Orphan Policies increase the risk of Unclaimed Policies

What makes it even more likely that an Insurance policy may go unclaimed  ?

Orphan Policies 

To clarify, Orphan policies do not relate to coverage for Orphans but rather to the fact that over time, lots of policyholders become “unattached” to a servicing agent. The policy holders become Orphans in a sense.

A recent article from  Insurance Business entitled Orphan Policyholders – How many are there ? noted :

Life insurance

Statistics vary about how many policyholders are orphans with figures being reported as high as 50 per cent for some companies. In an economic downturn more agents tend to leave the business, which creates more orphans. This suggests that the number of orphans likely has increased over the last several year.

 

The same article notes a recent survey conducted by Toronto based NewLink Group that estimated orphan policies being as high as 36% of personal life policy holders in Canada and 29% in the U.S. Orphan policies are more likely to be those purchased from a life agent/broker (41 % in Canada & 39% in the U.S.) as compared to those purchased from a financial planner or advisor (18 % in Canada & 22 % in the U.S.)

Whats at risk when a policy becomes orphaned ?

  • Beneficiary changes
  • Address changes
  • Insurance policy maturities as well as
  • Awareness of an actual claim occurring

A major gap develops when individuals and families may no longer have a direct contact with their contract provider by way of servicing agent. Unclaimed policies are more likely to be at risk of becoming unclaimed.  Orphaned policies may provide another reason why industry experts have estimated that Unclaimed policies may be as high as 20-30% of all life insurance policies