I85PREP
⌘ K
III IC-14 study materials
III IC-14 study resources

III IC-14 practice questions

One question at a time. Build your III IC-14 understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Indian insurance legislation and the regulatory framework

Which statute is the principal legislation governing the conduct of insurance business in India?

  1. Insurance Act, 1938 Correct answer.
  2. Companies Act, 2013
  3. IRDA Act, 1999
  4. Indian Contract Act, 1872

Explanation

The Insurance Act, 1938 is the core statute that regulates the conduct of insurance business in India, covering registration, capital, solvency and policyholder protection. The IRDA Act, 1999 established the regulator but does not itself replace the 1938 Act.

Question 2Indian insurance legislation and the regulatory framework

The Insurance Regulatory and Development Authority of India (IRDAI) was constituted under which legislation?

  1. Insurance Act, 1938
  2. IRDA Act, 1999 Correct answer.
  3. Companies Act, 2013
  4. Securities and Exchange Board of India Act, 1992

Explanation

The IRDA Act, 1999 established IRDAI as the insurance regulator with powers to license insurers, approve products and enforce regulations. The Act also amended the Insurance Act, 1938 to align it with the new regulatory structure.

Question 3Indian insurance legislation and the regulatory framework

What is the minimum paid-up equity capital required for a new life insurance company under the Insurance Act, 1938?

  1. ₹200 crore
  2. ₹100 crore Correct answer.
  3. ₹50 crore
  4. ₹75 crore

Explanation

Section 6 of the Insurance Act, 1938 prescribes a minimum paid-up equity capital of ₹100 crore for a life insurance company, a general insurance company or a health insurance company. This threshold supports solvency and policyholder protection.

Question 4Indian insurance legislation and the regulatory framework

An insurer has available solvency margin of ₹180 crore and required solvency margin of ₹120 crore. What is its solvency ratio, and does it satisfy the IRDAI minimum?

  1. 1.50, at the minimum Correct answer.
  2. 2.00, above the minimum
  3. 1.20, above the minimum
  4. 0.67, below the minimum

Explanation

The solvency ratio is available solvency margin divided by required solvency margin: ₹180 crore ÷ ₹120 crore = 1.50. IRDAI requires insurers to maintain a solvency ratio of at least 1.50, so this insurer meets the minimum exactly.

Question 5Indian insurance legislation and the regulatory framework

Under the Motor Vehicles Act, 1988, which insurance cover is compulsory for every motor vehicle used on a public road?

  1. Comprehensive insurance
  2. Own-damage insurance
  3. Third-party liability insurance Correct answer.
  4. Collision insurance

Explanation

The Motor Vehicles Act, 1988 mandates third-party liability insurance so that victims of road accidents can recover compensation from the insurer. Own-damage and comprehensive covers are optional commercial products, not statutory requirements.

Question 6Indian insurance legislation and the regulatory framework

What is the maximum amount that an Insurance Ombudsman may award in a complaint under the Insurance Ombudsman Rules, 2017?

  1. ₹10 lakh
  2. ₹30 lakh Correct answer.
  3. ₹50 lakh
  4. ₹1 crore

Explanation

The Insurance Ombudsman Rules, 2017, as amended, permit an award of up to ₹30 lakh, inclusive of the claim and any compensation. The award is binding on the insurer if the complainant accepts it within the prescribed period.

Question 7Indian insurance legislation and the regulatory framework

Under Section 45 of the Insurance Act, 1938, after how many years from the date of issue can a life insurance policy no longer be called in question on the ground of misstatement or suppression of material facts?

  1. 2 years
  2. 5 years
  3. 1 year
  4. 3 years Correct answer.

Explanation

Section 45 provides that a life insurance policy cannot be called in question after three years from the date of issuance on the ground of misstatement or suppression of facts. Fraud is an exception, and the insurer must still follow the prescribed notice procedure within the three-year period.

Question 8Indian insurance legislation and the regulatory framework

What is the current maximum permissible foreign direct investment in an Indian insurance company, including foreign portfolio investment?

  1. 74% Correct answer.
  2. 51%
  3. 26%
  4. 49%

Explanation

The foreign investment cap in Indian insurance companies is 74%, raised from 49% in 2021, and covers both direct and portfolio investment. The increase is subject to conditions on Indian ownership and control and to regulatory approvals.

Question 9Indian insurance legislation and the regulatory framework

Under Section 64VB of the Insurance Act, 1938, when may an insurer assume a risk?

  1. When the proposal form is signed
  2. When the premium is received in advance Correct answer.
  3. When the agent certifies the risk
  4. When the policy document is issued

Explanation

Section 64VB prohibits an insurer from assuming any insurance risk unless the premium is received in advance or is guaranteed to be paid by a bank. This rule prevents insurers from carrying unpaid premium risk and protects the policyholder.

Question 10Indian insurance legislation and the regulatory framework

Under the IRDAI (Protection of Policyholders' Interests) Regulations, 2017, an insurer must settle a claim within how many days of receiving all necessary documents?

  1. 45 days
  2. 60 days
  3. 30 days Correct answer.
  4. 15 days

Explanation

The regulations require an insurer to settle a claim within 30 days from the date of receipt of the last necessary document. Where an investigation is required, the insurer must complete it and settle the claim within six months.

Question 11Indian insurance legislation and the regulatory framework

Which section of the Insurance Act, 1938 expressly prohibits an insurer or its agent from offering a rebate of premium as an inducement to take out a policy?

  1. Section 39
  2. Section 41 Correct answer.
  3. Section 64VB
  4. Section 38

Explanation

Section 41 of the Insurance Act, 1938 prohibits insurers, agents and intermediaries from directly or indirectly offering rebates of premium or commission as an inducement. The provision is designed to prevent discriminatory pricing and unfair competition. Breach can attract penalties under the Act.

Question 12Indian insurance legislation and the regulatory framework

Under Section 64VA of the Insurance Act, 1938, every insurer is required to maintain a solvency margin of at least what percentage of the required solvency margin?

  1. 200%
  2. 100%
  3. 250%
  4. 150% Correct answer.

Explanation

Section 64VA of the Insurance Act, 1938 requires every insurer to maintain a solvency margin of not less than 150% of the required solvency margin at all times. The required solvency margin is the regulatory minimum, and the 150% rule adds a prudential buffer. Falling below this level can lead to directions from IRDAI.

Question 13Indian insurance legislation and the regulatory framework

Under the IRDAI (Protection of Policyholders' Interests) Regulations, 2017, what is the free look period for a policy sold through electronic or distance marketing?

  1. 45 days
  2. 15 days
  3. 21 days
  4. 30 days Correct answer.

Explanation

Under the IRDAI (Protection of Policyholders' Interests) Regulations, 2017, the free look period is 15 days from receipt of the policy document for ordinary sales. For policies sold through electronic or distance marketing, the period is extended to 30 days.

Question 14Indian insurance legislation and the regulatory framework

Under the Insurance Ombudsman Rules, 2017, a complaint to the Insurance Ombudsman must ordinarily be made within what period from the date of rejection of the representation by the insurer?

  1. Three years
  2. One year Correct answer.
  3. Six months
  4. Two years

Explanation

The Insurance Ombudsman Rules, 2017 require the complainant to approach the Ombudsman within one year from the date on which the insurer rejects the representation. This is a limitation period for filing the complaint. It is separate from the time allowed for the Ombudsman to make an award.

Question 15Indian insurance legislation and the regulatory framework

Under the IRDAI (Protection of Policyholders' Interests) Regulations, 2017, within how many days must an insurer acknowledge a complaint received from a policyholder?

  1. Within 3 days Correct answer.
  2. Within 14 days
  3. Within 7 days
  4. Within 30 days

Explanation

The IRDAI (Protection of Policyholders' Interests) Regulations, 2017 require an insurer to acknowledge a policyholder complaint within three days of receipt. The insurer must also maintain a grievance redressal mechanism and resolve complaints within the prescribed timeline.

Question 16Indian insurance legislation and the regulatory framework

Under Section 39 of the Insurance Act, 1938, what may a policyholder do if the person nominated to receive the life policy money is a minor?

  1. The insurer pays the minor directly
  2. An appointee may be named Correct answer.
  3. The nomination becomes void
  4. The guardian becomes the nominee

Explanation

Section 39 of the Insurance Act, 1938 permits a policyholder to nominate a person to receive the policy money. If the nominee is a minor, the policyholder may appoint an appointee to receive the money on the minor's behalf during the minority.

Question 17Indian insurance legislation and the regulatory framework

Under Section 38 of the Insurance Act, 1938, what additional step is required to make an assignment of a life insurance policy binding on the insurer?

  1. Written notice to the insurer Correct answer.
  2. Endorsement by the insurer
  3. Registration with IRDAI
  4. Approval of the nominee

Explanation

Section 38 permits assignment of a life policy by endorsement on the policy or by a separate instrument. To make the assignment binding on the insurer, written notice must be given to the insurer; otherwise the insurer may continue to deal with the original policyholder.

Question 18Indian insurance legislation and the regulatory framework

Under Section 64UM of the Insurance Act, 1938, a general insurer may not settle a claim above the threshold prescribed by IRDAI unless the loss has been assessed by which person?

  1. A licensed surveyor Correct answer.
  2. The Insurance Ombudsman
  3. An in-house claims manager
  4. An appointed actuary

Explanation

Section 64UM restricts settlement of claims above the threshold notified by IRDAI unless the loss is assessed by a surveyor and loss assessor licensed under the Act. The surveyor report supports the insurer's claim decision. An in-house official is not a statutory substitute for this requirement.

Question 19Indian insurance legislation and the regulatory framework

Under the solvency framework in the Insurance Act, 1938, the required solvency margin for a general insurer is determined by reference to which amount?

  1. Mathematical reserves plus sum at risk
  2. Investment income plus underwriting profit
  3. Higher of premium-based and claims-based amounts Correct answer.
  4. Paid-up capital plus free reserves

Explanation

Section 64VA defines the required solvency margin by reference to the higher of a premium-based amount and a claims-based amount. The insurer must then hold available solvency margin of at least 150% of that required margin. This dual test captures both premium growth and claim volatility.

Question 20Indian insurance legislation and the regulatory framework

Under India's reinsurance framework, before an Indian insurer places reinsurance with foreign reinsurers, it must first offer the prescribed obligatory cession to which entity?

  1. A foreign reinsurance branch
  2. Any Indian general insurer
  3. The Indian reinsurer Correct answer.
  4. Lloyd's India

Explanation

IRDAI's reinsurance framework requires insurers to cede the prescribed obligatory cession to the Indian reinsurer before making other reinsurance arrangements. The obligation is meant to retain a portion of reinsurance capacity within India. Foreign reinsurance can be placed only after this cession and subject to the regulations.

Question 21Indian insurance legislation and the regulatory framework

Under the Insurance Regulatory and Development Authority Act, 1999, what is the maximum number of part-time members the IRDAI may have?

  1. Eight
  2. Four Correct answer.
  3. Six
  4. Two

Explanation

Section 4 of the IRDA Act, 1999 constitutes the Authority with a Chairperson, not more than five whole-time members, and not more than four part-time members. The maximum number of part-time members is therefore four.

Question 22Indian insurance legislation and the regulatory framework

Under Section 42 of the Insurance Act, 1938, a person may act as an insurance agent only if the person holds which of the following?

  1. A certificate of registration issued by the insurer
  2. A licence issued by the IRDAI Correct answer.
  3. An authorisation issued by the Insurance Ombudsman
  4. A permit issued by the Ministry of Corporate Affairs

Explanation

Section 42 requires every insurance agent to obtain a licence from the Authority before soliciting or procuring insurance business. An insurer's internal appointment or registration does not substitute for that statutory licence.

Question 23Indian insurance legislation and the regulatory framework

An insurer has liabilities to policyholders in India. Under Section 27A of the Insurance Act, 1938, what must the insurer do with assets equivalent to those liabilities?

  1. Convert them into equity shares of the insurer's promoters
  2. Hold them exclusively in foreign currency with an overseas custodian
  3. Invest and keep them invested in India in the manner prescribed by the IRDAI Correct answer.
  4. Deposit them with the Reserve Bank of India in a special account

Explanation

Section 27A requires every insurer to invest and at all times keep invested assets equivalent to not less than its liabilities to policyholders in India, in the manner prescribed by the Authority. The provision is designed to keep policyholder-backed assets within the Indian regulatory jurisdiction.

Question 24Indian insurance legislation and the regulatory framework

Under the IRDA Act, 1999, an insurer aggrieved by an order of the IRDAI may appeal to which forum?

  1. The Securities Appellate Tribunal Correct answer.
  2. The Insurance Ombudsman
  3. The National Company Law Tribunal
  4. The High Court of the State where the insurer is registered

Explanation

The IRDA Act, 1999 provides that appeals against orders of the Authority lie to the Securities Appellate Tribunal. This gives a specialised appellate route rather than the Insurance Ombudsman or the company-law tribunal.

Question 25Indian insurance legislation and the regulatory framework

Under Section 6 of the Insurance Act, 1938, what is the general rule on an insurer transacting both life insurance and general insurance business?

  1. It must carry them on through separate companies; a single insurer cannot hold both classes in the same company Correct answer.
  2. It may transact both classes only if general insurance premium does not exceed life insurance premium
  3. It may transact both classes only with prior approval of the Insurance Ombudsman
  4. It may transact both classes freely once it obtains a single composite certificate of registration

Explanation

Section 6 embodies the separation of life and general insurance business: the two classes are not carried on by the same insurance company in India. A composite licence is not the general rule; separate insurers are required for life and general business.

Question 26Indian insurance legislation and the regulatory framework

Under Section 3 of the Insurance Act, 1938, what must a company obtain before it can carry on insurance business in India?

  1. An approval from the Securities and Exchange Board of India
  2. A no-objection certificate from the Ministry of Finance
  3. A certificate of registration from the IRDAI Correct answer.
  4. A licence from the Insurance Ombudsman

Explanation

Section 3 prohibits an insurer from carrying on insurance business unless it is registered with the Authority and holds a certificate of registration. The IRDAI is the regulator that grants that certificate under the Insurance Act, 1938.

Question 27Insurance Act, 1938

Under the Insurance Act, 1938, which authority must grant a certificate of registration before a company may carry on insurance business in India?

  1. The Ministry of Corporate Affairs
  2. The Insurance Regulatory and Development Authority of India Correct answer.
  3. The Securities and Exchange Board of India
  4. The Reserve Bank of India

Explanation

Section 3 prohibits any person from carrying on insurance business in India unless registered under the Act. The registration function is exercised by the Insurance Regulatory and Development Authority of India, which grants the certificate of registration to insurers. Company incorporation alone does not permit insurance activity.

Question 28Insurance Act, 1938

An insurer issues a life policy on 10 January but receives the premium cheque on 20 January. Under Section 64VB of the Insurance Act, 1938, when does the insurer assume the risk?

  1. Only when the premium is received in advance, before the risk is assumed Correct answer.
  2. On the date the proposal form was signed by the applicant
  3. On 10 January, because the policy document was issued on that date
  4. When the agent collects the cheque, irrespective of receipt by the insurer

Explanation

Section 64VB provides that no insurer shall assume any risk unless and until the premium payable is received in advance. The issue of a policy document or the signing of a proposal does not by itself create cover. Risk commences only when the premium requirement is satisfied.

Question 29Insurance Act, 1938

An insurance agent offers to pay the first premium out of her own commission so that a hesitant customer buys a life policy. Under the Insurance Act, 1938, this conduct is:

  1. Permitted, because the full premium ultimately reaches the insurer
  2. Prohibited as a rebate or inducement under Section 41 Correct answer.
  3. Permitted if the insurer approves the arrangement in writing
  4. Permitted only for policies above the minimum sum assured

Explanation

Section 41 prohibits any person from allowing or offering, directly or indirectly, a rebate of premium or any special advantage as an inducement to take out or renew a policy. Paying the premium from commission is an indirect inducement and remains prohibited even if the insurer receives the full premium. The prohibition does not depend on the size of the sum assured or on the insurer's approval.

Question 30Insurance Act, 1938

A life insurer discovers that a policyholder made a material misstatement in the proposal. Under Section 45 of the Insurance Act, 1938, within what period from the date of issue may the insurer call the policy in question on that ground?

  1. Five years
  2. Three years Correct answer.
  3. One year
  4. Two years

Explanation

Section 45 provides that a life policy may not be called in question after the expiry of three years from the date of issue on the ground of misstatement or suppression of a material fact. Within that period the insurer may repudiate only where the misstatement was material and fraudulently made. The section thus creates a three-year limit, not a one-year or five-year limit.

Question 31Insurance Act, 1938

Under Section 39 of the Insurance Act, 1938, a nomination made by a life policyholder:

  1. Entitles the nominee to receive the policy money on the policyholder's death, but does not transfer ownership Correct answer.
  2. Requires prior approval of IRDAI before it becomes effective
  3. Can be made only at the time of proposal and cannot be changed later
  4. Makes the nominee the absolute owner of the policy during the policyholder's lifetime

Explanation

Section 39 allows a policyholder to nominate a person to receive the policy money in the event of death. A nomination is not an assignment and does not transfer ownership of the policy during the policyholder's lifetime. The policyholder may cancel or change the nomination at any time.

Question 32Insurance Act, 1938

Under the Insurance Act, 1938, a person may act as an insurance agent only if the person:

  1. Holds a minimum of ten years' experience in insurance
  2. Is licensed by IRDAI, or by an authority authorised under the Act Correct answer.
  3. Is a shareholder of the insurer whose products are sold
  4. Has been appointed by at least two insurers

Explanation

Section 42 requires a person to hold a licence issued by IRDAI, or by an authority empowered under the Act, before acting as an insurance agent. Appointment by an insurer follows the grant of a licence. Neither long experience nor shareholding substitutes for the statutory licence.

Question 33Insurance Act, 1938

Under Section 6A of the Insurance Act, 1938, an applicant for registration as a life insurer must have paid-up equity capital of at least:

  1. Rs 100 crore Correct answer.
  2. Rs 5 crore
  3. Rs 500 crore
  4. Rs 25 crore

Explanation

Section 6A prescribes the minimum paid-up equity capital that an insurer must have, and the amount must be maintained at all times. For life, general and health insurers the prescribed minimum is Rs 100 crore, while reinsurers are subject to a higher requirement. The older nominal figure of Rs 5 crore no longer represents the statutory minimum.

Question 34Insurance Act, 1938

Section 64VA of the Insurance Act, 1938 requires every insurer to:

  1. Invest all its assets only in equities listed on Indian stock exchanges
  2. Obtain prior approval from IRDAI for every claim above Rs 1 crore
  3. Deposit the entire premium collected with the Reserve Bank of India
  4. Maintain assets in excess of liabilities at all times, as prescribed, to meet the solvency margin Correct answer.

Explanation

Section 64VA obliges every insurer to maintain assets in excess of liabilities, of the prescribed amount, at all times. This excess is the solvency margin, and the required solvency ratio is prescribed by IRDAI regulations. If solvency falls below the prescribed level, the insurer must submit a plan to restore it.

Question 35Insurance Act, 1938

A life policyholder assigns a policy to a lender by a separate instrument in writing. Under Section 38 of the Insurance Act, 1938, which requirement must be met for the assignment to bind the insurer?

  1. The assignment must be endorsed only on the policy; a separate instrument is invalid
  2. The assignment must be approved by IRDAI before it takes effect
  3. The assignment is valid only if the policy has been in force for at least five years
  4. The assignee must give written notice of the assignment to the insurer Correct answer.

Explanation

Section 38 permits an assignment to be made by endorsement on the policy or by a separate instrument in writing. The assignee must give written notice of the assignment to the insurer, and the insurer is bound from the date it receives that notice. IRDAI approval and a minimum policy duration are not conditions under the section.

Question 36Insurance Act, 1938

Under Section 27 of the Insurance Act, 1938, what is the core requirement for an insurer carrying on business in India?

  1. All assets must be kept outside India to protect against currency risk
  2. Assets may be invested anywhere if the insurer maintains a solvency ratio of 200 per cent
  3. Assets representing the insurer's liabilities in India must be invested and kept invested in India in approved investments Correct answer.
  4. Only immovable property in India may be used to back liabilities

Explanation

Section 27 requires every insurer carrying on business in India to invest and keep invested its assets in India, in the approved categories of investments, to an amount not less than its liabilities. The provision ensures that policyholder liabilities are backed by assets held within the country. Section 27A reinforces this for insurers incorporated outside India by requiring them to bring assets into India.

Question 37Insurance Act, 1938

Under Section 2(11) of the Insurance Act, 1938, which contract falls within the definition of "life insurance business"?

  1. A contract of fire insurance on a factory.
  2. A motor insurance policy covering third-party liability.
  3. An annuity contract dependent on human life. Correct answer.
  4. A contract of marine insurance on a cargo shipment.

Explanation

Section 2(11) defines life insurance business to include contracts of insurance upon human life and annuity contracts. Fire, marine and motor insurance are non-life classes and fall outside that definition.

Question 38Insurance Act, 1938

A policyholder assigns a life policy to a bank. Under Section 2(13A) of the Insurance Act, 1938, who is treated as a "policy-holder" after the assignment?

  1. Only the nominee recorded with the insurer.
  2. Only the original proposer named in the schedule.
  3. The person to whom the policy is assigned or transferred. Correct answer.
  4. Only the person who pays the premium.

Explanation

Section 2(13A) provides that "policy-holder" includes a person to whom the policy is assigned or transferred. This allows the assignee to be treated as the policyholder for purposes of the Act.

Question 39Insurance Act, 1938

An insurer pays a share of premium as commission to a person who solicits life insurance business but holds no licence under Section 42. Under Section 40 of the Insurance Act, 1938, this payment is:

  1. Permissible if the amount is below five per cent of premium.
  2. Prohibited, as only a licensed insurance agent may receive commission. Correct answer.
  3. Permissible if the commission is disclosed to the policyholder.
  4. Permissible if the person is an employee of the insurer.

Explanation

Section 40 prohibits payment of commission or other remuneration for soliciting or procuring insurance business to any person other than a licensed insurance agent. Disclosure to the policyholder, employee status or a small amount does not cure the prohibition.

Question 40Insurance Act, 1938

An individual is issued a licence to act as an insurance agent under Section 42. Under Section 42(3) of the Insurance Act, 1938, for how long is that licence valid from the date of issue?

  1. Three years. Correct answer.
  2. One year.
  3. Ten years.
  4. Five years.

Explanation

Section 42(3) provides that a licence issued to an insurance agent is valid for three years from the date of issue and may be renewed. The other periods do not match the statutory validity.

Question 41Insurance Act, 1938

An applicant for an insurance agent's licence has been convicted of an offence involving fraud. Under Section 42(4) of the Insurance Act, 1938, the applicant is:

  1. Disqualified from holding the licence. Correct answer.
  2. Eligible if the insurer recommends the application.
  3. Eligible if the applicant deposits additional security.
  4. Eligible if the offence was committed more than five years ago.

Explanation

Section 42(4) sets out disqualifications for holding an insurance agent's licence, including conviction for an offence involving fraud or dishonesty. A recommendation from an insurer or a security deposit does not remove the statutory disqualification.

Question 42Insurance Act, 1938

An insurer proposes to make a loan to one of its directors. Under Section 29 of the Insurance Act, 1938, the loan may be made only with:

  1. The consent of the policyholders' council.
  2. A resolution of the board of directors.
  3. A certificate from the statutory auditor.
  4. The previous approval of the Authority. Correct answer.

Explanation

Section 29 prohibits loans to directors and connected interests except with the previous approval of the Authority. A board resolution, auditor certificate or policyholder consent does not substitute for that approval.

Question 43Insurance Act, 1938

An insurer terminates the appointment of an insurance agent. The agent had procured a life policy that remains in force. Under Section 44 of the Insurance Act, 1938, the insurer:

  1. May stop commission only if the policyholder consents.
  2. Must stop all commission on the policy from the date of termination.
  3. Cannot stop commission merely because the agent's appointment ended. Correct answer.
  4. Must refund commission already paid to the agent.

Explanation

Section 44 prohibits an insurer from ceasing to pay commission on a policy procured by an agent merely because the agent has ceased to be in the insurer's employment. Termination of the appointment does not automatically extinguish commission on the procured policy.

Question 44Insurance Act, 1938

The Authority proposes to cancel an insurer's registration under Section 4 of the Insurance Act, 1938. Before cancelling the registration, the Authority must:

  1. Give the insurer a reasonable opportunity of being heard. Correct answer.
  2. Publish the proposed cancellation in two newspapers.
  3. Obtain a direction from the Central Government.
  4. Obtain the consent of the insurer's shareholders.

Explanation

Section 4 requires the Authority to give the insurer a reasonable opportunity of being heard before cancelling registration. This is the statutory safeguard against arbitrary cancellation.

Question 45Insurance Act, 1938

An insurer wants to employ a person who has been convicted of an offence involving fraud. Under Section 32A of the Insurance Act, 1938, the insurer:

  1. Is prohibited from employing or continuing to employ that person. Correct answer.
  2. May employ the person only in a non-solicitation role.
  3. May employ the person if the offence is disclosed in the application.
  4. May employ the person after obtaining the Authority's approval.

Explanation

Section 32A prohibits an insurer from employing or continuing to employ a person convicted of an offence involving fraud or dishonesty. Disclosure, allocation to a different role or subsequent approval does not remove the statutory bar.

Question 46Insurance Act, 1938

An insurer's solvency margin falls below 100% of the required solvency margin. Under Section 64VA(2) of the Insurance Act, 1938, the insurer must:

  1. Increase premium rates on all existing policies.
  2. Submit a plan to the Authority for restoring the solvency margin. Correct answer.
  3. Immediately surrender its registration to the Authority.
  4. Transfer all assets to a reinsurer.

Explanation

Section 64VA(2) requires an insurer whose solvency margin falls below 100% to submit a plan to the Authority for restoring the required margin. Surrender of registration, unilateral premium increases or asset transfers are not the statutory response.

Question 47Insurance Act, 1938

Under Section 42A of the Insurance Act, 1938, which person is required to maintain a register of insurance agents?

  1. Each licensed insurance agent
  2. The Tariff Advisory Committee
  3. Every insurer Correct answer.
  4. Each policyholder

Explanation

Section 42A casts the duty on every insurer to maintain a register of its insurance agents containing the prescribed particulars. The register supports regulatory oversight of licensed agents and their appointments.

Question 48Insurance Act, 1938

Under Section 11 of the Insurance Act, 1938, what must every insurer prepare at the end of each financial year?

  1. Only an actuarial valuation report prepared by the actuary
  2. Only a reinsurance treaty approved by the reinsurer
  3. Balance sheet and profit and loss account Correct answer.
  4. Only a solvency certificate signed by the insurer's auditor

Explanation

Section 11 requires every insurer to prepare a balance sheet and profit and loss account at the end of each financial year in the prescribed form. These annual accounts are distinct from the actuarial investigation and solvency returns.

Question 49Insurance Act, 1938

A life insurer is conducting the statutory investigation into its financial condition. Under Section 13 of the Insurance Act, 1938, the investigation must be made by:

  1. a chartered accountant in practice
  2. an advocate enrolled with the Bar Council
  3. an actuary Correct answer.
  4. a claims surveyor licensed by the Authority

Explanation

Section 13 requires a life insurer to cause an investigation into its financial condition by an actuary and to furnish the resulting report to the Authority. The actuary's valuation underpins the insurer's liabilities and policyholder protection.

Question 50Insurance Act, 1938

Under Section 64B of the Insurance Act, 1938, an insurer must furnish to the Authority:

  1. a copy of its articles of association
  2. returns of business in the prescribed form Correct answer.
  3. a list of all its policyholders
  4. a certificate of registration

Explanation

Section 64B requires every insurer to furnish returns of business to the Authority in the prescribed form, enabling periodic regulatory monitoring. The articles, policyholder list and registration certificate are not the business returns contemplated by that section.