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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, where the premium can be ascertained in advance, from which point may an insurer ordinarily assume the risk?

The insurer may assume the risk only from the date the premium is paid in cash or by cheque. Section 64VB bars assuming risk before premium receipt, so signing a proposal or issuing a document earlier does not start cover.

  1. AFrom the date the premium has been paid in cash or by cheque to the insurerCorrect
  2. BFrom the date the proposal form is signed by the proposer
  3. CFrom the date the policy document is printed by the insurer
  4. DFrom the end of the free-look period

Explanation

Section 64VB(2) provides that for risks whose 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. Signing the proposal or printing the policy does not meet this requirement, so those options are wrong.

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