LIC policy? Nominees can't be 'strangers'

The Insurance Regulatory Development Authority (Irda) is planning to issue a notice to Life Insurance Corporation of India (LIC) to stop the latter from allowing policy holders to nominate "strangers" (those who are not close relatives) and religious institutions as beneficiaries of life policy claims.

Last week, the corporation had decided to allow its policy holders to nominate strangers and religious institutions as beneficiaries for their insurance policies. A nominee is statutorily recognised as a payee who can give a valid discharge to the corporation for the payment of policy money.

The state-owned insurer changed nominee norms after a large number of policy-holders

requested permission to nominate people who are not immediate family members or religious institutions as beneficiaries.

Industry experts and Irda officials, however, believe that the corporation's move could be the "beginning of a disaster". A senior industry representative said the change in nominee rules could prove to be a threat to the life of the policy holder and create opportunities for money laundering.

LIC representatives, however, believe that norms have been put in place to nominate strangers, who by definition can be orphans, orphanages, distant relatives, family friends and people who are loyal and close to the policy-holders.