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CS Professional · Banking and Insurance - Laws and Practice · General and Health Insurance

Meridian General Insurance Ltd, a general insurer, wants to know what Section 40C of the Insurance Act, 1938, as currently in force, requires of it regarding its expenses of management. Which statement is correct?

Under Section 40C, every insurer must furnish to the Authority the details of its expenses of management in the manner and form specified by regulations made under the Act. The section sets a reporting duty, not a fixed percentage ceiling stated in the section.

  1. AIt must furnish to the Authority details of its expenses of management in the manner and form specified by regulationsCorrect
  2. BIt must keep expenses of management below a fixed percentage of premium written, stated in Section 40C itself
  3. CIt must obtain prior approval of the General Insurance Council for every item of management expense
  4. DIt must publish expenses of management only in its annual report, with no reporting to the Authority

Explanation

Section 40C as substituted in 2015 requires every insurer transacting insurance business in India to furnish the Authority details of expenses of management in the manner and form specified by regulations. The section does not itself fix a percentage cap, and it does not require Council approval of each item.

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