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

Mahalaxmi Life Ltd. was an insurer whose controlled business was transferred to and vested in the Life Insurance Corporation of India (LIC). LIC, having regard to the insurer's financial condition on the appointed day, wishes to reduce the amounts of insurance under policies the insurer issued on 10 March 1955. Under Section 14 of the LIC Act, 1956, which statement is correct?

LIC may reduce the insurance amounts only in accordance with a scheme it prepares and the Central Government approves. Section 14 proviso makes this approval mandatory, so a board resolution, IRDAI approval or Tribunal order alone is not enough.

  1. ALIC may reduce the amounts only under a scheme it prepares and the Central Government approvesCorrect
  2. BLIC may reduce the amounts on its own board resolution without any further approval
  3. CLIC may reduce the amounts only with the approval of the IRDAI
  4. DLIC may reduce the amounts only by an order of the Tribunal

Explanation

Section 14 lets LIC reduce amounts of insurance under contracts made before 19 January 1956, but the proviso bars any reduction except under a scheme prepared by LIC and approved by the Central Government. Board resolution alone, IRDAI approval or Tribunal order is not the prescribed route.

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