THE LIFE INSURANCE CORPORATION ACT, 1956
The Life Insurance Corporation Act, 1956, established the Life Insurance Corporation of India (LIC) to nationalize life insurance in India. This Act aimed to spread life insurance widely, especially in rural areas, and to mobilize public savings for nation-building activities.
ESTABLISHMENT AND INCORPORATION OF LIC
Section 3 of the Act led to the creation of LIC on September 1, 1956. LIC was formed by merging 243 insurance companies, becoming a body corporate with perpetual succession and a common seal. It has the authority to acquire, hold, and dispose of property, and can sue or be sued in its name.
CAPITAL STRUCTURE
Initially, the Central Government provided LIC with a capital of ₹5 crores, as per Section 5 of the Act. This capital structure was designed to ensure financial stability and enable LIC to undertake its extensive operations across the country.
FUNCTIONS AND OBJECTIVES
LIC’s primary function is to carry on life insurance business in and outside India, ensuring that such business serves the best interests of the community. Its objectives include:
- Spreading Life Insurance Widely: Particularly in rural areas, to reach all insurable persons.
- Mobilizing Public Savings: Channeling them into nation-building activities.
- Providing Financial Security: Offering insurance policies that cater to various segments of society.
MANAGEMENT STRUCTURE
The management of LIC comprises a Chairman and several members appointed by the Central Government, not exceeding sixteen in total. This structure ensures efficient governance and adherence to the objectives set forth in the Act.
LEGAL PROVISIONS AND REGULATIONS
The Act grants LIC the power to:
- Invest Funds: In a manner deemed fit, ensuring the protection and realization of investments.
- Acquire, Hold, and Dispose of Property: For the purpose of its business operations.
- Advance or Lend Money: Upon the security of movable property or otherwise.
These provisions enable LIC to operate effectively and contribute to the economic development of the country.
CASE LAW
In the case of A. Lakshmanaswami Mudaliar v. Life Insurance Corporation of India, the Supreme Court dealt with the validity of a donation made by a company prior to its nationalization under the LIC Act. The Court held that the donation was ultra vires (beyond the powers of) the company, emphasizing that companies must act within the scope of their authority as defined by their constitutive documents and the law.
GUARANTEED POLICIES
All policies issued by LIC are guaranteed by the Central Government, ensuring policyholders’ interests are protected. This guarantee enhances public confidence in LIC’s insurance products.
AMENDMENTS AND DEVELOPMENTS
Over the years, the LIC Act has undergone amendments to adapt to changing economic and regulatory environments. Notably, the Life Insurance Corporation (Amendment) Act, 2011, revised the capital structure and introduced provisions for greater operational flexibility.
CONCLUSION
The Life Insurance Corporation Act, 1956, has played a pivotal role in shaping India’s life insurance sector. By establishing LIC, the Act facilitated the spread of life insurance, mobilized public savings for developmental activities, and provided financial security to millions. Its provisions and subsequent amendments have ensured that LIC remains a robust institution, contributing significantly to the nation’s economic growth.
REFERENCES
- The Life Insurance Corporation Act, 1956.
- “The Life Insurance Corporation Act, 1956: An Overview,” Indian Journal of Law and Legal Research.
- “Life insurance contract – functioning of LIC,” iPleaders Blog.
- “The Life Insurance Corporation Act, 1956,” Lawyers Law.
- “Establishment and Functions of the Life Insurance Corporation of India,” Law Audience.
- “A. Lakshmanaswami v. Life Insurance Corporation of India,” Laws Forum.
- “Life Insurance Corporation Act 1956 (Simply Explained),” InsuranceLiya.com.
