Memorandum submitted by the Investment
& Life Assurance Group (ILAG)
1.1 ILAG welcomes the opportunity of sending
this position statement to the House of Commons Treasury Select
Committee on its current inquiry into unclaimed assets within
the financial system.
1.2 The Investment & Life Assurance
Group is a professional representative body in the UK concerned
with the future of the investment, life assurance and pensions
industry. It is led by practitioners and aims to identify and
develop industry good practice. The Group currently has a growing
membership of around 50 practitioner companies and associate members.
In addition, a number of individual members are affiliated to
1.3 It is customary for life insurance companies
to offer a mixed portfolio of products including standard life
assurance/protection, personal/occupational pension plans and
savings/investment funds (with life cover). In outlining our basic
approach to an unclaimed assets scheme below, references made
to life insurance companies should be construed as relating to
their whole range of products.
1.4 Our basic approach to the potential
application/ extension of an unclaimed assets scheme is as follows:
2.1 We believe that in operating a central
or national scheme specific criteria be drawn up and adopted from
the outset, namely that:
firms' participation should be voluntary
rather than compulsory;
the period for determining unclaimed
assets is extended significantly beyond 15 years of "no customer
firms should not be financially disadvantaged
in having to meet late claims where the associated assets have
otherwise been disbursed.
2.2 Many firms take seriously their social
and corporate responsibilities by sponsoring or making regular
donations to charitable and welfare projects either within local
communities or on a wider scale. It would be regrettable if these
individual actions were to be prejudiced in any way by the operation
of a universal scheme of asset disbursement. Hence for this reason,
as well as other operational factors, participation in the latter
by insurance companies should be of a voluntary nature subject
to any overriding governance issues.
2.3 In general, the insurance sector is
very pro-active in its attempts to identify/locate policyholders
both on an individual basis and in some cases in a collective
manner by posting their identity on the Unclaimed Assets Register
2.4 However the task and cost involved for
insurers in tracing claimants should not be underestimated on
account of the varying length and duration of life policies, residential/geographical
mobility, and the reality that in most cases contact between insurer
and policyholder during the lifetime of the policy will have been
2.5 Practical experience amongst firms points
to a steady stream of claims being received many years after the
last premium was paid often when relatives discover old policies
belonging to the deceased policyholder. Where however it has not
been possible to trace the holder the policy must still remain
"live" for a considerable period to reflect the possibility
of that person attaining maximum age ie 110 years of age.
2.6 Insurance firms retain legal and financial
liability for paying out on eventual policy claims even if assets
have been disbursed elsewhere. In this context, firms will either
need some form of financial indemnity to protect themselves against
"loss of assets" or reimbursement provision where the
assets have been transferred to an outside disbursement agency.
3.1 We note previous proposals by the Commission
for Unclaimed Assets to set up "A Social Investment Bank"
to handle the disbursement of unclaimed assets for appropriate
3.2 Whatever type of organisation is finally
agreed and set up, such a body should be responsible for both
the collection and disbursement of assets in order to minimise
administrative costs. Equally, if the Government supports the
scheme then it should fund the establishment costs of the organisation
which thereafter should function on an independent basis.
3.3 As part of the Government's commitment
to the scheme we believe that the criteria for aiding eligible
projects should be limited to those designed to promote financial
inclusion. Within this wide arena, proper scrutiny procedures
need to operate to ensure legitimate applications and usage of
monies to maintain scheme credibility.
4.1 We are aware of similar schemes in other
countries but do not have any evidence to submit in helping to
identify best practice. However it is important that before any
decisions are taken in the UK both the methods of operation and
working experiences of other national schemes are fully assessed
5.1 Any central or national scheme should
provide for voluntary rather than compulsory participation by
insurance firms (to reflect the additional operational difficulties
that would otherwise face mutual insurers and insurance companies
with closed funds).
5.2 Precise definition of the term "unclaimed
assets" is required in relation to the life insurance sector.
Only money that has built up under an individual policy-holder's
insurance planwith the intention of being paid out either
at the end of a specified period or on the policyholder's deathand
remaining in the insurers' custodianship in the absence of a claim
should be the only type of insurance asset capable of being defined
as "unclaimed". Accrued funds held in inherited estates/
orphan assets and used as firms' working capital shall be excluded.
5.3 The time-frame for determining "unclaimed
assets" in respect of life insurance policies shall be (a)
a period of 30 years from the date on which the insurer last had
contact with the policy-holder or (b) in the case of a policy
the benefits under which are payable only in the event of death,
when the youngest person insured by that policy would have attained
the age of 110 years (based on longevity data and firms' working
5.4 Within a national scheme, the collecting
and disbursement arrangements should be vested in one organisation
(thus minimising operational and money transfer costs) established
with start-up funding from Government.
5.5 The principal target area for the use
of unclaimed assets shall be projects designated to address financial
exclusion (an area recognised as a Government priority).
5.6 As the legal and financial liability
for meeting late claims has to remain with life insurance companies
any national scheme should provide for companies to be reimbursed
from the assets held in the central fund or for arrangements to
be made whereby the liability can be reinsured externally.
6.1 ILAG believes that a properly defined,
organised and controlled scheme on unclaimed assets could operate
in the UK complementing the financial contribution that insurance
companies already make to worthy social and charitable projects
on a local and wider basis. We would therefore be ready and prepared
to participate in further discussions with interested parties
should it be decided to extend such a scheme across the field
of financial services.