CR6 Cession – sale of second-hand policies


• Cession – sale of second-hand policies

Policies are sometimes traded at a discount, often through the intervention of intermediaries.

The practice as such is not reprehensible but it can lead to irregularities.

Where a policyholder signs documents in blank, allowing for a cession, there is not much the office can do for a complainant if his verbal instructions were ostensibly disregarded, and there is an irresolvable dispute of fact as to what was said between the policyholder and the intermediary.

In a recent case the policyholder ceded his policy to a bank as security for an overdraft and afterwards, through the intervention of an intermediary, sold the policy to a third party who paid a sum in excess of the amount owing by the policyholder to the bank and applied for its repayment. Thereafter the policy was receded by the policyholder to the new purchaser as an out-and-out cession. The policyholder alleged that this was not in accordance with his agreement with the intermediary, who was an agent of the insurer, but on that point there was a dispute of fact, which could not be resolved in favour of the policyholder.

When confronted with the insurer’s version of events the policyholder failed to respond and the file was closed.