The Supreme Court on Monday admitted a couple of petitions filed by the Life Insurance Corporation of India challenging the trading of life insurance policies in the secondary market. While LIC is opposing trading or mortgaging of its policies sold to policy holders, private players, which buy insurance policies from policyholders and then sell it to banks and financial institutions, are claiming that such trading was legal. Admitting the petition, a Bench headed by Justice Markandey Katju directed that the issue be decided expeditiously.
LIC’s petition assumes importance as such trading, if it gets legal sanction, would boost the growing business of assigning insurance policies. Acquisition and life insurance policies trading is a profitable business abroad ? the US market is pegged at $143 billion (Rs 5,72,000 crore) and the UK market at ?2 billion.
Challenging the Bombay High Court judgement that ruled in favour of trading LIC policies, LIC said such illegal trading was opposed to the public policy and defeated the very object of the insurance policy. It contended that the business would be detrimental to the interest of the policy holder as well as take away the security net provided for the widow or the dependent.
?None of the assignees has any insurable interest either at the time of the first purchase of the policy from the original policy holder… Such trader?s desire is to obtain the benefits of the policy at the earliest on the demise of the life assured or the maturity of the policy,? LIC counsel A V Rangam said in its petition.
However, private players – Insure Policy Plus Services (India) Pvt Ltd (IPPS), a Mumbai-based bulk trader in acquiring lapsed insurance policies, and Bachraj Finance Pvt Ltd are opposing LIC’s plea on the ground that the policyholder loses all the benefits under the policy including the death benefit.
?The assignment recorded is only for the financial value of the policy and the status of the policy whether live or lapsed has no relevance as no other benefits are accrued to the new assignee,? IPPS has stated.
Stating the job carried out by its registered company was legal, IPPS said, ?The company acquires only endowment and money-back policies issued by LIC and the policies, which constitute 80% of its business, are purely in the nature of investments as the policyholder is entitled for bonus as an investment return on policy.?