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CS Professional · Banking and Insurance - Laws and Practice · Concept of Insurance

Deepak, a bona fide insurance agent employed by Sagar Life Insurer, takes a life policy on his own life and accepts the commission on it. Under the proviso to Section 41(1) of the Insurance Act, 1938, when is this NOT treated as acceptance of a rebate of premium?

It is not treated as a rebate when, at the time of accepting the commission, the agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer. This proviso to Section 41(1) applies to life insurance on the agent's own life.

  1. ANever, since an agent cannot accept commission on his own policy
  2. BOnly if the premium is below Rs 10,000
  3. CWhenever the agent informs the policyholder
  4. DIf at the time of acceptance he satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurerCorrect

Explanation

The proviso says acceptance by an insurance agent of commission on a life policy on his own life is not a rebate of premium if, at the time, he satisfies the prescribed conditions showing he is a bona fide agent employed by the insurer. No premium threshold exists, and the exception is not absolute.

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