Levy of Service Charges for recording transfer or assignment of life insurance policy is not legal – Section 38 of the Insurance Act 1938

Judgment dated 6.9.2023 of the Supreme Court of India

LIC Vs. Dravya Finance Pvt Ltd & Ors (non-reportable)

Section 38 of the Insurance Act, 1938 – Transfer / Assignment of Policy – LIC Circular dated 24.4.2006 for levy of Rs.250/- as service charges for registration – Article 265 of the Constitution of India

By the Circular dated 24.4.2006, the LIC had started levy service charges of Rs.250/- for assignment of insurance policy.

However, Rules 3 and 4 of the IRDAI (Fee for granting written acknowledgement of the receipt of Notice of Assignment or Transfer) Regulations, 2015, framed under Section 114A of the Insurance Act, 1938, prohibit levy of any fee to record assignment of policies.

HELD that the LIC has no right to levy services for recording endorsement of transfer or assignment of insurance policy.