You may have often heard about orphan policies but did you know what happens to them? Read on to find out more...
As the name suggests, Orphan policies are those insurance policies which are abandoned by the insurance agents who have quit their profession. Many policy holders who bought their policies from such drop-out agents are facing servicing problem from the insurance companies. Therefore, IRDA came up with certain guidelines on June 2012 to tackle this problem.
Those policies which have a longer tenure and require regular premium payouts can be termed as ‘Orphan’. However, single premium life insurance policies or life insurance policies on which no further premiums are due for payment are not termed as orphan policies.
Insurance companies are allowed to allot any orphan policies to individual insurance agents whose license is in force. These agents are termed as ‘allottee agents’. However, insurance companies are required to take consent of such insurance agents before the allotment process.
While allotting the policy, insurers are required to check the complete track record of ‘allottee agents’ which includes their ability, feasibility, number of complaintsregistered against them etc.The number of policies allotted to these agents must not exceed 20 percent of the total number of orphan policies. If these allotted orphan policies don’t receive any response within six month of the date of allotment then insurance companies are allowed to re-allocate these policies to other agents.
Insurance companies have to pay remuneration to these ‘allottee agents’ for servicing these orphaned policies. However, no upfront commissions are paid to such agents. The insurance companies also have to submit periodic reports of allotment of orphan policies to IRDA.