First let us look at the meaning of “Orphaned Policies”. It is common in Insurance business that today who used to say as full time agent or adviser of particular life insurance company may switch his profession due to competitive business or finding any other lucrative profession than Insurance advisory. In that case persons who took policies through him may some time miss the premium paying cycle. If the premiums are not paid within the grace period then policy will be in lapsed condition. It is not only premium paying reminders which you may miss but also the services he used to provide like; switching in ULIPs, surrender, loan, nomination change, address change and claims in case of policy holders untimely death. So agents or advisers role is very much important when it comes to after sale service in insurance policies. But if agent who sold you the policy, either left the industry or terminated from the insurer whom he is representing then your policy will miss that service part. Such policies are called “Orphaned Policies”. For your information around 3,38,891 agents left the life insurance industry in the year 2011 (IRDA report 2010-11)
To serve such policies and reduce the lapsation ratio of insurers, IRDA came up with guidelines. Let us look at these guidelines and how they can be useful for you.
1) From now onwards your insurance company is allowed to allot such “orphaned lapsed policies” to another agent. But that allottee agent’s agency must be completed atleast 2 years (means he must be in insurance industry for atleast 2 years). But remember your policy must be in “orphaned lapsed policy” condition to get new agent to serve you. So if you are paying premium regularly within the grace period then even though your agent is no more in this industry, you will not get such facility by your insurance company. As per IRDA lapsed policies are those policies where premiums not paid even after six months from the due date.
2) Single premium Life Insurance policies, Life Insurance policies on which no further premiums are due for payment and online policies (as their is no agents role is required) are not eligible to avail such facility.
3) This allotment to new agent will be informed to you. New allotted agent may canvass new policies to you and get new business from you. But if you surrender the allotted policy before revival then the allotted agent will not be eligible to get the new business for next 6 months from the date of surrender. This measure is taken to serve the orphaned policies rather to close existing policy and get new business from you.
4) New allotted agent will get the future commission on the premium what you pay. Also he is eligible for the commission on the arrears what you pay to reinstate the lapsed policy.
To allot these orphaned policies to new agents for your service, IRDA given few guidelines to insurance companies too. Few of important guidelines are as below.
A) The number of policies that were allotted to this new agent shall not exceed 20% of the total number of policies that were introduced by him and in force as on the date of allotment.
B) Insurance companies need to check this new agents track record for complaints registered against him before allotting orphaned policies.
C) If the allotted policy is not revived within 6 months then insurance companies have rights to re-allot to the new agent.
In my view IRDA taken a good initiative to reduce the lapsation of policies.  But I have not found a single guidelines related to  for example-what will happen if your allotted agent not help you in other service related issues. IRDA only concentrated on premium collection and reducing the lapsation ratios of insurance companies. But servicing to policies will also includes like; providing good service during the time of surrendering the policies, getting loans, switching in ULIPs, nomination change, address correction and death claims.
