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CS Professional · Banking and Insurance - Laws and Practice · Regulatory Framework in Insurance

Surya General Insurance Ltd. appoints Meena as an agent even though she is a minor, and procures business through her. Under Section 42 of the Insurance Act, 1938, what is the maximum penalty on the insurer for this?

The insurer is liable to a penalty which may extend to one crore rupees. A minor is disqualified from being an agent, and Section 42(4) imposes this higher penalty on an insurer that appoints a non-permitted person or transacts business through that person.

  1. ARupees ten thousand
  2. BRupees one lakh
  3. CRupees ten lakh
  4. DRupees one croreCorrect

Explanation

A minor is disqualified under Section 42(3)(a). Section 42(4) provides that an insurer appointing a person not permitted to act as an agent, or transacting business through such a person, is liable to a penalty up to one crore rupees. The ten thousand figure applies to the person acting as agent, not to the insurer.

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