The insurance regulator has directed all insurance companies to deposit amounts that have not been claimed by policyholders for more than 10 years as on September 30, 2017 to Senior Citizen’s Welfare Fund (SCWF).
The insurance regulator has directed all insurance companies to deposit amounts that have not been claimed by policyholders for more than 10 years as on September 30, 2017 to Senior Citizen’s Welfare Fund (SCWF). The latest direction is in continuation of Insurance Regulatory and Development Authority of India’s (Irdai) several attempts and notifications regarding unclaimed amounts of policyholders. All insurers will have to get the details of such accounts and deposit the money before March next year.
Senior Citizens’ Welfare Fund
The government has brought in the Senior Citizens’ Welfare Fund Act (2015) as a part of the Finance Act. It mandates the transfer of unclaimed amounts from accounts of all small savings schemes, accounts of Employees’ Provident Fund, insurance companies and banks. The fund is created for promoting the welfare of senior citizens like financial security, healthcare and nutrition, old age homes or for other purposes as specified in the Act. The SCWF will be an interest bearing account in the public account of the Centre and will be administered by the committee. The rate of interest for the money parked in the fund will be determined and notified by the ministry of finance.
The transfers by the institutions will be made on a net basis—unclaimed deposits minus the claims accepted. The nodal ministry for the administration of the fund will be the ministry of social justice and empowerment and it will be administered by a committee consisting of officials from ministry of social justice and empowerment, department of financial services, ministry of health and family welfare, etc.
Steps before transferring money
The Act underlines that before crediting the unclaimed amounts to the fund, each institution will have to first publish the information relating to the accounts in which unclaimed amounts are lying. The institutions will have to identify such accounts and prepare a list by September 30 every year. Before depositing the unclaimed money in the fund, the institution will have to try to contact each of the account holders of the unclaimed amount through notice, email and telephone on at least two occasions, within a period of 60 days. The institution will also have to display the list on notice boards of the relevant offices and also on its website for at least 60 days, inviting claims.
Rising unclaimed amount in insurance
According to a reply to a question in Lok Sabha, unclaimed deposits of life insurers nearly doubled to Rs 10,527 crore from Rs 5,440 crore between March 31, 2015 and March 31, 2016. The Limitation Act, 1963 provides a time limit of three years for insurance claims due to a policyholder. Insurance Regulatory and Development Authority of India (Irdai) directive covers the entire gamut of unclaimed amount including any amount payable to policyholder as death claim, maturity claim, survival benefit, premium due for refund, etc.
As per the regulator’s norms, it is mandatory for insurers to display information about any unclaimed amount above Rs 1,000 on their respective websites. Insurers also have to keep policyholders and beneficiaries informed about any updates, changes and maturity details by SMS alert or e-mail or any other mode.
The regulator has also mandated companies to show unclaimed amounts as a separate line in their balance sheet under current liabilities and such amounts are governed by investment norms applicable to the funds. Moreover, insurers have to credit the investment income accruing on the unclaimed amount to the respective identified unclaimed account. They can recover administrative and fund management expenses from the unclaimed amounts.