LIC sees red over policy 'trading' by ACESO, to take legal action
Life Insurance Corporation of India is preparing for a second legal battle over trading in insurance policies, something the insurance behemoth says is illegal, arguing that such transactions threaten to hit at the root of the industry and expose policy buyers to losses.
India's biggest insurer is seeking to challenge legally the campaign by ACESO, a company that claims to be an asset monetiser and focused on buying up LIC policies, said officials aware of the plans. It is luring policyholders to transfer their rights to it for a consideration instead of surrendering them.
ACESO, founded by two chartered accountants — Ketan Mehta and Himanshu Ashar — is offering ALIP or Assign Your Life Insurance Policy. This it says is based on a legal contract which is permissible under the law. It brings double benefits to those involved in the insurance policy — the agents and the policyholder. When assigned, ACESO is said to be paying more than what LIC would have paid and the continuity of commissions for agents.
This carrot of continued commissions is a big draw where the agents themselves are turning against the interest of LIC which is the primary source of their income. For policyholders who get a raw deal when surrendered, in many cases, less than half the premium is paid because a big chunk of their payment goes to agents as commissions.
But LIC says the practice is illegal.
«This defeats the very purpose of insurance and is not in the interest of policyholders,» said Siddharth Mohanty, managing director of LIC.
