Unclaimed funds higher in agent-sold life policies

The unclaimed funds within the life insurance sector are higher from policies sold by agents as against other channels like bancassurance or a digital platform, said analysts and officials from insurance companies.

Unclaimed life insurance funds refer to the proceeds of insurance policies including death or survival benefits not claimed by the beneficiary or the policyholder. Bancassurance means selling an insurance product through banks.

“The insurers can easily verify the bank details with the bank for bancassurance customers and also get new bank account, contact details and address from the bank based on permanent account number (PAN). The updating of customer mobile and email in policies sourced through digital channels also helps to instantly connect with customers to get bank details during payout,” said Vighnesh Shahane, managing director (MD) & chief executive officer (CEO), Federal Ageas Life Insurance.

“In the case of agency channels, the attrition makes it difficult to connect with customers once the agent leaves the company,” Shahane added.

Recently, the Insurance Regulatory and Development Authority of India (Irdai) issued modifications in the master circular for unclaimed insurance. The regulator directed the insurers to contact the customer 12 months instead of 6 months in advance before declaring the funds unclaimed amounts. The regulatory notifications also include measures on communication with customers, updating their contact and bank details and adoption of digital methods like customer portals and apps, and advertisements in print/digital media to trace customers.

Swarup Kumar Sahoo, senior insurance analyst at Globaldata, said Life Insurance Corporation of India (LIC) accounted for more than 90 per cent of the total unclaimed funds in the last five years.

“Since LIC generates most of its business through agents, we can estimate that agents-sold policies account for a major share of the total unclaimed insurance funds. However, the actual data-specific number on unclaimed funds by distribution channel is not available,” Sahoo said.

In FY23, the unclaimed insurance funds in the life insurance industry sharply declined to ~2.06 crore from ~4.82 crore in the year-ago period.