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CMA Final · Risk Management in Banking and Insurance · Insurance Intermediaries

An insurance agent receives commission from an insurer on policies issued in India in a manner that contravenes the regulations made under Section 40 of the Insurance Act, 1938. What is the maximum penalty stated in Section 40(3) for the agent?

The agent is liable to a penalty which may extend to one lakh rupees. Section 40(3) of the Insurance Act, 1938 applies this to any agent, intermediary or insurance intermediary who contravenes the commission provisions or the regulations framed under Section 40.

  1. AA penalty which may extend to ten thousand rupees
  2. BA penalty which may extend to one lakh rupeesCorrect
  3. CA penalty which may extend to ten lakh rupees
  4. DA penalty equal to three times the commission received

Explanation

Section 40(3) provides that an insurance agent, intermediary or insurance intermediary who contravenes the provisions or regulations is liable to a penalty which may extend to one lakh rupees. The other amounts do not appear in that sub-section.

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