Pay no premium, but remain insurance covered – why a business idea has LIC in knots

Assignment of Life Insurance Policies is an accepted norm in many countries

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How about a facility where you don’t have to pay your insurance premium, but continue to get the coverage benefits?

Seriously, ALIP or Assignment of Life Insurance Policies is an accepted norm in many countries, whereby policy holders get a way to receive the surrender value of their endowment insurance policies while keeping their life cover benefits intact by assigning their policies to a third party.

Mumbai-based firm Aceso deems to do exactly that with its ALIP service—though Life Insurance Corporation of India (LIC) recently came out with a circular that the state-run insurance behemoth is not associated with such entities.

Ironic, considering Aceso’s ALIP service is presently limited only to policy  holders of the very same LIC.

But Aceso officials are unfazed, and say it is business as usual. Aceso founder and director Ketan Mehta pointed out that as many as around half of LIC’s policies don’t reach maturity due to surrender or lapses. “ALIP addresses this by offering an alternative to surrendering  policies prematurely, allowing policyholders to access their policy’s value while safeguarding their future life coverage.”

ALIP is quite common in countries like the UK, Singapore etc., though in India, Aceso says it is the only company working this provision, and claims it will have immense scope once it catches on in the country. ALIP means that once a policy holder transfers their policy to an ALIP service provider like Aceso, they need not pay the premiums any longer but will continue to enjoy the coverage benefits. The ALIP service provider then becomes eligible to receive the maturity proceeds or death benefits, as the case may be, while the policy owner gets an amount equivalent to the surrender value that they would have got from LIC anyway.

The scope indeed is huge, as the value of surrendered policies of LIC last year alone came to 1.33 lakh crore rupees. 

However, the state-run corporation did throw a spanner in the works. “Related to entities offering to acquire (by sale, transfer or assignment) policies as an alternative to surrendering...we want to clarify that LIC is not associated with any such entity,” said a statement released by LIC on June 24. It added that “Any sale/transfer or assignment of LIC policies need to be undertaken in accordance with the Insurance Act 1938. Under applicable laws, LIC may decline to act upon any assignment of policies whereas LIC has reason to believe such transfer or assignment is not bona fide.”

However Aseco officials claim that as per a Supreme Court judgement in 2015, it was clear that policy holders had a right to assign their insurances. An insurance policy is an object of property of a citizen and can be transferred as per laws relating to property and is not necessarily governed by the Insurance Act or IRDA, they pointed out. 

Aseco officials also argued that despite the LIC circular, claims made by them on behalf of assignors were being honoured by LIC anyway. 


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