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Last Updated : May 18, 2019 09:34 AM IST | Source:

Is it time to relax the seven-year rule for missing persons' insurance payouts?

Insurance companies wait for seven years before settling death claims in case of missing persons

M Saraswathy @maamitalks
Representative image
Representative image

Pratik Vaishnava and his sister Kritika will give their board examinations in 2020. Their mother could not choose a nearby CBSE school in Kanpur because of a tough financial situation. Her husband who was an alcoholic has been missing for the past five years and she has to wait two more years before getting a term insurance claim from the insurer.

Life insurance companies use a seven-year rule in case of a missing person to determine the death of a person. Any death claims filed by the family members of a missing person is stored in the system after a police complaint is filed.

A waiver is only given in case of natural calamities like earthquake, flash floods, landslides or cyclones. Insurance company officials said that the idea was to avoid paying fraudulent claims when the person was still alive. Insurers lose almost Rs 3,000 crore every year due to such frauds.


Claim settlement officers of companies point out cases where family members file a fake missing complaint to get Rs 10-15 lakh worth insurance claims settled. The investigation officers were able to track the person who admitted that he faked being kidnapped to get a claim passed.

Doing a detailed underwriting before a policy is issued can help prevent any fraudulent claims being filed later. The seven-year missing person rule can also be done away with in this case.

Waiting for seven years to get death claims defeats the whole person of buying a pure term life insurance product. In a majority of cases, the person could be dead and the family suffers from financial troubles when the bread earner is absent.

Data from the National Crime Records Bureau showed that out of total 5,49,008 missing persons during the year 2016, a total of 2,29,381 persons were traced and 3,19,627 persons were untraced at the end of the year. While this is the latest official data available, estimates suggest that 50-55 percent missing person remained untraced even after three years.

On the other hand, there are almost 45,000 unidentified bodies every year in India. Considering at least 30-40 percent of these individuals would have taken a basic life cover, their families would have to wait for a long time to get the claims settled.

As a start, insurers could reduce the missing person claim period to three years. Fraudsters would not wait three years for an insurance claim since they are out to make a quick buck. Genuine policyholders, on the other hand, would be benefitted since insurance is the only instrument specifically intended to act as an income replacement for a family without a bread earner.

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First Published on May 18, 2019 09:34 am
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