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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part II)

Ramesh, an insurance agent of Bharat Shield Insurance, collects a premium of Rs 20,000 from a client on a Tuesday, with an agreed agent commission of Rs 2,000. Under Section 64VB(4) of the Insurance Act, 1938, what must Ramesh do?

Ramesh must deposit or dispatch the entire Rs 20,000 to the insurer within twenty-four hours of collection, excluding bank and postal holidays. Section 64VB(4) forbids deducting his commission from the premium collected; commission is paid separately by the insurer.

  1. ADeposit Rs 18,000 within twenty-four hours, keeping his commission
  2. BDeposit the full Rs 20,000 with the insurer within twenty-four hours of collection, excluding bank and postal holidaysCorrect
  3. CDeposit Rs 20,000 within thirty days of collection
  4. DDeposit the premium at the end of the month along with other collections

Explanation

Section 64VB(4) requires the agent to deposit or post the premium collected in full, without deducting commission, within twenty-four hours of collection, excluding bank and postal holidays. Deducting the Rs 2,000 commission, as in the first option, is not allowed.

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