LIC To Take Legal Action Against ACESO Over Policy 'Trading'
The Life Insurance Corporation (LIC) of India is gearing up for a second legal battle over trading in insurance policies against ACESO, a firm that claims to be an asset monetiser. LIC argued that transactions like this endanger policy buyers to losses and called the practice illegal.
Founded by chartered accountants Ketan Mehta and Himanshu Ashar, ACESO offers a service called “Assign Your Life Insurance Policy” (ALIP) and claims that it benefits policyholders and insurance agents. LIC argued that ACESO’s practice of buying LIC policies from policyholders undermines commissions for agents.
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While doing so, the Mumbai-based firm pays policyholders more than the amount they would get from surrendering the policy to LIC. Since agents continue to receive commissions, they support the practice.
However, LIC argued that such trading practices violate the core purpose, to protect policyholders, of insurance. The insurance company expressed concerns over a policy being assigned to firms like ACESO where it is unclear who would receive the death benefit. This would expose policyholders to risk, argued LIC.
Around twenty years ago, another company bought lapsed insurance policies, which led to LIC declaring them invalid. However, the Supreme Court ruled against LIC.
Notably, policy holders receive the surrender value of their endowment insurance policies while keeping their life cover benefits intact by assigning their policies to a third party under ALIP. The service is popular in countries including the UK and Singapore.
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Earlier, Mehta highlighted that more than half of LIC’s policies do not reach maturity due to surrender or lapses. The value of surrendered policies of LIC last year is estimated to be Rs. 1.33 lakh crore, as per The Week.
