Insurance Regulatory and Development Authority of India (IRDAI) released the circular on managing the unclaimed amounts lying in the books of insurers. Effective 1st July 2015, Insurers are not permitted to apportion or write back such unclaimed amounts as income under any circumstance. Further, these unclaimed amounts are required to be shown as a separate line item in the Balance Sheet under “Current Liabilities”.
Further IRDAI has directed that in respect of all unclaimed amounts lying with the insurers, the following shall be ensured:
1. Nonlife, Health and Life (Funds other than ULIP)
The amount representing the unclaimed amounts shall be segregated under each fund/segment and shall be shown under the head “Unclaimed Amount”. Such amounts shall continue to be governed by the investment norms applicable to the respective funds under which the unclaimed amounts have been identified.
2. ULIP Funds
In order to avoid the down side risk of unclaimed amounts of Unit Linked Fund, such amount shall be invested in accordance with the investment pattern specified for “Fund for discontinued policies” in Regulation 18 of IRDA (Linked Insurance Products) Regulations, 2013.
3. Treatment of Investment Income
Further to the provisions of the regulation 8 (4) of the IRDA (Protection of Policyholders’ Interests) Regulations, 2002, all insurers shall credit the investment income accruing on the unclaimed amount to the respective identified unclaimed account.
4. Recovery of Expenses
Insurers may recover administration and fund management expenses from the unclaimed amounts. However, such recovery shall not in any case exceed 50 basis points per annum of the said underlying funds as at the close of the financial year.
5. Manner of Computation of Solvency Margin
It is reiterated that 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.
6. Ageing 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, re-classify such amounts for the purpose of age-wise classification.
7. Disclosures in the Notes to Accounts
The insurers have been advised vide circular no. IRDA / F&I/ CIR/ CMP/174/ 11/2010 dated 04.11.2010 on the manner of disclosure of the unclaimed amounts along with its ageing. It is hereby further directed that the details of unclaimed amounts and Investment Income thereon shall also be disclosed alongside as under:
(Rs. In Lakhs)
Particulars
Current Financial year
Previous Financial Year
Opening Balance
Add: Amount transferred to unclaimed amount
Add: Cheques issued out of the unclaimed amount but not encashed by the policyholders (To be included only when the cheques are stale)
Add: Investment Income
Less: Amount paid during the year
Closing Balance of Unclaimed Amount
