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CS Professional · Banking and Insurance - Laws and Practice · Inspection, Investigation, Penalty and Appellate Procedure

An investigation ordered by IRDAI into Himalaya Insurance Co. Ltd. incurs expenses of Rs 8 lakh, including fees of an actuary employed by the Investigating Officer to assist. Who bears these expenses under section 33 of the Insurance Act, 1938?

The insurer bears the Rs 8 lakh. Section 33(9) of the Insurance Act, 1938 makes all expenses of and incidental to an investigation payable by the insurer, with priority over its debts and recoverable as an arrear of land revenue, including costs of an employed actuary.

  1. AIRDAI, since it ordered the investigation
  2. BThe Investigating Officer personally, to the extent of the actuary's fees
  3. CThe insurer, with priority over its debts, recoverable as an arrear of land revenueCorrect
  4. DThe Central Government, recoverable from IRDAI later

Explanation

Section 33(9) states that all expenses of and incidental to an investigation are defrayed by the insurer, have priority over the debts due from the insurer, and are recoverable as an arrear of land revenue. The proviso to section 33(1) lets the Officer employ an auditor or actuary, so those costs are incidental expenses.

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