CMA Final · Risk Management in Banking and Insurance · Insurance Intermediaries
Section 40 of the Insurance Act, 1938 deals with payment of remuneration for procuring insurance business. Which statement reflects it correctly?
Under Section 40(1), remuneration or reward for soliciting or procuring insurance business in India can be paid only to an insurance agent, intermediary or insurance intermediary, and only in the manner specified by the regulations. Payment to other persons is prohibited.
- AAny person may pay commission to anyone who solicits business, provided the insurer approves
- BRemuneration for soliciting or procuring insurance business in India may be paid only to an insurance agent, intermediary or insurance intermediary, in the manner specified by the regulationsCorrect
- CCommission may be paid only to insurance agents and never to intermediaries
- DCommission paid may be at any rate agreed between insurer and intermediary, with no regard to regulations
Explanation
Section 40(1) bars any person from paying or contracting to pay remuneration or reward for procuring business in India to anyone other than an insurance agent, intermediary or insurance intermediary, and only as specified by the regulations. Option C wrongly excludes intermediaries, and option D ignores the regulations.
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