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CMA Final · Risk Management in Banking and Insurance · Managing Risk in Insurance Business

Under Section 64VB of the Insurance Act, 1938, when may an insurer ordinarily assume a risk in India where the premium can be ascertained in advance?

Where the premium can be ascertained in advance, the insurer may assume the risk only from the date the premium is paid in cash or by cheque. Section 64VB requires advance receipt of premium, so promises by agents or a signed proposal do not start cover.

  1. AOnly after the policy document is physically delivered to the insured
  2. BNot earlier than the date on which the premium has been paid in cash or by cheque to the insurerCorrect
  3. CAt any time, provided the agent promises to collect the premium within 30 days
  4. DOn the date the proposal form is signed, irrespective of premium payment

Explanation

Section 64VB(2) says that where the premium can be ascertained in advance, the risk may be assumed not earlier than the date the premium has been paid in cash or by cheque to the insurer. An agent's promise or a signed proposal is not enough. Delivery of the policy document is not the test either.

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