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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part II)

A policy of life insurance issued to Anil Verma is cancelled and Rs 4,500 of premium becomes refundable. The insurer's agent, Deepa, asks that the refund be credited to her account so she can hand it over to Anil. Under Section 64VB(3) of the Insurance Act, 1938, how must the refund be made?

The refund must be paid directly to Anil by a crossed or order cheque or postal money order, with a proper receipt obtained. Section 64VB(3) says such refund shall in no case be credited to the agent's account.

  1. ACredited to the agent's account, as agents act for the insurer
  2. BPaid in cash to the agent against her receipt
  3. CPaid directly to the insured by crossed or order cheque or postal money order, obtaining a proper receipt, and never credited to the agent's accountCorrect
  4. DHeld by the insurer until the insured claims it at the next renewal

Explanation

Section 64VB(3) requires any refund on cancellation or alteration of terms to be paid by the insurer directly to the insured by crossed or order cheque or postal money order, with a proper receipt, and in no case credited to the agent's account. Routing via Deepa breaches this.

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