Ensure Insurance Companies Transfer Unclaimed Policy Amounts To Senior Citizen Welfare Funds : Karnataka HC Directs IRDA

The Karnataka High Court on Wednesday directed the Insurance Regulatory and Development Authority (IRDA) to ensure that all insurance companies follow the master circular issued by it and the companies transfer unclaimed amounts to the Senior Citizens Welfare Funds, established under the Finance Act, 2015. A division bench of Acting Chief Justice Satish Chandra Sharma and Justice Sachin Shankar Magadum while disposing off the petition filed by M/s The Legal Attorneys and Barristers said,"Respondent 3, shall ensure that in future also, the master circular is being complied with by insurance companies and periodical reports be also called from all insurance companies regarding compliance of the master circular issued by it. Only to ensure that the amount is being transferred to the senior citizens welfare fund as provided in the master circular issued by Respondent 3." The petitioners had claimed that various insurance companies have collected premium amounts from a large number of Indian citizens and after the maturity period or death of persons insured, there are unclaimed policies/amounts. Further, it was contended that the unclaimed policies are amounting to the tune of Rs 15167 crore and therefore as the amount is lying with various insurance companies including LIC, the same should be used for social welfare and the legal heirs of the policyholders should be traced. The petition prayed for the issuance of directions to respondents for taking suitable action to formulate a policy for disbursement of unclaimed amounts to the successors or legal heirs or nominees of policyholders. Directions were also sought to be issued to the respondents to ensure that all accumulated unclaimed amounts shall be disbursed in the manner specified by appointing an investigating body. The unclaimed amount could then be transferred to the government relief funds. Counsel for the IRDA informed the court that the Government of India has enacted the Senior Citizen Welfare Fund Act 2016, as a part of the Finance Act 2015, which mandates the transfer of unclaimed amount to senior citizen welfare fund, after a period of 10 years and the same is being done by all the insurance companies. Further, it was said that "IRDA is monitoring the transfer of funds in terms of Senior Welfare Funds Rules 2016, and upto 2020, the insurance companies have transferred Rs 81.65 crore in March 2018 and Rs 398.66 crore in March 2019, and it is a continuous process." The counsel also informed the court that IRDA has issued a master circular dated July 25, 2017, which is in respect of unclaimed amount of policy holders. As per the master circular issued by IRDA, the amount is being transferred to senior citizens welfare fund and there is a complete mechanism under the master circular, in respect of unclaimed policies/unclaimed amounts. Counsel appearing for Life Insurance Corporation of India (LIC) categorically stated that as per directions issued by IRDA, amount is being transferred from time to time to senior citizens welfare fund and the information in respect of unclaimed policies is available on the LIC website. It has been further stated that there is a complete mechanism for settling unclaimed policies. The court after hearing all the parties noted: "The Government of India was aware of the huge amount available with insurance companies and Senior Citizens Welfare Fund Act 2016 was enacted as per finance act 2015, which mandates transfer of unclaimed amount to the senior citizen welfare fund after a period of ten years. The act has been enacted to promote the welfare of senior citizens and for such other purposes, as is specified in the act." Further, it said, "Government of India, in exercise of powers conferred under the Finance Act of 2015, has formulated the Senior Citizen Welfare Fund 2016 Rules, which specifies the entities which are required to transfer unclaimed amount to the senior citizens welfare funds. The same is being done by insurance companies as reflected by the reply filed by IRDA." The court continued to observe: "Respondent 3 (IRDA) has issued a master circular dated July 25, 2017. Counsel for respondent has categorically stated that the regulator is keeping strict watch and vigil over the various insurance companies and the master circular is being strictly enforced. It has also been stated that any violation of the master circular will attract penal provisions, including under section 102 of Insurance Act 1938." It added, "In light of the aforesaid, as there is already a mechanism to transfer the funds to senior citizens welfare fund and the fund is being transferred from time to time, the court is of the opinion the matter deserves to be disposed of and is being disposed off accordingly." Case No: WP 35552/2018.

Ensure Insurance Companies Transfer Unclaimed Policy Amounts To Senior Citizen Welfare Funds : Karnataka HC Directs IRDA

Mustafa Plumber

The court also asked IRDA to ensure that the master circular is being complied with and periodical reports are submitted by insurance companies.

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