CS Professional · Banking and Insurance - Laws and Practice · Life Insurance
In a financial year, LIC earns a profit from a business other than life insurance business. Under Section 28A of the LIC Act, 1956 as it now stands, what is to be done with the balance of such profit after provision for reserves and other necessary matters?
The balance of profit from non-life business is allocated to or reserved for the members, after making provision for reserves and other necessary matters. The earlier requirement to pay it to the Central Government was substituted by Act 13 of 2021 with effect from 30 June 2021.
- AIt is paid to the Central Government
- BIt is allocated to or reserved for the membersCorrect
- CIt is distributed entirely to life insurance policyholders
- DIt is transferred to the Insurance Regulatory and Development Authority
Explanation
Section 28A, as substituted by Act 13 of 2021 with effect from 30 June 2021, provides that the balance of non-life profits after provisions is allocated to or reserved for the members. Payment to the Central Government was the earlier position and has been replaced. Policyholders share in surplus from life business under Section 28, not in these profits.
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