Lok Sabha Question No. 2086 (UNSTARRED), answered on 2016-07-29
Subject: Dormant Accounts
Ministry: FINANCE
Asked by: SHOBHA KARANDLAJE, KIRIT SOMAIYA

## Government of India Ministry of Finance Department of Financial Services Lok Sabha Unstarred Question No. 2086

To be answered on Friday, July 29, 2016/Shravana 7, 1938 (Saka)

## Dormant Accounts

## 2086. KUMARI SHOBHA KARANDLAJE: DR. KIRIT SOMAIYA:

Will the Minister of FINANCE be pleased to state:

- (a)    whether the lakhs of dormant accounts of insurance companies, pension and annuity schemes and private provident fund trusts are not identified/checked and not brought into the notice of the Government;
- (a) if so, the details thereof along with the guidelines in this regard;
- (c)  whether the insurance companies are not under the ambit of these guidelines; and
- (d) if so, whether the Government will amend the guidelines for insurance companies, pension and annuity  funds,  provident  funds,  etc.  so  that  dormant  accounts  money  can  be  transferred  to Government's Consolidated Fund?

Answer

## Minister of State in the Ministry of Finance

(Shri Santosh Kumar Gangwar)

(a) to (d) There are unclaimed amounts of policyholders with various insurance companies in India. The approximate unclaimed amount with insurance companies as on 31.03.2016 is Rs.11,668 crore. The company wise details of unclaimed amounts are placed at Annexure-I.

No such instances of unidentified/ unchecked/unclaimed accounts have been reported under National Pension System.

Employees'  Provident  Fund  Organisation  has  informed  that  there  is  no  system  of  capturing  data relating to dormant accounts lying in private Provident Fund Trusts.

The  details  of  directions  issued  by  Insurance  Regulatory  and  Development  Authority  of  India (IRDAI) on handling of unclaimed amounts of policyholders by the insurance company are placed at Annexure-II.

*****

## Unclaimed Amount of Policyholders AS ON 31.03.2016 (Rs in crore)

| S No.   | Non Life Insurers                                |   Unclaimed Amount |
|---------|--------------------------------------------------|--------------------|
| 1       | Bajaj Allianz General Insurance Co. Ltd.         |               9.37 |
| 2       | ICICI Lombard General Insurance Co. Ltd.         |             106.56 |
| 3       | IFFCO Tokio General Insurance Co. Ltd.           |              31.03 |
| 4       | Reliance General Insurance Co. Ltd.              |              50.47 |
| 5       | Royal Sundaram General Insurance Co. Limited     |              16.26 |
| 6       | Tata AIG General Insurance Co. Ltd.              |              21.05 |
| 7       | Cholamandalam MS General Insurance Co. Ltd.      |              12.09 |
| 8       | HDFC ERGO General Insurance Co. Ltd.             |              13.31 |
| 9       | Future Generali India Insurance Company Ltd      |               7.88 |
| 10      | Universal Sompo General Insurance Co. Ltd.       |              16.53 |
| 11      | Shriram General Insurance Company Limited        |              12.12 |
| 12      | Bharti AXA General Insurance Company Limited     |              18.8  |
| 13      | Raheja QBE General Insurance Company Limited     |               0.22 |
| 14      | SBI General Insurance Company Limited            |              10.38 |
| 15      | L&T General Insurance Company Limited            |               1.74 |
| 16      | Magma HDI General Insurance Company Limited      |               0.78 |
| 17      | Liberty Videocon General Insurance Company Ltd   |               0.2  |
| 18      | Star Health and Allied Insurance Company Ltd     |               0.81 |
| 19      | Max Bupa Health Insurance Company Ltd            |               2.56 |
| 20      | Apollo Munich Health Insurance Company Ltd       |               2.46 |
| 21      | Religare Health Insurance Company Limited        |               1.49 |
| 22      | Cigna TTK Health Insurance Company Ltd.          |               3.33 |
| 23      | Kotak Mahindra General Insurance Company Ltd     |               0    |
| 24      | National Insurance Company Limited               |              74.7  |
| 25      | New India Assurance Company Limited              |             140.81 |
| 26      | United India Insurance Company Limited           |             143.69 |
| 27      | Export Credit Guarantee Corporation of India Ltd |               1.76 |
| 28      | Agriculture Insurance Company of India Ltd.      |             438.99 |
|         | Total (A)                                        |            1139.42 |

| Grand Total (A) + (B)   | 11668.29   |
|-------------------------|------------|

| S No.   | Life Insurers                                                            |   Unclaimed Amount |
|---------|--------------------------------------------------------------------------|--------------------|
| 1       | AEGON Life Insurance Company Limited                                     |              57.41 |
| 2       | Aviva Life Insurance Company India Ltd                                   |             216.62 |
| 3       | Bajaj Allianz Life Insurance Company Ltd                                 |             466.02 |
| 4       | Bharti AXA Life Insurance Company Ltd.                                   |              60.77 |
| 5       | Birla Sun Life Insurance Co. Ltd                                         |             230.99 |
| 6       | Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.            |              34.84 |
| 7       | DHFL Pramerica Life Insurance Co. Ltd.                                   |              10.95 |
| 8       | Edelweiss Tokio Life Insurance Co. Ltd.                                  |               2.08 |
| 9       | Future Generali India Life Insurance Co. Ltd                             |              39.55 |
| 10      | HDFC Standard Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. |             711.23 |
| 11      | Ltd                                                                      |             495.65 |
| 12      | IDBI Federal Life Insurance Company Ltd.                                 |               8.71 |
| 13      | IndiaFirst Life Insurance Company Limited                                |              81.54 |
| 14      | Exide Life Insurance Company Limited                                     |              63.5  |
| 15      | Kotak Mahindra Old Mutual Life Insurance Ltd                             |              30.87 |
| 16      | Life Insurance Corporation of India                                      |            5934.42 |
| 17      | Max Life Insurance Co. Ltd                                               |             213.38 |
| 18      | PNB Metlife India Insurance Co. Ltd.                                     |             221.16 |
| 19      | Reliance Nippon Life Insurance Company Ltd                               |             562.93 |
| 21      | Sahara India Life Insurance Co, Ltd.                                     |               3.75 |
| 20      | SBI Life Insurance Co. Ltd                                               |             653.38 |
| 22      | Shriram Life Insurance Co Ltd.                                           |              64.07 |
| 23      | Star Union Dai-ichi Life Insurance Co. Ltd.                              |             126.64 |
| 24      | Tata AIA Life Insurance Company Limited                                  |             238.41 |
|         | Total (B)                                                                |           10528.9  |

## HANDLING OF UNCLAIMED AMOUNTS PERTAINING TO THE POLICYHOLDER

## 1. Background:

Unclaimed amount is not uncommon in insurance sector and over a period of time a huge amounts have accumulated as unclaimed amount which is a cause of concern. It has been noticed by the Authority that the quantum of the amount lying unclaimed by the policyholders / insured's is accumulating on year on year basis.  The Limitation Act, 1963 provides a time limit of 3 years for claim due to a policyholder under an insurance policy.

In  order  to  bring  better  governance,  transparency  and  smooth  transfer  of  the  amount  due  to  the policyholders, the Authority has issued directions in the matter.

## 2. Definitionof Unclaimed Amount:

Unclaimed amount includes any amount payable to policyholder as death claim, maturity claim, survival benefit, premium due for refund, premium deposit not adjusted against premium and indemnity claims etc. remained unclaimed beyond six months from the due date for settlement of the claim amount.

## 3. Forms of Unclaimed Amount:

The unclaimed amounts of the policyholders/Insured's may be on the following account:

- a. claims  settled  but  not  paid  to  the  policyholders  /  insured's  due  to  any  reasons  except  under litigation from the insured / policyholders
- b. sum due to the insured / policyholders on maturity or otherwise
- c. Any  excess  collection  of  the  premium  /  tax  or  any  other  charges  which  is  refundable  to  the policyholders either as terms of conditions of the policy or as per law or as may be directed by the Authority but not refunded so far

## 4. ReasonsforincreasingtrendofUnclaimed Amount:

- a. Lack of Awareness: Dependants of the insured are not aware about the insurance policy taken by the insured.  Therefore in the event of untimely death of the insured, the family members are not in a position to claim the amount.
- b. Delay: The  settlement  of  the  claims  /  maturity  amount  etc.  is  largely  made  by  issuance  of  the cheques  /  demand  drafts.   Clearance  of  these  instruments  takes  some  time  and  in  few  cases  the cheques / demand drafts are time-barred and remain un-presented for payments.
- c. Change in address: in  few  cases,  change  of  address  is  not  duly  intimated  to  the  insurer.  In  the absence of which cheques/ demand drafts issued by the insurer towards maturity payment etc. are not received by the insured and become time barred.

## 5. Provisions governing the Unclaimed Amount:

In  order  to  bring  better  governance,  transparency  and  smooth  transfer  of  the  amount  due  to  the policyholders, all insurers have been advised as under:

1. No apportionment/write back: Unclaimed amount shall not be appropriated/written back, in any circumstances, by the insurers.
2. Policyholder  Protection  Committee: Policyholder  Protection  Committee  of  the  Board  shall oversee  timely  payouts  of  the  dues  to  policyholders. A  detailed  agenda  items  covering  the following shall be placed before the Committee on quarterly basis :
- a) Payouts made by the insurer during the quarter
- b) Comparison of the payments of unclaimed amount vis a vis previous quarter.
- c) Steps  taken  by  the  company  to  reduce  unclaimed  amount  by  identifying  the  insured,  creating awareness etc.

The details of the action taken and status of the unclaimed amount along with a certified copy of the minutes of the Committee shall  be filed with the Authority on half yearly basis within 45 days from the end of the half year.

3. Audit Committee : The Audit Committee of the Board shall have oversight on the unclaimed amounts. The committee shall also oversee compliance of the directions of the Authoity.
4. All insurers are required to display the information about any unclaimed amount above Rs. 1000/- (Rs. One Thousands only) of Policyholders on their respective web-site.

A facility shall be given in the website of the insurer to enable Policyholders/or its dependants to find out  whether  any  unclaimed  amounts  due  to  them  are  lying  with  the  insurer.  For  this  purpose,  the Policyholder may be allowed to enter the following fields in a window provided in the website for this purpose:

- a) Policy No.
- b) PAN of the Policyholder
- c) Name of the Policyholder
- d) Date of birth of the Policyholder

Name of the Policyholder and Date of birth may be made as compulsory fields to enter, while Policy No. and PAN may be optional fields.

Based  on  the  above  information  entered,  the  insurer's  website  shall,  if  the  credentials  matches  (on matching of any two fields), confirm the name of the Policyholder and address of the Policyholder against whom any unclaimed amount is lying with the insurer.

5. Remittance: Insurers shall remit proceeds of all claims / maturity payments/ any other sum due to the policyholders or nominees or assignees only through Electronic mode as under:

## A. For existing policies:

In  case  of  life  insurance, a  communication providing an option of electronic transfer shall be sent to the insured along with the next communication which is sent to the Policyholder. Further, a standard clause to this effect may be included as foot note in all future communications with the Policyholders.

In  case  of  non-life  insurance ,  bank  account  detail  shall  be  collected  in  the  event  of  claim  or payment of refund or at the time of renewal.

All claims / maturity payments / other sum due to the policyholders shall be paid through electronic mode where such option has been exercised by the insured.

## B. For new policies :

- i. Insurer shall take all the required details of the bank account of the insured / proposer in the proposal form.  Insurer shall also insist necessary documents as a proof of the bank account to ensure authenticity of this information such as cancelled cheque etc. However, insurers are not required to collect the cancelled cheque where payment of premium is made by the proposer through  cheque  from  his  own  bank  account.  Retaining  a  copy  of  the  cheque  issued  by  the proposer shall be sufficient compliance of this clause.

Exemptions: The following are exempted from the applicability of the clause

- a) All term insurance policies (without return of premium) are exempted from the applicability of this clause. In the case of death claim, bank details of nominee shall be called for in the event of  a claim.
- b) All policies issued to policyholder having a bank account with a bank which is not having linked to RBI Core Banking Solutions (Co-operative or Regional Rural Bank).
- c) All insurance policies where the annualized premium payable is up to Rs. 25,000/- (Twenty Five Thousand only) or such other sum as may be specified by the Authority from time to time.
- ii. Insurer shall also provide an option to the Insured to change the bank account / modify the bank  account  particulars  in  case  insured  desires  so.  Such  option  shall  be  provided  to  the policyholders without any charge.
- C. All  payments  due  to  the  insured  relating  to  such  policy  will  be  routed  through  the  said  bank account through Electronic Clearing System (ECS), National Electronic Funds Transfer (NEFT), Real  Time  Gross  Settlement  (RTGS),  Interbank  Mobile  Payment  Service  (IMPS),  Automated Clearing House (ACH) or any other electronic mode as permitted by RBI.
6. In  order  to  minimize  the  unclaimed  amount,  Insurers  shall  endeavor  to  keep  the  Policyholder  and beneficiary informed about any updates, changes and maturity details by SMS alerts or Email or any other mode as may be specified by the Authority on regular basis.

## 7. Treatment of Unclaimed Amount - Non-Life, Health and Life (including ULIPs)

Insurers shall maintain a single segregated fund to manage all unclaimed monies and the sum of such fund shall be invested in money market instruments and /or fixed deposits of scheduled banks.

## 8. Treatment of Investment Income

All insurers shall credit the investment income accruing on the unclaimed amount to the respective identified unclaimed account

The Insurer shall pay the identified unclaimed amount along with the investment income so credited, to the insured/ policyholders / claimants. However, in case of any award/ order made by a statutory body including a court, which includes an interest component, it shall not carry any further interest.

## 9. Recovery of Expenses

Insurers  may  recover  administration  and  fund  management  expenses  from  the  unclaimed  amounts. However, such recovery shall not in any case exceed 20 basis points per annum of the said underlying funds.

## 10. Manner of Computation of Solvency Margin

The unclaimed amounts, the investment income accrued / earned on the said unclaimed amounts and the  investments  representing  such  amounts  shall  not  be  counted  towards  computation  of  solvency margin.

## 11. Disclosure  of Unclaimed Amount

- a) Unclaimed  amount  shall  be  disclosed  as  a  separate  line  item  in  Schedule  13  -  'Current Liabilities' of the Balance Sheet.

## b) Aging of the unclaimed amount

There may be instances where insurers have issued cheques against the outstanding unclaimed amounts but some of these cheques may have not been encashed by the policyholders.  In such cases, after the expiry of the validity period of the cheques, the same shall be credited back to unclaimed amount.   However, the age-wise classification of such amounts shall continue from the original date of such unclaimed amount.  The insurers shall not, under any circumstance, reclassify such amounts for the purpose of age-wise classification.

## c) Disclosures in the Notes to Accounts

The insurers have been advised to disclose the unclaimed amounts along with its ageing as per the prescribed format in the Notes to Accounts forming part of the Financial Statements.