The unclaimed sum of money lying with life insurance companies in India have reached the sky. The amount stood at a whopping Rs 22,237 crore at the start of FY24, or April 2023. However, a six-month drive from June-November 2023 helped reduce the sky-high pile by slightly more than Rs 1,018 crore, figures from Insurance Regulatory and Development Authority of India (IRDAI) suggest.
The problem of unclaimed deposits and amounts with various financial institutions have plagued the policymakers and addressing the current situation in life insurance companies needed urgent attention. Policyholders have been advised to do proper estate planning. On their part, insurers have exercised caution about registering nominees who are not immediate family members.
The problem with nominees
Insurance company officials say that unclaimed amounts often result from a situation where nominees become difficult to trace, lack of awareness on the part of the beneficiary, nominees expiring etc. To urgent address the problem, insurance companies have been urged to update contact, bank, conduct KYC checks and update them repeatedly for proper and updated database. Agents have also been asked to trace the nominees/beneficiaries. “This is a problem that needs to be solved as an industry,” Sujeet Kothare, executive VP (marketing) at Tata AIA, was quoted in the media as saying.
In order to avoid this problem, public sector behemoth LIC has advised policyholders to nominate immediate family members as beneficiaries. It has also stated, “nomination in favour of a stranger cannot be made as there is no insurable interest, and moral hazard may be involved.” However, there is an intriguing offshoot to this policy since it creates challenges for those in same-gender relationships. The same is applicable for those persons without an immediate family member.
Problem of unclaimed deposits
The problem of unclaimed deposits with various financial institutions is not new in India. According to a report in 2023, the banking system in India alone accounted for more than Rs 35,000 crore in unclaimed deposits. It was said that the overall quantum of unclaimed money in the financial ecosystem exceeded Rs 1 lakh crore. In September 2023, while speaking at a fintech event, Union finance minister Nirmala Sitharaman said, “I want banking system, the financial ecosystem (including) the mutual funds, stock markets… everybody to keep in mind that when someone deals with his (customer’s) money, the organisations will have to think about the future and ensure that they (customers) nominate their heir, give the name and address.”
Life insurance companies were sitting on unclaimed amounts of about Rs 22,237 crore in the beginning of FY24. This is the result of a decline of about Rs 1,018 crore of unclaimed amount, which was the outcome of a special drive between June and November 2023. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
