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

Under Section 64VB(3), a policy is cancelled and a refund of ₹15,000 becomes due to the insured. How must the insurer pay the refund?

The refund must be paid directly to the insured by a crossed or order cheque or by postal money order, and a proper receipt obtained. It can never be credited to the agent's account, as Section 64VB(3) specifically prohibits it.

  1. ABy crediting it to the agent's account for onward payment
  2. BDirectly to the insured by crossed or order cheque or postal money order, obtaining a proper receipt, and never through the agent's accountCorrect
  3. CIn cash through the agent against the agent's receipt
  4. DBy adjusting it against the agent's commission

Explanation

Section 64VB(3) requires refunds to be paid directly to the insured by a crossed or order cheque or postal money order, with a proper receipt, and in no case credited to the agent's account. Routing through the agent is the exact practice prohibited.

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