It took a lot of convincing by his agent/friend to make Amit Kumar buy a money-back life insurance plan in 2014. Five years later, when he did not receive his periodic bonus, he wanted to contact his agent only to be told that the policy has been “orphaned”.
“Orphaned” policies refer to a situation where a life insurance policy originally sold by an agent becomes unserviceable after this individual quits the business. Till the time a new agent handles the responsibility, the policy remains orphaned.
From April to July 2019, a total of 11,819 agents (net) exited the insurance industry. Assuming that each agent has at least sold 10 policies, approximately 1.2 lakh insurance policies have been “orphaned” in this financial year.
Getting a replacement agent is no mean feat. The life insurance industry has 2.18 million agents as of now. A lack of a fixed monthly remuneration and few career development opportunities are some of the factors leading to the high attrition rates for agents.
For a customer, losing an agent is a bigger worry. Since it is largely a push product, policyholders often require handholding from the agent. This could be during the process of switching funds in a unit-linked insurance, understanding the sequence of bonuses or the most crucial process of filing a claim.
An insurance agent is not only responsible for the product sales but is also required to be with the customer throughout the journey of the insurance policy. If he/she decides to quit the insurance company, it is imperative that the customers are immediately alerted about their “orphaned” policies.
The insurance regulator states that there should be an “Allottee Agent” who will be allotted the “orphaned” policy. However, there is no clarity on how many such allotments can be made per agent; nor is there a time period within which a policy has to be handed over to this person.
With agent hiring becoming a time-consuming process, insurance customers are often left several months without a new agent. Those who are not aware of how simple processes like claim settlement are left in the lurch.
The idea is to have processes in place to ensure that a replacement agent is immediately allotted for an “orphaned” policy. At a time when the regulator is looking to improve the rate of insurance penetration in the country, a seamless transfer of policy servicing is an urgent need.