What is Section 38 of Insurance Act?

Section 38 - Assignment and Transfer of Insurance Policies

Assignment or transfer of a life insurance Policy is as below in accordance with Section 38 of the Insurance Act, 1938 as amended from time to time. The extant provisions in this regard are as follows:


  1. This   Policy   may   be   transferred/assigned,   wholly   or   in   part,   with   or   without consideration.
  2. An Assignment may be effected in a Policy by an endorsement upon the Policy itself or by a separate instrument under notice to the Insurer.
  3. The instrument of Assignment should indicate the fact of transfer or Assignment and the reasons for the Assignment or transfer, antecedents of the Assignee and terms on which Assignment is made.
  4. The Assignment must be signed by the transferor or assignor or duly authorized agent and attested by at least one witness.
  5. The transfer of Assignment shall not be operative as against an insurer until a notice in writing of the transfer or Assignment and either the said endorsement or instrument itself or copy there of certified to be correct by both transferor and transferee or their duly authorised agents have been delivered to the insurer.
  6. Fee to be paid for Assignment or transfer can be specified by the Authority through Regulations.
  7. On receipt of notice with fee, the insurer should Grant a written acknowledgement of receipt of notice. Such notice shall be conclusive evidence against the insurer of duly receiving the notice.
  8. If the insurer maintains one or more places of business, such notices shall be delivered only at the place where the Policy is being serviced.
  9. The  insurer  may  accept  or  decline  to  act  upon  any  transfer  or  Assignment  or endorsement, if it has sufficient reasons to believe that it is
    1. not bonafide  or
    2. not in the interest of the Policyholder,  or
    3. not in public interest or
    4. is for the purpose of trading of the insurance Policy.
  10. Before refusing to act upon endorsement, the Insurer should record the reasons in writing and communicate the same in writing to Policyholder within 30 days from the date of Policyholder giving a notice of transfer or Assignment.
  11. In case of refusal to act upon the endorsement by the Insurer, any person aggrieved by the refusal may prefer a claim to IRDAI within 30 days of receipt of the refusal letter from the Insurer.
  12. The priority of claims of persons interested in an insurance Policy would depend on the date on which the notices of Assignment or transfer is delivered to the insurer; where there are more than one instruments of transfer or Assignment, the priority will depend on dates of delivery of such notices. Any dispute in this regard as to priority should be referred to Authority.
  13. Every Assignment or transfer shall be deemed to be absolute Assignment or transfer and the Assignee or transferee shall be deemed to be absolute Assignee or transferee, except
    1. where Assignment or transfer is subject to terms and conditions of transfer or Assignment OR
    2. where the transfer or Assignment is made upon condition that
      • the proceeds under the Policy shall become payable to Policyholder or nominee(s)  in  the  event  of  Assignee  or  transferee  dying  before  the insured OR
      • the insured surviving the term of the Policy

             Such conditional Assignee will not be entitled to obtain a loan on Policy or Surrender the Policy. This provision will prevail                         notwithstanding any law  or  custom  having  force  of  law  which  is  contrary  to  the  above position.

  1. In  other  cases,  the  insurer  shall,  subject  to  terms  and  conditions  of  Assignment, recognize the transferee or Assignee named in the notice as the absolute transferee or Assignee and such person
    • shall be subject to all liabilities and equities to which the transferor or assignor was subject to at the date of transfer or Assignment and
    • may institute any proceedings in relation to the Policy
    • obtain  loan  under  the  Policy  or  Surrender  the  Policy  without  obtaining  the consent of the transferor or assignor or making him a party to the proceedings
  2. ​​​​​​​Any rights and remedies of an Assignee or transferee of a life insurance Policy under an Assignment or transfer effected before commencement of the Insurance Laws (Amendment) Ordinance, 2014 shall not be affected by this section.

[Disclaimer: This is not a comprehensive list as mentioned in Insurance Act, 1938 (as amended from time to time), but only a simplified version prepared for general information. Policy Holders are advised to refer to the Act for complete and accurate details