According to experts there are billions of rands sitting in unclaimed insurance, investment and funeral policies, pension funds and provident funds. The extent is so large that accurate figures are difficult to obtain as this is spread across many product providers. This is significant cash, so why do people walk away from the money that is due to them? Some of the most obvious reasons include non-notification of a change of address, forgotten or unknown policies, Intestate estates, a lack of resources to trace the policies, deceased estates and red tape.
Another root cause is that the individual allows a policy to lapse. A lapse occurs when the policyholder stops paying premiums before the fund value exceeds the unrecovered costs meaning that the paid-up (or surrender) value is zero. Often people are unaware of the value of their policies and they feel they are not losing anything if they simply stop paying due to financial pressures.
During the first half of 2011 a total of 2.5-million policies were lapsed – 1.3 in their first year and 1.2 in their second year. In the second half of 2010 2.6-million policies were lapsed and 2.7 million in the first half of last year.
These statistics are startling and something needs to be done industry wide to put money back in the pockets of the policy holders. Up until recently it has been difficult if not impossible for the individual to easily access their policy details. Due to the long term nature of insurance policies people often misplace the policy documents and even forget which company they bought them from. This has been a massive contributor to lapses.
Many individuals do not feel comfortable approaching a broker for help, nor do they have the time to sift through mounds of documents and make numerous phone calls to disinterested call centre agents. The launch of VeriFi, the online tool that gives policy holders the ability to download a comprehensive report on all their policies, will go a long way to helping people manage their portfolios more effectively.