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

Section 14 of the LIC Act, 1956 empowers LIC to reduce amounts of insurance. Aarav holds a policy issued by a transferor insurer on 5 June 1957, whose business vested in LIC. Can LIC reduce his policy under Section 14?

LIC cannot reduce Aarav's policy under Section 14. The power applies only to contracts entered into by the transferor insurer before 19 January 1956, and a policy issued in June 1957 falls after that date, so a government-approved scheme cannot reach it.

  1. AYes, because the insurer's business was transferred to LIC
  2. BYes, if the Central Government approves a scheme
  3. CNo, because Section 14 covers only contracts entered into before 19 January 1956Correct
  4. DNo, because Section 14 permits only increase, not reduction

Explanation

Section 14 applies to contracts of life insurance entered into by the transferor insurer before 19 January 1956. A policy issued in 1957 falls outside this date limit, so even an approved scheme cannot reduce it under this section.

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