Unclaimed life insurance benefits exempted from prescription laws

29 November 2012 Association for Savings and Investment South Africa (ASISA)
Peter Dempsey, deputy CEO of ASISA

Peter Dempsey, deputy CEO of ASISA

South African life insurers who are members of the Association for Savings and Investment South Africa (ASISA) have committed to holding and growing unclaimed policy benefits until the rightful owner is found, no matter how long it takes.

Announcing the new ASISA Standard on Unclaimed Assets, Peter Dempsey, deputy CEO of ASISA, says this commitment by life insurers was developed as part of the industry’s focus on treating customers fairly.

Dempsey says the Financial Services Board (FSB) was consulted extensively during the drafting process of the new Standard and supports the initiative.

“This new Standard is significant in that unclaimed assets are not subject to the Prescription Act, which provides for a three-year period within which a debt must be collected.”

The new Standard on Unclaimed Assets, which comes into effect on 1 June next year, replaces the Code on Unclaimed Benefits introduced by the former Life Offices’ Association and adopted by ASISA in 2008. The Code will remain in force until the new Standard comes into effect.

Dempsey points out that while the new Standard currently only applies to unclaimed long-term insurance benefits, the intention is to expand it to include collective investment scheme assets as well as pension fund benefits.

The ASISA Standard on Unclaimed Assets applies the following principles:

  • A customer has the right to unclaimed assets regardless of the timeframe.
  • ASISA members are required to intensify the level of tracing policyholders or beneficiaries in order to minimise the pool of assets that remain unclaimed.
  • Members must make a greater effort to effectively disclose to customers the process to be followed when assets are not claimed and how these assets will be invested until the rightful owner is located.
  • All life insurers must apply the same approach across their risk and life linked investment products.
  • Companies must hold sufficient capital reserves to back unclaimed assets.

Tracing beneficiaries

Dempsey explains that from 1 June 2013, life insurers will be obliged to start the process of tracing policyholders or beneficiaries within six months of the assets becoming payable, either as a benefit or a maturity payment.

If this process does not match the rightful owner with the assets, the life company must repeat the tracing process within a three-year period and again within 10 years if the assets remain unclaimed. If after 10 years the life company cannot trace the beneficiaries or policyholder, an external tracing company must be used. The only time this requirement may be waived is if the assets are worth less than R1 000 and the cost of tracing exceeds the amount available.

In terms of the Standard any reasonable administrative and tracing costs incurred after the first attempt to trace the rightful owners may be recovered from the unclaimed assets.

Effective disclosure

Dempsey says if you buy a life product from 1 June next year, the policy documents need to inform you of the following:

  • That you are responsible for keeping your contact information up to date.
  • The steps that will be taken by the life insurer to trace you or your beneficiaries should your assets remain unclaimed.
  • The administrative, management and tracing fees that may be charged on any unclaimed assets.
  • You will be asked to consent to the life insurer sharing your personal information with a tracing company to facilitate tracing should your assets remained unclaimed.

If you are an existing customer, you can expect your life insurance company to provide you with the information outlined above as part of regular customer communication such as annual benefit statements.

Investing unclaimed assets

Dempsey says irrespective of the source of the unclaimed assets, the life company must make sure that the money is invested in such a way that the policyholder or beneficiary, once traced, receives an amount in line with the expectation created by the risk policy or investment policy contract.

“In the case of investment policies the company must aim to achieve returns in line with reasonable customer expectations across a range of stock market condition,” he explains.

Dempsey says the policy contract must inform the customer how unclaimed assets will be invested in the case of an investment policy or what interest will be paid on any unclaimed risk policy benefits.

He points out that should a life company want to release assets from the reserve account backing unclaimed assets, this money must be used for socially responsible initiatives and may not be moved to the company’s income statement.

Keeping track

The ASISA Standard requires member companies to submit to ASISA once a year statistics on tracing activities conducted and cases that have not been traced within three years. These statistics will be made available to the Financial Services Board (FSB).

Quick Polls


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