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 Life Insurance Corporation Act, 1956 (as amended in 2021), what is to be done with the balance of this profit after provision for reserves and other necessary matters?
The balance of profits from non-life business is allocated to or reserved for the members, after provision for reserves and other necessary or expedient matters. The pre-2021 rule of paying it to the Central Government was replaced by Act 13 of 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, says that after making provision for reserves and other necessary matters, the balance of profits from non-life business is allocated to or reserved for the members. Earlier wording required payment to the Central Government, which is why that option is wrong.
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