All you need to know about Aceso's ALIP scheme and why LIC is opposed to it

These days, the advertisement of a company named Aceso is much discussed on social media and in newspapers. It is claimed in this advertisement that insurance coverage can be availed even without paying an LIC premium. This claim is being made under Aceso's new ALIP (Assignment of Life Insurance Policies) scheme, which has been recently launched in India.

What is the ALIP scheme?

According to Aceso, the policyholder gets an amount equivalent to the surrender value on assignment and continuity of benefit of life coverage. All endowment type of life insurance policies including money back policies come under this ALIP scheme, according to the company.

What does Aceso claim?

Under the ALIP scheme, Aceso claims that if a policyholder surrenders his LIC policy, Aceso will give them a better surrender value from LIC within 48 hours. The insured will continue to enjoy insurance coverage even after surrendering the policy, and the nominee will receive the amount after his death.

For example, the policyholders assign their policy to a service provider like Aceso. After this, Aceso pays the remaining premium of that policy, from which the agent continues to earn income on commission. If the policy matures during the policyholder's lifetime, the insured receives nothing, and Aceso receives the entire maturity amount.

What LIC says

This service is currently available only for LIC policyholders. However, LIC has strongly opposed the ALIP scheme and rejected its claims. On June 24, LIC issued a statement clarifying that LIC has no connection with any entity like Aceso that acquires policies (through sale, transfer, or assignment). LIC has also said that it can reject any assignment if it believes that the assignment is not in good faith.

On August 13, LIC ran advertising in national newspapers warning policyholders against transferring their policies to third companies (such as ACESO).

LIC maintains that the act falls under the realm of ‘trading of policies’, which is not permissible under the law.

“Certain unregulated entities may be seeking to benefit at the cost of LIC’s strong market position and sovereign guarantee, without any authorisation or approval from LIC and at the cost of policyholders’ interests,” the LIC’s advertisement says. 

“LIC believes that these products and services may pose a significant risk to policyholders’ and their families’ interests…are fraught with risks and may be prone to being misused,” the advertisements claim.

The reply followed ACESO's commercials on August 5, which invited LIC policyholders to assign their endowment or money-back policies to the business rather than relinquish them to LIC. The life insurance behemoth claims that this constitutes 'trading' of plans, which is prohibited by the Insurance Act of 1938 (as revised in 2015).

According to LIC Chairman Siddharth Mahanty, a scheme like ALIP defeats the basic purpose of insurance and is not in the interest of policyholders. Because it is not clear who will receive the death benefit – the nominee or the assignee company. This creates uncertainty, which militates against insurance and the protection it provides to policyholders.

According to sub-section 2 of section 38 of the Insurance Act, "An insurer may refuse to accept or act on any transfer or assignment where he has reason to believe that such transfer or assignment is not in good faith, or would prejudice the policyholder or the public interest." Not in, or in the business of, insurance policies."

Now it remains to be seen what is the future of Aceso's ALIP scheme, and what impact this opposition of LIC has on this scheme.