Life insurance in India has struggled this financial year as the unclaimed total amount has reached a staggering Rs 22,237 crore in the first quarter of April 2023, during the FY24 financial quarter. However, due to the efforts and hard work executed over a period from June to November 2023, the amount was able to be decreased by up to 1,018 crore.

From a policymaker’s perspective, unclaimed amounts depositing with other financial institutions has always been a challenge needing firm resolution. In regards to life insurance companies, the mentioned concern was addressed promptly. Proper estate management was advised for the policyholders, while caution was advocated for insurers when registering distant family members as nominees.

Nominated Problems

The officers of the insurance company however say that the unclaimed amounts are a function of nominators being hard to trace, lack of knowledge of the beneficiary, death of the nominees and the like. To curtail the issue, it has been suggested that insurance companies be compelled to correct their address from time to time since this allows them to have a proper and updated database as that involves changing banks and doing KYC checks. The agents have also been requested to locate the nominees/beneficiaries. Sujeet Kothare, executive VP (marketing) at Tata AIA For instance, was recently said to media outlets, “this is an issue which must be addressed as an industry, Together we simply fight it.”

To mitigate this issue, LIC, the giant of the public sector has recommended avoided this issue by asking policyholders to nominate only their close relatives. It has also stated, “There can be no nomination in favour of a stranger because there is no insurable interest and it may present a moral hazard.” Nevertheless, this policy has an interesting complication because it makes life difficult for those in same-gender relationships. The same goes for those who do not have immediate relatives.

Unclaimed Investments And Economies

It is true that the issue of deposits, which have not been claimed by any of the clients in a given institution, is not a new one to the Indian people. In 2023, a report estimated that the Indian Banking System alone had more than Rs. 35000 Cores in unclaimed deposits. It was said that the overall quantum of unclaimed money in the financial ecosystem exceeded Rs 1 lakh crore. On September 23, 2023, at a fintech event, Union finance minister, Nirmala Sitharaman said: “I want banking system, the financial ecosystem (including) the mutual funds, stock markets… to all understand that when someone deals with his (customer’s) money, the organisations will have to think about the future and ensure that the clients are in a position to nominate their heirs, give their names and addresses.”