Nomination under Life Insurance Policies

Nomination under Life Insurance Policies

In accordance with Section 39 of the Insurance Act, 1938, the holder of a policy of life insurance on his own life, may, when effecting the policy or at any time before the policy matures for payment, nominate a person or persons to whom the money secured by the policy shall be paid in the event of his death.

Administrative instructions in this regard are given in the Policyholders’ Servicing Department Manual No. 5.

All offices are advised to strictly follow the instructions given in the manual while allowing nomination under insurance policies.

Your attention is drawn to Item No. 8 under the first chapter which deals with nomination in favour of a stranger. It states:

Whereunder a proposal, the proposer contemplates nominating as Nominee a person who is apparently a stranger, enquiry should be made so as to ascertain the purpose of insurance. If the reply is satisfactory from the view point of insurable interest and moral hazard, the consideration of the proposal may be proceeded with. In all doubtful cases, a reference should be made to Central Office. This also applies mutatis mutandis to an existing policy whereunder a similar nomination is contemplated.

Chapter 2 of the above manual deals with New Business Administration. Following is stated therein:

Examine the answer to question No. 6A and see that the Nominee is mentioned by name and that his/her particulars as called for in that question are properly given. If any particulars are omitted, call for the same.
If the nominee contemplated is a stranger, make suitable reference to the proposer.

Chapter 3 deals with Policy Servicing. Item (d) under section 1 states as under:

If it is permissible to effect a nomination thereunder, check up that the name/s, address/es and the relationship of the nominee/s with the life assured are clearly mentioned. (If the last two particulars are not mentioned or they are not clear, register the Nomination, if otherwise in order, but make a reference to the Life Assured and call for the particulars).

In view of certain malpractices observed in the nomination process, it has been decided to issue the following additional guidelines regarding nomination:

i. If the person to be nominated is spouse, child / children or a parent, the cases may be completed as usual.

ii. If the person to be nominated is brother, sister, grand-child, grand parent, step child and adopted child, then case may be completed provided spouse, child/children or parent is not surviving. If spouse, child or a parent is surviving, then reasons for not appointing them as a nominee and appointing some other relative should be asked. If reply is satisfactory, then case may be completed. If not, a reference should be made to the one-step higher office (branch to DO, DO to ZO) before completion.

iii. If the person to be nominated is a distant relative or not related to the life to be assured, such cases should not be considered and nomination in favour of a close relative should be insisted upon.

If the life to be assured insists for nomination in favour of a person not related (including a distant relative) to him / her, then a letter should be sent at his / her address to have his/ her consent for the desired nomination. Further a special MHR should be obtained at least from a Development Officer regarding the genuineness of the nomination and to ensure that no moral hazard is involved.

A reference should also be made to Central Office before deciding the case.