Skip to content

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

Sunrise Life Ltd. has been proved insolvent. A policyholder, Meera, argues that the Tribunal's only option is to pass a winding up order. Which statement correctly applies section 61 of the Insurance Act, 1938?

Meera is wrong. Section 61(2) allows the Tribunal, where a life insurer is proved insolvent, to reduce the amount of insurance contracts instead of passing a winding up order, if it thinks fit, on terms and conditions it considers appropriate.

  1. AShe is correct, since reduction is possible only after a winding up order is made
  2. BShe is wrong; the Tribunal may, if it thinks fit, reduce the insurance contracts instead of making a winding up orderCorrect
  3. CShe is wrong; only the Authority can choose between reduction and winding up
  4. DShe is correct, but reduction needs the consent of every policyholder

Explanation

Section 61(2) provides that where a life insurance company is proved insolvent, the Tribunal may, if it thinks fit, reduce the amount of the contracts in place of making a winding up order. No consent of all policyholders is required.

Did you get it right without looking?

One question tells you little. A timed set on Life Insurance shows your real accuracy, how long you take and where you lose marks.

Practise Life InsuranceFree diagnostic mock

More Life Insurance questions