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

Suryoday General Insurance Ltd has been paying unusually high commission to brokers and, in the view of the Executive Committee of the General Insurance Council, is acting in a manner prejudicial to the interests of general insurance policyholders. What is the Executive Committee's function under the Insurance Act, 1938 in this situation?

The Executive Committee of the General Insurance Council must bring the matter to the notice of the Authority. Under section 64L it only reports insurers acting prejudicially to policyholders; it cannot cancel registration, levy penalties or order refunds, which are matters for the Authority.

  1. ATo cancel the insurer's registration directly
  2. BTo bring the case to the notice of the AuthorityCorrect
  3. CTo impose a monetary penalty on the insurer itself
  4. DTo order the insurer to refund the commission to policyholders

Explanation

Section 64L(1)(c) makes it a function of the Executive Committee to bring to the notice of the Authority any insurer acting prejudicially to policyholders' interests. The Committee has no power to cancel registration or penalise; those powers rest with the Authority.

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