5.
(1) A nomination by a policy owner, other than a Muslim
policy owner, shall create a trust in favour of the nominee of the
policy moneys payable upon the death of the policy owner, if—
(a) the nominee is his spouse or child; or
(b) where there is no spouse or child living at the time of
nomination, the nominee is his parent.

Roy: It means that if there is no trustee being specifically assigned upon inception of the policy an Auto Trustee is being assigned to prevent the 'problem' mentioned above from occuring.

(2) Notwithstanding any written law to the contrary, a payment
under subparagraph (1) shall not form part of the estate of the
deceased policy owner or be subject to his debts.
(3) The policy owner may, by the policy, or by a notice in
writing to the licensed insurer, appoint any person other than himself
to be trustee of the policy moneys and where there is no trustee
appointed—
(a) the nominee who is competent to contract; or
(b) where the nominee is incompetent to contract, the parent of
the incompetent nominee other than the policy owner and
where there is no surviving parent, the Public Trustee or a
trust company nominated by the policy owner,
shall be the trustee of the policy moneys and the receipt of a trustee
shall be a discharge to the insurer for all liability in respect of the
policy moneys paid to the trustee.
(4) If there is more than one nominee who is competent to
contract, the nominees shall be joint trustees and the consent for the
purposes of this paragraph shall be given by all such trustees.
(5) A policy owner shall not deal with a policy to which
subparagraph (1) applies by revoking a nomination or adding a
nominee other than his spouse, child or parent under the policy, by
varying or surrendering the policy, or by assigning or pledging the
policy as security, without the written consent of the trustee.
(6) If it is proved that the policy was effected and the premiums
paid with intent to defraud a creditor of the policy owner, the
creditor shall be entitled to receive from the policy moneys payable
under the policy a sum equal to the premiums paid under that policy.