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?

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

The policy doesn’t become orphaned if the agent terminates the agreement with the insurance company but chooses to carry on with another insurer. In such a case, the agent can continue to impart services to the policyholder. Also, if the agent has serviced the policy for at least five years, the insurers let them receive commission.

Scenario 3: Agent Bank and Insurance Company Part Ways

These days, banks also sell insurance products, contributing significantly to the insurer’s business. At the same time though, many banks also end up severing their partnerships with insurers. For instance, IndusInd Bank recently scrapped its insurance partnership with Aviva to sign a fresh agreement with Birla Sun Life Insurance. Last year, the Standard Chartered bank ended its partnership with Bajaj Allianz to sell policies of ICICI Prudential.

As a result, any change in the bank’s insurance partners can spell trouble for policyholders. In this case, the policy will go into the orphaned phase. To combat this problem, various insurers have set up call centers to cater to orphaned policyholders.

Scenario 4: Policyholder is Unhappy with the Services of the Agent

Policyholder can terminate the services of the existing agent if he is not satisfied with the quality of services being offered to him. In this situation, you can approach life insurers to service you directly.

Your Responsibility as a Policyholder

Even if you have bought the policy via an agent, you can approach the insurance company directly to avail policy servicing. Also, to protect the policy from becoming an ‘orphan’, you should:

• Use all channels available to reach out to the insurer, such as calling on the company’s customer care number and visiting branch offices.
• Take responsibility for the policy renewal by keeping track of the renewal dates. All insurers send emails and messages as premium due date reminders.
• Make sure the information provided to the insurer is accurate and true.

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