Exiting your insurance? This expert suggests selling instead of surrendering

livemint.com:

Ketan Mehta is a patient man. After establishing a business for buying and selling life insurance policies in 2002, the chartered accountant (CA) spent a decade (2005-2015) embroiled in litigation. LIC, India’s largest insurance company, opposed the idea of a 'secondary market' in insurance and did not cooperate with Mehta. 

Perhaps influenced by LIC’s stance, the government amended the Insurance Act, 1938 in 2015 to discourage ‘trading’ in insurance policies. 

Mehta approached the Supreme Court to clarify that a ‘one-time assignment’ was not considered ‘trading’ in life insurance. The court ruled in his favour saying that a ‘one-time assignment’ was not considered ‘trading’ in life insurance.

However, a secondary market of life insurance policies where multiple trades could happen could not be allowed. The Supreme Court judgement came in December 2015, but a bill passed in Parliament had already empowered insurance companies (via March 2015 amendments) to reject assignment requests if they were deemed not bona fide, not in the interest of the policyholder or public, and intended for trading the policy, explained Sanket Kawatkar, a fellow of the Institute of Actuaries of India and director at Wisdom2Wealth, a financial awareness firm. 

Now, as the founder-director of Aceso Endowment Services, Mehta has set up a trust structure to facilitate the sale (assignment) of insurance policies. He targets the nearly ₹1.33 trillion worth of policies surrendered in 2023-24, which he believes could have been sold instead. 

According to Mehta, policyholders looking to surrender can sell their policies to his trust (with Aceso as the settlor). Mehta would pay them the surrender value and a part of the death benefit as an incentive.