CMA Final · Risk Management in Banking and Insurance · Insurance Intermediaries
Under Section 40 of the Insurance Act, 1938 as given in the official text, which statement about remuneration for soliciting or procuring insurance business in India is correct?
Section 40(1) prohibits any person from paying or contracting to pay commission or other reward for procuring insurance business in India to anyone except an insurance agent, an intermediary or an insurance intermediary, and only in the manner specified by the regulations.
- AAny person may pay commission to anyone for procuring business if the policy tenure exceeds one year
- BNo person may pay or contract to pay remuneration or reward for soliciting or procuring insurance business in India to anyone other than an insurance agent, intermediary or insurance intermediary, in the manner specified by the regulationsCorrect
- COnly insurance agents, and not intermediaries or insurance intermediaries, may receive commission, as specified by the regulations
- DA contravention by an intermediary attracts a penalty that may extend to ten lakh rupees
Explanation
Section 40(1) bars any person from paying or contracting to pay remuneration or reward for procuring business to anyone except an insurance agent, intermediary or insurance intermediary, in the manner the regulations specify. Option C wrongly excludes intermediaries. Option D misstates the penalty, which may extend to one lakh rupees. Option A invents a tenure exception; tenure is only a factor the Authority considers when framing regulations.
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