Experts believe that e-payments of claims will reduce the rising unclaimed money lying idle with insurers.
IRDA has instructed insurance companies to settle insurance claims through electronic payment mode in an effort to deter rising unclaimed money. However, the regulator has asked insurance companies to make e-payment of those policies where payment exceeds Rs 10,000 (life insurance) and Rs 25,000 (non-life insurance). The regulation will come into effect from April 1, 2014.
The insurance regulator has asked insurers to seek bank details of new customers and their nominees through the proposal forms of insurance policies. For existing policyholders, the regulator has directed insurers to get bank details within six months.
Pankaj Mathpal of Optima Money is of the view that the move will increase transparency. “In a few cases, investors try to evade tax by giving details of joint account holder who are generally unemployed like housewife or son etc. thereby reducing their tax liability. Through e-payment, there will be no chance of tax evasion as the payment will be directly credited to the policyholder’s account.”
In a circular, IRDA said that it has found a steep rise in unclaimed amount which is a major cause of concern. It informed that the unclaimed amount lying idle with insurance companies increased by 60% to Rs 4,866 crore in FY 2012-13 from Rs 3,038 crore in FY 2011-12. In FY 2009-10, the unclaimed amount was Rs 1,373 crore. The regulator attributed this to lack of awareness, delay in claim settlement process and change in address of policyholder.
Mathpal said that the money back policies which typically come with five year tenure remain unclaimed due to change in address of policyholders.
Suresh Sadagopan of Ladder7 Financial Advisories seconds the view. “Many policyholders change their address without giving prior intimation to the insurance companies. As a result, cheques/ DDs issued to policyholders remain undelivered.”
Also, IRDA has instructed insurers to display detailed information related to unclaimed amount like name of insured, address and reason on their respective websites within six months. The insurers have to provide search option in such disclosure for the convenience of policyholders.