Report No. 66
II. Insurance Act
5.5. Sections 38-39, Insurance Act, 1938.-
We may now refer to certain provisions of the Insurance Act, 1938 which deal with the question of assignment and nomination of life insurance policies-a subject also dealt with in section 6 of the Married Women's Property Act, 18741. Before the enactment of the Insurance Act, in 1938, the general rule was that a person who had his name in the policy as the one to whom payment due under the policy is to be made, did not have any rights under the policy, merely by reason of his name being mentioned, and it was necessary for him to get a succession certificate or letters of administration2. In general, assignment of the policy was governed only by section 130 of the Transfer of Property Act3, as a transfer of actionable claims, except where section 6 of the Married Women's Property Act, 1874 became operative.
This position was changed by the Insurance Act, 1938. Section 38 of the Act deals with the assignment and transfer of life insurance policies. Sub-section (1) provides that a transfer or assignment of a policy of life insurance, whether with or without consideration, may be made only by an endorsement upon the policy itself or by separate instrument signed in either case by the transferor or by the assignor or his duly authorised agent and attested by at least one witness, specifically setting forth the fact of transfer or assignment.
In order that the transfer or assignment may be complete and effectual as between the parties, this is enough. But, in order that the transfer or assignment may be complete and effectual against the insurer, it is also necessary that written notice of the transfer or assignment is given and certain other formalities are complied with, as provided in section 38(2) of that Act. Section 39 of the Insurance Act deals with nomination by the holder of a policy of life insurance. Sub-section (1) of that section, so far as is material, provides that the holder may, when effecting the policy or at any time before the policy matures, for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death.
The rest of the section deals with certain formalities for nomination, the effect of the nomination on an assignment or transfer tinder section 38 and other connected matters not material for our purpose. In general, the nominee is nothing more than an agent to receive the money, which money remains the property of the insured and at his disposal during his lifetime and on his death forms part of theiestate. For our purposes, sub-section (7) of section 39 is important, and it reads as follows:-
'(7) The provisions of this section shall not apply to any policy of life insurance to which section 6 of the Married Women's Property Act, 1874 applies or has at any time applied:
Provided that where a nomination made whether before or after the commencement of the Insurance (Amendment) Act, 1946, in favour of the wife of the person who has insured his life or of his wife and children or any of them is expressed, whether or not on the face of the policy, as being made under this section, the said section 6 shall be deemed not to apply or not to have applied to the policy."
1. Chapter 8, infra.
2. AIR 1935 Rang 211 (212).
3. AIR 1955 Mad 459 (460).