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

Rohan holds a policy issued in 1954 by a private insurer whose controlled business was later transferred to and vested in the Life Insurance Corporation of India (LIC). LIC wants to reduce the amount of insurance under this policy because of the old insurer's financial condition on the appointed day. Under the LIC Act, 1956, which condition must be met for the reduction?

LIC may reduce the insurance amount only under a scheme that it prepares and the Central Government approves. Section 14 of the LIC Act, 1956 makes this a proviso, so neither the policyholder's consent nor Tribunal approval is the required step.

  1. ARohan must give written consent to the reduction
  2. BThe reduction must follow a scheme prepared by LIC and approved by the Central GovernmentCorrect
  3. CThe reduction must be approved by the Tribunal
  4. DThe reduction must be approved by the Life Insurance Council

Explanation

Section 14 of the LIC Act, 1956 lets LIC reduce amounts of insurance under pre-19 January 1956 contracts, but only in accordance with a scheme prepared by LIC and approved by the Central Government. Rohan's consent, Tribunal approval or Council approval is not the stated requirement.

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