Just coming to terms with the loss of a spouse is daunting enough. But for the surviving spouse to figure out what to do with the insurance money- the death claim that could come her way- can be quite intimidating. The shock gives way to confusion. Many financial experts say that often when a big sum arrives by way of an insurance claim, the nominee tends to put in a low-yielding investment or the money might just lie in a savings bank account that earns hardly anything.
But help is at hand now.
The Association of Registered Investment Advisors (ARIA) has tied up with Kotak Life Insurance to offer help to people- particularly women — who have just got their death claims. Registered investment advisors are financial planners who are registered with the capital market regulator, the Securities and Exchange Board of India (SEBI), and offer investment advisory for a fee. This tie-up is aimed to help nominees of insurance policies that Kotak Life Insurance had issued and where the policyholder has died.
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Lending a helping hand
Renu Maheshwari, a registered investment advisor from Chennai and one of ARIA’s founding members, says that often the nominee is a woman. Life must continue, she says, for the surviving spouse and that’s where guidance is the need of the hour on how to handle the insurance corpus. This, she adds, could run into lakhs of rupees. ARIA will now counsel people on how to manage the money that they received through death claims. Here’s how the arrangement will work.
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Once Kotak Life Insurance pays off the insurance money in a death claim to a nominee, it will connect the nominees to ARIA, which is a growing tribe of around 300 members at the moment. It will conduct an online webinar with those nominees who are willing to attend. ARIA’s senior members (registered investment advisors) will conduct these sessions — once a month to begin with, Maheshwari says, but could go up to twice a month — wherein they’ll explain the nuances of financial planning.
Eventually, participants have a choice to enrol with an advisor, but there’s no compulsion if they want to go on their own.
Not just investments
Elaborating on the need for a helping hand, Subhasis Ghosh, Joint President & Head - Financial Institutions, Employee Benefits, Marketing & Alliances, Kotak Mahindra Life Insurance, says that it’s not just about investments that nominees are bothered about. There could be investments made by the deceased spouse that the surviving spouse doesn’t know about. “An unpaid credit card bill running into thousands or worse, lakhs, might just show up. There could be a loan taken by the deceased spouse that needs to be repaid because creditors or loan recovery agents have shown up…it could be anything,” says Ghosh.
He says that insurance claims went up sharply during the peak of the Covid-19 pandemic. In 2021-22, the insurance industry paid a sum of Rs 48,081 crore as death claims, up from Rs 28,227 crore in 2020-21, a jump of 70 percent. “Covid-related deaths were sudden; like accident death. If it’s a long-term illness, then at least you can prepare yourself for the eventuality. But when the death is sudden, you are left unprepared and often don’t know what to do,” says Ghosh. That’s where, he says, ARIA comes to help.
Ghosh estimates that close to 90 percent of the death claims go to the woman of the house.
The roadmap
Maheshwari says that the project will go live in the first half of 2023 when the counselling sessions start. The good news is that sessions are free and so would, most probably, be a single follow-up individual counselling session to clear any specific doubts that individuals might have. After this, the individual would be given a choice to enrol with a registered advisor, who is part of ARIA. Here, a fee would be involved, just like any regular client.
What needs to be seen is how regularly ARIA can conduct these sessions. Says a mutual fund distributor: “The premise looks very interesting and if conducted diligently, these sessions can be of great help. The only thing to watch out for is that this shouldn’t be an exercise to get new clients for the advisor associated with these sessions.”
At the moment, ARIA has only tied up with Kotak Life Insurance. If the project takes off then it might also tie up with other insurers.
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