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Report No. 190 Response to the Proposal in the Consultation Paper 6.1.9 By and large the responses received in relation to the suggestions contained in the Consultation Paper have been positive. The response of FICCI has been that section 38 sub-section (7) should be retained. LIC and Aviva Life Insurance Company India (P) Ltd. have also made a similar suggestion. 6.1.10 Om Kotak Mahindra Life Insurance Company Ltd., has recommended that a clear distinction be drawn between absolute and conditional assignment. They also suggested that the absolute assignee should step into the shoes of the policyholder and be entitled to deal with the policy in any manner, including obtaining a loan, without requiring the consent of the original policyholder. Conversely, the conditional assignee should be barred from dealing with the policy without the consent of the original policyholder. As regards notice of assignment not being given to the insurer, it has been suggested that in such a case the insurer should be permitted to proceed on the basis that no assignment has been made. 6.1.11 The advocate M.K.P. Kannan from Madurai suggests that partial assignment of an insurance policy should be permitted with a stipulation that the insured will not further assign the residual right in the policy. 6.1.12 The National Insurance Academy, Pune (NIA) points out that since there does not appear to be any difference between the two terms 'transfer' and 'assignment', the word 'transfer' may be deleted. Further the term 'assignment' may be defined to 69mean "transfer of right, interest and title under the policy'. The NIA has agreed to the suggestion made in the Consultation Paper that the provisions of this section be extended to all personal lines of non-life insurance business. 6.1.13 The HDFC Standard Life Insurance Company Ltd. points out that section 38 (7) requires to be amended to make it clear that the conditional assignee does not have the same legal position as the absolute assignee. The present provision in section 38 (7) envisages two eventualities: (i) the assignee predeceasing the insured; and ii) the insured surviving the term of the policy. To illustrate, policyholder A assigns a life insurance policy (for a term of 20 years) in favour of B. The stipulation is that if B pre-deceases A, the benefit under the policy will revert to A. Secondly, if A survives even after the period of the policy is over, then also the benefit under the policy would revert to A. It has been suggested this position be made explicit while redrafting section 38 (7). As regards partial assignment, it has been suggested that the change as proposed in the Consultation Paper may not be necessary at all because in any event it is not intended to permit the original assignor (insured) to further assign the residual rights. 6.1.14 The IRDA has during its interactions with the Commission expressed concern about the actual working of the provision relating to assignment and transfers of policies. It appears that there could be certain unscrupulous elements running a racket whereby even lapsed life insurance policies are purchased for a given price and then revived on the expectancy of receiving the sum on maturity of the policy. However, it is feared that since the amount becomes payable upon the death of the policyholder, it may not encourage such purchasers of policies to go to any length to ensure that the amount becomes payable. Some safeguards will have to be built into the provision to prevent the misuse of this facility.    |
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