DONE BY,

VARSHA S. PILLAI
15BLB1044
 MEANING OF ASSIGNMENT
• “Transfer of interest from one to another is called assignment. In insurance also when rights and obligation
under the contract are transferred from one to another, the same is called assignment of the policy. There
can be another assignment in insurance which is assignment of benefits under the policies.
• In insurance the assignment means assignment of rights under the contract. An assignee for all purposes
becomes the owner of the policy and enjoys all rights thereunder. However, by assignment no change is
made in the subject matter insured by the policy and it remains unaltered.”
• Assignment of policy and assignment of benefits are quite distinct.
• Whereas in the case of assignment o all the rights and obligations are transferred, in the latter only benefits
(i.e. money due under the policy etc) are transferred ( survival or death benefits).
• Assignment Clause is expressed in section 38 of the Insurance Act, 1938. The
policyholder who assigns the policy (transfers the rights) is known as “Assignor” and
the person to whom the policy is assigned is known as “Assignee”. After the
assignment of the life insurance policy, the assignor loses his rights over the policy
and the assignee becomes the owner of the policy.
• It is everywhere assignable except as restricted by law, by the provisions of the policy,
or by collateral agreement.
 PRINCIPLE OF ASSIGNMENT- IN
INDIA
• The principle of assignment as recognized under Indian law and affirmed and applied by Indian courts—derives its
origins from English law.
• Common law systems have favoured freedom of assignment, such that when there is no express prohibition
against assignment in a contract, then assignment should be freely permitted. However, courts in India have taken
a different view—in the absence of a specific clause restricting transfer of a contract, the intention of the parties
has to be taken into account, which can be gathered from the nature of the agreement and the surrounding
circumstances. Where a contract is silent or incomplete as regards the parties’ intention concerning assignment,
one will have to rely on the provisions of the Indian Contract Act, 1872, and the principles of assignment enshrined
therein.

• The judicial trend in India has reiterated this position and laid down that rights under a contract are capable of
assignment unless (a) the contract is personal in nature; or (b) the rights are incapable of assignment either under
law or under an agreement between the parties.

• Khared and Co. Ltd v Ramon and Co. Pvt. Ltd, observed that, as a rule, obligations under a contract cannot be
assigned except with the consent of the promisee. Where such consent is obtained, it will be considered as a
deemed novation, resulting in the substitution of liabilities and obligations to the assignee.
 NOMINATION V. ASSIGNMENT
• Nomination is appointing some person(s) to receive policy benefits only when the policy has a
death claim. Whereas Assignment is transfer of rights, title and interest of the policy to some
person(s) by the insurer for the death or surviving benefits.
• Nomination is done at the instance of the insured whereas in case of assignment of a life
insurance policy, along with the instance of the insured, consent of insurer is also required.

• Nomination can be changed or revoked several times whereas assignment is done once or twice
during the policy period. Assignment can be normally revoked after obtaining the "no objection
certificate" from the concerned Assignees. Further, an assignee under a life insurance contract can
re-assign the policy to the original owner.
 PURPOSE OF ASSIGNMENT
An assignment of a life policy is a document or action which is effective to transfer the ownership
of the policy from one person to another. Assignments may be made for a variety of reasons,
including:
• Sale of exchange;
• Gift or voluntary transfer;
• Settlement, transferring the policy to trustees to give effect to successive or contingent interests;
• Transfer to existing trustees of a settlement or to beneficiaries in pursuance of the trusts;
• Mortgage; transfer of mortgage; or reassignment on repayment; or
• Assignment to a trustee for the benefit of creditors.
• A life policy can also be unconditionally or absolutely assigned either as a gift or under a contract
of sale. Such an assignment is absolute and does not leave any residual rights with the assignor.
 TYPES OF ASSIGNMENT OF LIFE
INSURANCE
• Absolute Assignment means complete Transfer of Rights. Hence Absolute Assignment means
completely transferring whole and sole rights of the policy from the Assignor to the Assignee without
any further terms and conditions applicable. The process of assignment is complete only when the
original Policy Document has been endorsed or a fresh Policy Document has been issued in favour of
the Assignee.
• Procedure: The Assignment must be in writing and a notice to that effect must be given to the insurer.
Assignment of a life insurance policy may be made by making an endorsement to that effect in the policy
document (or) by executing a separate ‘Assignment Deed’. In case of assignment deed, stamp duty has to be
paid. An Assignment should be signed by the assignor and attested by at least one witness.
• Once the formalities prescribed by section 38 of the Insurance Act 1938 are completed, subject to the terms
and conditions of the transfer, the insurer shall recognize the assignee as the only person entitled to the
claim under the policy. The assignee steps into the shoes of the assignor, in the sense that he will not only
be entitled to all the rights of the assignor but will also be liable to all the duties of the assignor towards the
insurer. Thus section 38 of the Insurance Act, 1938, implies that the ownership rights of the life insurance
policy can be legally transferred in the name of a third party in exchange for money value. The law approves
the selling of insurance rights to a third party.
• Also, the provisions under section 38 of the Act is clearly recognised to be substantive and not merely
procedural in nature by the Bombay High Court.- Judgment 2007 on Writ Petition No.2159 of 2004.
• According to section 38, Insurance Act 1938, Section 38(1) Mode of Assignment and Execution: A transfer or
assignment of a policy of life insurance, whether with or without consideration, may be made only by an
endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by
the assignor or his duly authorized agent and attested by at least one witness, specifically setting forth the
fact of transfer or assignment.
• In India the assignment must be in a written mode-38 (1). Attestation has special significance and is much
more than merely witnessing the document, because if the assignor does not accept the execution of the
document, S. 68 of the Evidence Act states that the one attesting witness is called to prove the execution.
• Section 38(2) Notice of Assignment: The transfer or assignment will be complete and effectual once the
execution of such endorsement is duly attested. But it would become operative only after a notice in
writing of the transfer or the endorsement or its certified copy is delivered to the insurer
• As per section 38(3), the insurer upon receiving the notice is required to recognise the transferee or
assignee named in the notice as the only person entitled to benefit under the policy even though the
assignment is not registered immediately.
• Section 38(4) requires the insurer to record the assignment along wit date of transfer and the names of
the parties.( upon receiving the notice of assignment)
• The assignee shall be subject to all the liabilities and equities to which the transferor or assignor was
subject at of date of the transfer or assignment and may institute any proceedings in relation to the policy
without obtaining the consent of the transferor or assignor or making him a party to such proceedings, this
is been mandates under section 38(5) of the Act.
• If there are more than one instrument of transfer/assignment, the priority of claims shall be governed by
the order in which the notices are delivered to the insurer.
• Section 38 (6) states that the provisions of the Act would remain inapplicable to the cases of
transfer/assignment which was effected before the commencement of the Insurance Act, 1938.
 TYPES OF ASSIGNMENT OF LIFE
INSURANCE
• Conditional Assignment – Under this type of assignment, the transfer of rights will
happen from the Assignor to the Assignee subject to certain conditions. If the
conditions are fulfilled then only the Policy will get transferred from the Assignor to the
Assignee.
• Section 38 (7) rendered valid any assignment made with the condition ‘that it shall be
inoperative or that the interest shall pass to some other person on the happening of a
specified event during the life time of the insured.
• Such an assignment commonly happens when an insured under an own life policy uses
the policy, which is a valuable piece of property, as security for a loan and assigns it to
the creditor. This usually takes the form of a conditional assignment whereby the policy
would be reassigned to the insured once he has paid all his debts. Banks and other
credit-giving institutions which lend huge sums of money to individuals normally insist
that the borrower takes out a policy on his life and assigns it to them as security for the
loan.”
• Any type of life insurance policy is acceptable for collateral assignment, provided the insurance
company allows assignment for the particular policy. A permanent life insurance policy with a cash
value allows the lender access to the cash value to use as loan payment if the borrower were to
default.

• The borrower must be the owner of the policy, but not necessarily the insured, and the policy must
remain current for the life of the loan with the owner continuing to pay all necessary premiums
• AMENDEMNT: With the addition in Insurance Act 2015, an insurer has the right to accept or
decline assignment of the policy. This addition in the insurance act was made because of the
use of assignment of life insurance policy as a profit making business. Trading of life insurance
policy is strictly banned and is considered illegal. If the insurer finds that your reason of
assignment is not genuine or is forceful then they will decline your assignment request.
 ASSIGNMENT OF LIC POLICIES
• Features:
1. Assignment can be done only after purchase of a policy
2. Assignment is applicable to all kinds of insurance plans except pension plans
3. Assignor should have complete ownership of the policy. The life assured is minor of is not the policy
holder or proposer, does not have any rights over the policy, hence cannot assign the policy
• After assignment the assignee gets complete ownership and rights over the policy including death
benefit. He can even surrender the policy
4. Assignment can be done towards a person or an institution
5. Insurer has to record the fact of the assignment in their record
6. Assignment once made cannot be cancelled. Policy can be re-assigned in the name of the life
assured.
7. The policy would be re-assigned to you and the repayment of the loan. A fresh nomination should be
done after assignment of the policy
• Documents Required:
1. Original bond paper (for pasting endorsement)
2. KYC Documents
3. Notice
4. Assignment form 3855
5. Re-assignment form 3848
Process: endorsement or assignment deed and notify to the insurer who registers it the
records.
The date on which the notice of assignment is delivered to the insurer shall regulate the
priority of all claims under a transfer or assignment.
 RESTICTIONS
• Restrictions upon the power to assign are frequently found in policy
contracts.
• Sometimes there is in the policy an absolute prohibition of any assignment of
it. It is interesting to note that such a provision has been held inoperative
where the regulatory law declares that life insurance policies shall be
assignable.
• Further the clause restricting the assignment of an insurance policy can be
waived by the insurer or can be amended upon equitable agreement.-
Cook v. Cook, 111 P. (2d) 322 (Cal. 1941)
• A contract of insurance constitutes a highly personal contract and as a general rule, such a
contract is generally not assignable
• The insured has an insurable interest in his own life, he may transfer a policy taken out by him in
good faith upon his life, to anyone he chooses either with or without an insurable interest; and
that continuity of insurable interest is not necessary, and, therefore, in all cases where the policy
when issued is based upon an insurable interest in the life of the insured, it may thereafter be
transferred to anyone even though the assignee has no insurable interest in the life of the insured.
• However, if the policy is taken out by the insured pursuant to an agreement or understanding that
it is to be assigned to one having no insurable interest, it will be considered not taken out by him in
good faith and not supported by the insurable interest insured has in his own life, and as a mere
attempt to evade the requirement of insurable interest and a wager upon the life of the insured
and, therefore, invalid.
• Wagner v. National Engraving Co., 307 Ill. App. 509, 30 N.E. (2d) 750 (1940)
 ISSUES
• “Insurance companies are frequently presented with conflicting claims advanced by the
original beneficiary and a subsequently designated beneficiary or assignee. Rather than pay to
either one at its peril, it is the practice of insurance companies to bring both claimants into a
law suit, deposit the money into court and leave the two claimants to fight the matter out
themselves.”
• Reassignment: Second issue arises when the owner of the insurance policy, after repayment
of the debt or loan received through assignment, forgets to get the insurance policy re-
assigned to himself. And during this course, if he dies, the question is again taken to the
Courts causing difficulties to the dependents