Skip to content

CS Professional · Banking and Insurance - Laws and Practice · Life Insurance

An officer reviewing LIC's accounts finds a profit from a non-life activity. Before the balance goes to the members, what must LIC do under Section 28A?

LIC must first make provision for reserves and other matters for which provision is necessary or expedient. Only the balance of the non-life profit is then allocated to or reserved for the members. The 90 per cent policyholder rule applies to life surplus, not these profits.

  1. AObtain IRDAI approval for each rupee distributed
  2. BMake provision for reserves and other matters for which provision is necessary or expedientCorrect
  3. CPay ninety per cent of it to policyholders
  4. DWait for an investigation by the Board under section 26

Explanation

Section 28A allows only the balance remaining after provision for reserves and other necessary or expedient matters to go to members. The 90 per cent policyholder share belongs to surplus from life insurance business under section 28, not to non-life profits.

Did you get it right without looking?

One question tells you little. A timed set on Life Insurance shows your real accuracy, how long you take and where you lose marks.

Practise Life InsuranceFree diagnostic mock

More Life Insurance questions