No secondary trade of LIC’s lapsed policies

Fearing cannibalisation of its new business, the Life Insurance Corporation (LIC) has totally banned high potential secondary market transac...

Fearing cannibalisation of its new business, the Life Insurance Corporation (LIC) has totally banned high potential secondary market transaction in any of its lapsed policies (policies which are inoperative due to non-payment of premium), practically nipping in the bud a market of Rs 3,000 crore.

The secondary market for tradeable insurance policies (TIP) in the life insurance segment is a new concept in the country where the original policy holder manages to sell his lapsed policy to another buyer (who may be an individual or an institution) with a bit of discount who revives the policy and receives all the returns and benefits of the policy the original buyer is entitled for.

State-owned LIC, which has almost over 70 lakh lapsed policies with a premium value of Rs 2,500 crore, has surprisingly issued a circular to its branch offices banning any transaction of these

lapsed policies.

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Confirming the development, a top official of the Corporation said the step is necessary now as it would have affected sales of new policies.

“A domestic secondary market for life insurance policies is non-existent in the country,” he added. Market sources point out that a big market for the lapsed tradeable life insurance policies would not augur well for the LIC immediately though the Corporation would have benefited once again by reviving the premium flow of dead policies as these lapsed policies are comparatively offering high return than the new policies. A three-year old lapsed policy of LIC, which can be traded in the secondary market, can offer a guaranteed return of almost 12 per cent, whereas currently, LIC does not have any guaranteed policy and returns from any of its policies are not beyond 4-5 per cent.

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