Life Insurance Corporation Act 1956 (Simply Explained)
Life Insurance Corporation of India (LIC) was established after The Government of India passed the Life Insurance Corporation Act in 1956 in The Indian Parliament. The LIC Act 1956 elucidates the functions, management structure, auditing and accounting mechanisms of Life Insurance Corporation of India.
Going through the whole act is beyond the scope of this article. This article will be discussing the top 10 most important aspects of The LIC Act 1956.
Top 9 most important aspects of The LIC Act 1956 are the following:
- Functions of LIC
- Management structure of LIC
- Powers of LIC
- Guaranteed policies
- Reporting to the Parliament
- Rule-making power of LIC
- Powers of regulation
Functions of LIC
Chapter 3 of The LIC Act states the functions of LIC. Let us go through the top 5 functions of LIC as mentioned in The LIC Act.
- Conducting life insurance business in and outside India efficiently and with a vision of growth.
- Investing the funds collected as premium appropriately and securely.
- Disbursing loans to policyholders against their LIC policy.
- LIC even has powers to disburse loans against property or other kinds of assets.
- LIC has the ability to conduct its business through subsidiaries in India as well as abroad.
Management structure of LIC
- Executive committee: The executive committee is constituted by 5 members, and the duties of the committee are specified by LIC.
- Investment committee: The investment committee will advise LIC on the most apt investments keeping in mind the benefit of LIC and its policyholders.
- Managing Directors: The Managing Directors shall work as the captain of the ship, steering LIC towards growth and prosperity.
- Central Government of India: LIC will have to adhere to governance related decisions by the Central Government of India.
- Zonal managers: Zonal managers will manage their specific zones and their responsibilities will not extend the said zones or jurisdiction.
- General staff: General staff consists of officers, peons, general administration, and so on.
Powers of LIC
The powers of LIC are derived from the LIC Act 1956, passed in The Indian Parliament. Let us look at some of the most important powers of LIC.
- LIC has the power to buy, sell, and lease properties in India.
- LIC has the power to alter or modify the contents of its life insurance policies.
- LIC has the power to conduct life insurance business in India and abroad.
All LIC policies are guaranteed by The Central Government of India. Not only the sum assured, but any accumulated bonus is also assured by the Government.
LIC related disputes can be handled in tribunals. These tribunals have the power equivalent of a civil court. One of the members of the tribunal must include a practicing or past High Court Judge. These tribunals will act as courts, including accepting evidence, making judgements, summoning people, and issuing commissions.
Reporting to the Parliament
LIC must furnish important reports like audit reports, general reports, and growth reports to The Parliament of India from time to time.
The books of LIC are audited from time to time, and auditors are mandated to furnish the auditing reports to The Government of India.
The Central Government has the power to make or alter rules that ensure the smooth functioning of LIC. New rules can be laid down, and older rules can be altered by notification in the official gazette.
Powers of regulation
Over reaching regulatory powers can be exercised by LIC when it comes to recruitment, selection of agents, investments, formation of committees, and more.
Are you looking for a new insurance policy or a policy renewal? Reach out to us and let us assist you.
Frequently asked questions
The LIC Act was passed in 1956 by the Parliament of India.
LIC must disburse its annual report to the Central Government.
Previously, The Government of India used to appoint the auditors, but now, post its IPO, the company shareholders have the power to appoint auditors.