claims, or governmental interventions, present significant hurdles.

Moreover, the transition of policies from in force to unclaimed status due to time constraints, alongside unclaimed annuity options and proceeds from pension and insurance products, further compound the issue. Additionally, the challenge of settling claims for consumers residing abroad adds to the complexity.

In response, the Irdai has advised them to intensify their efforts in locating rightful recipients and streamlining the disbursement process, ensuring that owed amounts reach their designated beneficiaries efficiently and effectively.

According to Irdai circular on the unclaimed amount for policyholders, issued on February 16, stated the following measures for the reduction of existing unclaimed amounts and to contain future accumulation of unclaimed amounts:

i) Prompt existing policyholders at the time of payment of renewal premium (online/offline) to update their mobile number, email address, current address, bank account details, nominee details etc, by flashing existing details and send intimations accordingly.

ii) Make the respective agents, intermediaries, group master policyholders, and other distribution channels involved in the solicitation accountable for tracing consumers and updating the contact details, bank account details, etc.

iii) Undertake ongoing KYC for existing policies, Re-KYC of minors on immediately attaining majority.

iv) Put in place fool-proof systems to automatically validate existing and new consumers' mobile numbers and email addresses to ensure that these details are not of their distribution channels.

v) Engage with Credit Bureaus, Account Aggregators, CSC/POS, and e-commerce portals for tracing consumers.

vi) Advertise in Print/Digital media to reach out to consumers who are not traceable.

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vii) In all communications (except in respect of termination/exit of contracts) sent to the consumer, include a footnote advising the consumer to update contact details, nominee details and bank account details in case of any change.

viii) To make provisions in the insurer's website/portal/App to enable policyholders to update their contacts, including

Email IDs, bank details, and nominee details can be accessed at any point in time with a secure login.

ix) Send advance notifications in respect of maturity claims and survival benefits at least 6 months in advance, through all possible modes, and advise them to provide KYC/Bank details; follow-up notifications may be sent every 2 months thereafter to customers who have not responded.

x) Develop an online tool for processing and payment of unclaimed amounts once the consumers identify the amounts due to them on the websites of insurers

xi) Implement appropriate systems and controls to address fraudulent claims and practices.