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CMA Final · Risk Management in Banking and Insurance · Concept and Types of Health Insurance Policies

A standalone health insurer asks whether it must underwrite the minimum percentage of third party motor vehicle insurance business that the regulations specify for general insurers. Which statement is correct under Section 32D of the Insurance Act, 1938?

The Authority may, by regulations, exempt an insurer primarily engaged in health business. Section 32D imposes the minimum third party motor underwriting obligation on general insurers, but its proviso permits such an exemption. It is not automatic, and the power lies with the Authority, not the Central Government.

  1. AIt must underwrite the percentage, with no exemption possible
  2. BIt is exempt automatically because health insurers are outside general insurance
  3. CThe Authority may, by regulations, exempt an insurer primarily engaged in health business from this obligationCorrect
  4. DOnly the Central Government may exempt it, by executive order

Explanation

Section 32D requires general insurers to underwrite a regulation-specified minimum percentage of third party motor business. Its proviso lets the Authority, by regulations, exempt insurers primarily engaged in health, re-insurance, agriculture or export credit guarantee. The exemption is therefore not automatic, which rules out the second option.

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