What to Do If You are an ‘Orphan’ Life Insurance Policyholder?

A friend of mine bought a life insurance policy through an agent a few years ago. Initially, everything was hunky-dory. He would get regular updates from his agent, who had almost become a close friend he would ring up for guidance on insurance matters. Then abruptly, the agent-cum-friend stopped sending him updates. My friend later got to know that the agent had left that organization and would no longer be able to assist him. The problems arose my friend had to renew his policies, he felt orphaned. Has this ever happened to you? Suddenly feeling deserted by your agent?

Further in this article, we have elaborately discussed everything you need to know about COVID_19 and life insurance.

Life insurance agents act as the point of contact between the insurer and the insured. An agent’s role is particularly important during the renewal process as they offer services, such as sending reminders to customers about the premium due date and ensuring policyholders get the receipt on time for tax purposes. But when agents switch their profession or leave the insurance company, they leave their clients hanging. In some situations, it could result into a policy lapse and delay in claim settlement. Such clients are known as called orphan life insurance policyholders.

If we look at the IRDAI data available on the number of agents, you will be amazed. According to the 2010-11 IRDAI Annual Report, the total number of agents appointed by life insurance companies was 5.65 lakh, while the number of agents terminated was 8.01 lakh. To help out orphaned policyholders, the IRDAI has come up with a set of guidelines.

Here, we’ll delve into some scenarios that you may face if your agent deserts you, and the recommended course of action:

Scenario 1: Agent Quits the Insurance Sector

Irrespective of the agent’s availability, the insurer and its staff are responsible for offering services to policyholders. The insurance company can designate the policy to another agent as per the following guidelines:

• Only an orphan policy that remains lapsed (i.e., premium remains unpaid after six months of the due date) at the time of allotment is eligible for re-allotment to another agent.
• Single premium life insurance policies or policies on which no further premium is due are not eligible for re-allotment.
• The insurer should notify the particulars of ‘Allottee Agent’ to the policyholders concerned.
• If the policyholder surrenders the policy after the allotment but before revival, no new business will be accepted by the insurer from the same allotted agent on the life of the same policyholder until the expiry of 6 months from the surrender of the orphan policy.
• The number of policies allotted to the agent should not exceed 20% of the total number of active policies introduced by him.

The insurance company informs policyholders about the change while asking them to contact the in-house team directly as and when required.

Scenario 2: Agent ends business relation with your insurer