Simplified Overview of ACESO's ALIP Program

Introduction to ALIP

ACESO has launched a program called Assignment of Life Insurance Policies (ALIP), designed specifically for policyholders of the Life Insurance Corporation of India (LIC). This program is aimed at helping those who are considering surrendering their policies or have policies that are about to lapse. ALIP allows policyholders to receive the surrender value of their endowment insurance policies while still keeping their life cover benefits.

Key Features of ALIP

1. Surrender Value: ALIP provides policyholders with the exact surrender value as determined by LIC of India.
2. Continued Life Coverage: ALIP ensures that the life coverage benefits continue for the policyholder's nominees from the assignment date to the maturity date without the need for further premium payments. 
3. Management: The service is managed by an independent Special Purpose Vehicle (SPV) Trust, overseen by a SEBI-registered trusteeship company.

How ALIP Works

If a policyholder passes away after assigning their policy to ALIP, the nominee can claim the death benefit from the Trust. Here's how the process works:
1. Claim: The nominee files a claim with the Trust.
2. Payment: LIC pays the death benefit to the Trust.
3. Deductions: The Trust deducts 9% and the investment amount (premiums paid) from the death benefit.
4. Final Payment: The remaining amount is paid to the nominee.

Background of ACESO

Founded in 2018, ACESO specializes in endowment policies issued by LIC of India and has facilitated over Rs 400 million worth of assignments. The founder, Ketan Mehta, fought a multi-decade legal battle against LIC, culminating in a Supreme Court victory in 2015. This win enabled policyholders to assign their life insurance policies, which led to the creation of ALIP.

Why ALIP Was Created

LIC’s endowment policies make up a significant portion of their yearly issuances. However, many of these policies (about 50%) don't reach maturity because they are surrendered or lapse. ALIP was created to offer an alternative to surrendering policies prematurely, allowing policyholders to access the value of their policies while maintaining life coverage.

Quick Payment Process

ALIP promises a quick payment process, typically completing within 48 hours after all necessary documents are finalized. The documentation and KYC process are handled online, minimizing inconvenience for policyholders and their LIC agents.

LIC’s Recent Notice

LIC recently issued a notice regarding entities offering to acquire policies as an alternative to surrendering them to LIC. The notice emphasized that LIC is not associated with any such entities and that any transfer of policies must comply with the Insurance Act, 1938. LIC reserves the right to decline any transfer it deems not bona fide or not in the policyholder's interest.

Response from ACESO

Ketan Mehta responded to LIC’s notice, emphasizing that insurance policies are considered property according to the Supreme Court judgment, and ACESO is following the rules. He highlighted that ALIP reduces surrender payouts and boosts LIC's assets under management, which can lead to higher bonus rates and earnings, fostering a sustainable insurance ecosystem.

How ACESO Makes Money

ACESO makes money through assigned policies by pooling them and creating pass-through certificates (PTCs). These PTCs are issued at a discount to third parties, mostly family offices or high-net-worth individuals (HNIs). The company combines policies and offers a return of around 7% per annum to PTC holders.

Taxability of PTC Returns

Since life insurance maturity benefits are tax-free, no income tax is paid by PTC holders.

Conclusion

ACESO’s ALIP program offers a valuable alternative for LIC policyholders looking to surrender their policies. By providing the surrender value while maintaining life coverage benefits, ALIP addresses a critical need in the market. Despite LIC's recent notice, ACESO continues to operate within the legal framework, offering a streamlined process for policyholders to maximize the value of their policies.

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