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

LIC earns a profit from a business other than life insurance in a financial year. Under Section 28A of the LIC Act, as amended in 2021, how is the balance of that profit dealt with?

After providing for reserves and other necessary matters, the balance of profit from non-life-insurance business is allocated to or reserved for the members. The older rule of paying it to the Central Government was replaced in 2021.

  1. APaid to the Central Government as before the amendment
  2. BAfter provision for reserves and other necessary matters, it is allocated to or reserved for the membersCorrect
  3. CDistributed entirely to the life policyholders
  4. DTransferred to the Insurance Regulatory and Development Authority of India

Explanation

Section 28A, as substituted by Act 13 of 2021, says that after making provision for reserves and other necessary or expedient matters, the balance of profits from non-life-insurance business is allocated to or reserved for the members. The earlier wording, 'paid to the Central Government', was replaced, so the first option reflects the superseded position.

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