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

LIC earns a profit of ₹40 crore in a financial year from a non-life-insurance business it carries on, after making necessary provision for reserves. Under Section 28A of the LIC Act, 1956 as currently stated, what is to be done with the balance of such profit?

The balance is allocated to or reserved for the members. Section 28A, as amended in 2021, replaced the earlier requirement of payment to the Central Government. It applies after provision for reserves and other necessary matters, and to profits from business other than life insurance.

  1. AIt is allocated to or reserved for the membersCorrect
  2. BIt is paid to the Central Government
  3. CIt is allocated entirely to life insurance policyholders
  4. DIt is transferred to the IRDAI fund

Explanation

Section 28A now says that, after provision for reserves and other necessary matters, the balance of profits from business other than life insurance is allocated to or reserved for the members. The earlier wording 'paid to the Central Government' was substituted in 2021, so that option is outdated.

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