LIC tracks down clients, settles 89k unclaimed policies

NEW DELHI: The country's largest insurer Life Insurance Corp (LIC) has tracked down thousands of investors, who had unclaimed amounts in their policies, and settled their claims, doling out hundreds of crores in forgotten money.

 The effort follows a finance ministry directive as part of broader government measure to popularise life insurance. LIC has settled close to 89,000 unclaimed policies, aggregating about Rs 500 crore.

 As per industry estimates, the life insurance sector holds about Rs 2,000 crore in unclaimed funds, with the private sector accounting for about 45%.

 "We had asked insurers to track down all such policy holders or their beneficiaries. Almost all such policies have been paid for in the case of LIC," a ministry official said.

 A senior LIC official said the disbursal amount would be about Rs 500 crore with data from regional offices yet to come in. Sector regulator Irda has also issued new guidelines with regard to orphan policies. The new norms ensure that life insurers can re-allot orphan policies-where premium has not been paid for at least six months-to agents still active with them, from those who have switched jobs.

 "This will ensure that even if agents switch jobs, the policyholder does not lose out," an Irda official said. Many investors forget about their policies or stop paying premiums after a while. Such policies become fully paid up after a while, but investors fail to follow up on such policies or surrender them, leaving the insurer with unclaimed amounts.

 The finance ministry feels delivering these unclaimed amounts to investors will improve perception about life insurance business. The government is looking at a host of measures, including tax incentives and simplified guidelines, to provide a flip to the life insurance industry.

 Among the measures being discussed is quicker clearance for insurance products. The key taxation issues include reduction in service tax and prospective taxation on policies, and separate tax benefit for investment in insurance products.

 Earlier, the government had asked PSU banks to make public details of unclaimed deposits aggregating Rs 1,700 crore, a move aimed at encouraging account holders to reclaim funds. The RBI has also made it mandatory for banks to publish on their websites the names of customers whose accounts have been lying inactive for 10 years or more.

vinay mohanty