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

An insurance agent collects a premium cheque on behalf of an insurer. Under Section 64VB of the Insurance Act, 1938, what must the agent do?

The agent must deposit or post the premium collected to the insurer in full, without deducting commission, within twenty-four hours of collection, excluding bank and postal holidays. Delayed remittance or netting off commission breaches Section 64VB.

  1. ADeposit or post the full premium to the insurer within twenty-four hours of collection, excluding bank and postal holidays, without deducting commissionCorrect
  2. BDeposit the premium after deducting the agreed commission within seven days
  3. CRetain the premium until the policy is issued and then remit it
  4. DRemit the premium at the end of the month along with other collections

Explanation

Section 64VB(4) requires the agent to deposit with, or dispatch by post to, the insurer the premium in full, without deduction of commission, within twenty-four hours of collection excluding bank and postal holidays. The commission-deduction and delayed-remittance options contradict this.

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