Insurance companies will be obliged to transfer unclaimed insurance money to the custodian general as of September 2003, an instruction issued recently by Commissioner of Insurance Eyal Ben-Chelouche stipulates.
The custodian general's office estimates the total sum of unclaimed policies at tens of millions of shekels, but sources in the industry have said that the figures are much higher.
One of the main reasons that savers abandon their money is that life insurance policies offered by employers include a severance-pay element as well as an element of retirement benefits and life insurance coverage. When the work relations end, the client receives the severance pay, but is not entitled to withdraw the retirement benefits until the legal retirement age (65 for men and 60 for women), or unless he/she is unemployed for six months. Savers may only withdraw this money immediately subject to a 35-percent tax. Most savers therefore prefer not to make the withdrawal before retirement; but by the time they retire, they often forget that they even had the insurance policy.
Some of the unclaimed money is life insurance that was not collected by the heirs of the insured after his death, simply because they are not aware that any such policy even existed. Ben-Chelouche has now defined a procedure that the insurers must follow to search for the owners of such unclaimed policies. The companies are to contact the insured person, his insurance agent and check the Population Registry of the Ministry of Interior to try to trace the person or the beneficiaries named in the policy.
"One of the reasons why these funds are stuck is that the computer systems used by insurance companies are outdated and unable to track the insured party and his heirs," the CEO of one of the insurance companies explained. "Some clients change their addresses without letting us know, and we have no way of tracing them. So obviously, some of the money stays in the coffers of the insurance companies."
Until funds are transfered to the custodian general, the management fee that insurers will be entitled to collect on unclaimed assets will be limited to 0.25 percent of the amount; until now companies were permitted to charge 0.6 percent, plus 15 percent of the annual profit generated on the invested amount.
A veteran of the insurance industry admits that the insurance companies have so far benefited from the fact that such funds were not claimed, and that the commissioner's instruction in effect eliminates one of their sources of income. However, Ben-Chelouche himself maintains that one of the reasons for his investigation was in fact a request by the insurance companies themselves, which directed his attention to the matter.
This move was probably prompted by the public censure that surrounded the affair of the Swiss bank accounts of Holocaust victims and the dormant accounts that were discovered at Bank Leumi. Insurers apparently realized that their reputations could suffer a serious blow if they took money that was not theirs, even if this was only discovered decades after the fact.
One possible way to prevent policies from being abandoned in the first place is to enable clients to take retirement benefits they have accumulated under a certain policy and consolidate them with the new policy that the new employer takes out for them. Although the commissioner's instructions allow this to be done, insurance agents hinder such shifts since they then lose their commission. Another alternative is to reduce the 35 percent tax rate on immediate withdrawal.
Transferring the money to the custodian general is an unjust solution, one insurance manager says, because eventually these funds "will find their way into yeshivas and other parochial institutions." The right way to go about it, he says, is to force insurance companies to trace their clients and beneficiaries.
A similar problem exists with pension funds and dormant bank accounts. A few years ago, Mivtachim's former chairman, Doron Shorer, launched a comprehensive campaign to trace pension savers and the heirs, and paid out hundreds of millions of dollars that otherwise would not have been claimed.
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