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CMA Final · Risk Management in Banking and Insurance · Managing Risk in Insurance Business

A policyholder cancels a general insurance policy and a premium refund becomes due. Under Section 64VB of the Insurance Act, 1938, how must the refund be paid?

The insurer must pay the refund directly to the insured by crossed or order cheque or postal money order and obtain a proper receipt. It can never be credited to the agent's account, so routing it through the agent is not permitted.

  1. ADirectly to the insured by crossed or order cheque or postal money order, with a proper receipt obtained, and never credited to the agent's accountCorrect
  2. BThrough the agent, who may adjust it against commission due
  3. CBy credit to the agent's account for onward payment
  4. DIn cash through the branch cashier without any receipt

Explanation

Section 64VB(3) requires refunds to be paid by the insurer directly to the insured by crossed or order cheque or postal money order, obtaining a proper receipt. The refund may in no case be credited to the agent's account, which rules out routing through the agent.

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