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CS Professional · Banking and Insurance - Laws and Practice · General and Health Insurance

A compliance officer compares the expense provisions for life insurers and for general and health insurers. Which statement correctly reflects the Insurance Act, 1938 as substituted in 2015?

Section 40B prohibits a life insurer from spending on management expenses in a financial year more than the amount specified by regulations. Section 40C instead requires insurers to furnish details of expenses of management to the Authority in the specified manner and form, so the two operate differently.

  1. ASection 40B bars a life insurer from spending on management expenses in a year more than the amount specified by regulations, whereas Section 40C requires insurers to furnish details of expenses of management in the manner and form specified by regulationsCorrect
  2. BSection 40C bars general insurers from exceeding a specified amount of expenses, whereas Section 40B only requires life insurers to furnish details
  3. CBoth Section 40B and Section 40C only require furnishing of details and impose no expenditure limit
  4. DBoth Section 40B and Section 40C fix the same percentage ceiling in the Act itself

Explanation

Section 40B restricts life insurers from spending in a financial year any amount exceeding that specified by regulations. Section 40C, in its substituted form, is a furnishing requirement covering general, health and re-insurance business. The options that swap or equate the two are wrong.

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