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

An insurance agent collects a premium of Rs 48,000 on behalf of an insurer from a policyholder. Under Section 64VB of the Insurance Act, 1938, what must the agent do?

The agent must deposit with or post to the insurer the entire premium collected, without deducting commission, within twenty-four hours of collection, excluding bank and postal holidays. Section 64VB(4) imposes this to protect the insurer's premium flow and the insured's cover.

  1. ADeposit the premium in full, without deducting commission, within twenty-four hours of collection, excluding bank and postal holidaysCorrect
  2. BDeduct the commission and remit only the balance at month end
  3. CHold the premium until the policy is issued and then remit it
  4. DRemit the premium within seven days after deducting commission

Explanation

Section 64VB(4) requires an agent who collects premium to deposit with, or post to, the insurer the premium in full, without deducting commission, within twenty-four hours of collection, excluding bank and postal holidays. Deducting commission or delaying remittance breaches this rule.

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