Important MCQs

Insurance Laws
Part 3- The Insurance Act, 1938- B
1. As per the Insurance Act, 1938 which of the following are
the restrictions with respect to the registration of the name
of the insurer?

A. Name identical with that by which an insurer in existence is already registered

B. Name identical with or such that can create resemblance with the name of the
Government entities
C. Name nearly resembling that name as to be calculated to deceive except when the
insurer in existence is in the course of being dissolved and signifies his consent to the
Authority
D. Either (a) or (c)
E. All the above
Ans. D.
Section 5 Restriction on name of insurer- (1) An insurer shall not be registered by a name
identical with that by which an insurer in existence is already registered, or so nearly
resembling that name as to be calculated to deceive except when the insurer in existence
is in the course of being dissolved and signifies his consent to the Authority
2. According to the Insurance Act, 1938 an insurer who has been
granted a certificate of registration shall pay such annual fee to the
Authority in such manner as may be specified by the regulation and
any failure to deposit the annual fee shall render_____________

A. The certificate of registration liable to be cancelled

B. The insurer liable for a penalty of 1 lakh rupees
C. The Authority shall have the power to decide the quantum of the punishment in proportion
to the amount of the fee required to be paid
D. The insurer shall be liable for penalty as well as the imprisonment as laid down under the
Act
E. None of the above

Ans. A.
The certificate of registration liable to be cancelled, Explanation: Section 3A Payment of annual
fee by insurer- (1) An insurer who has been granted a certificate of registration under section 3
shall pay such annual fee to the Authority in such manner as may be specified by the
regulations. (2) Any failure to deposit the annual fee shall render the certificate of registration
liable to be cancelled.
3. According to the Insurance Act, 1938 any member or
shareholder aggrieved by the assessment of compensation
made by the Authority with respect to the scheme of
Amalgamation _________________
A. May within thirty days from the publication of such assessment prefer an appeal to the Securities
Appellate Tribunal
B. Shall within thirty days from the publication of such assessment prefer an appeal to the
Securities Appellate Tribunal
C. May within thirty days from the publication of such assessment prefer an appeal to the National
Company Law Appellate Tribunal
D. May within thirty days from the publication of such assessment prefer an appeal to the IRDA
E. None of the above

Ans. A.
Section 37A. Power of Authority to prepare Scheme of Amalgamation -(4C) Any member or
shareholder aggrieved by the assessment of compensation made by the Authority under sub-section
(4A) may within thirty days from the publication of such assessment prefer an appeal to the
Securities Appellate Tribunal
4. Section 41 of the Insurance Act deals with the
provisions relating to ___________________

A. Prohibition of rebates
B. Prohibition of payment by way of commission or otherwise for procuring business
C. Prohibition of insurance business through principal agent, special agent and multilevel
marketing
D. Limitation of expenses of management in life insurance business
E. None of the above

Ans. A.
No person shall allow or offer to allow, either directly or indirectly, as an inducement to any
person to 1[take out or renew or continue] an insurance in respect of any kind of risk relating to
lives or property in India, any rebate of the whole or part of the commission payable or any
rebate of the premium shown on the policy, nor shall any person taking out or renewing 2[or
continuing] a policy accept any rebate, except such rebate as may be allowed in accordance
with the published prospectuses or tables of the insurer
5. The Insurance Act, came into force on_____________

A. 1st January, 1938

B. 1st July, 1938
C. 1st July, 1939
D. 31st July, 1939
E. None of the above

Ans. C.
Section 1 Short title, extent and commencement- (3) It shall come into force on such date
as the Central Government may, by notification in the Official Gazette, appoint in this
behalf.
6. Which of the following correctly describes general
insurance business as per the Insurance Act?

A. It includes life insurance policies

B. It covers only fire and marine insurance
C. It encompasses fire, marine, and life insurance
D. It involves miscellaneous insurance but excludes fire and marine insurance
E. It comprises fire, marine, or miscellaneous insurance, alone or in combination

Ans. E.
It comprises fire, marine, or miscellaneous insurance, alone or in combination, Explanation: Section
2 Definitions: (6B) “general insurance business” means fire, marine or miscellaneous insurance
business, whether carried on singly or in combination with one or more of them.
7. What is the requirement for insuring properties in India with
foreign insurers as per the Insurance Act?
A. Properties in India cannot be insured with foreign insurers without the permission of
the Authority
B. Properties in India must be insured with foreign insurers regardless of permission
C. Foreign insurers are automatically permitted to insure properties in India without any
restrictions
D. The Authority's permission is not required for insuring properties in India with foreign
insurers
E. The Insurance Act in silent on this issue so there is discretion for the same
Ans. A.
Properties in India cannot be insured with foreign insurers without the permission of the
Authority, Explanation: Section 2CB. Properties in India not to be insured with foreign
insurers except with the permission of Authority —(1) No person shall take out or renew
any policy of insurance in respect of any property in India or any ship or other vessel or
aircraft registered in India with an insurer whose principal place of business is outside India
save with the prior permission of the Authority.
8. What are the factors that the Authority considers
when granting registration to an insurer under the
Insurance Act?
A. Financial condition and general management character are not taken into account by the Authority
B. The Authority only considers the volume of business likely to be available to the applicant
C. The Authority assesses if the applicant has complied with all provisions of the Insurance Act, with no
other considerations
D. The Authority evaluates the financial condition, management character, business volume, and public
interest before granting registration
E. The Authority grants registration solely based on the applicant's compliance with specific sections of
the Insurance Act
Ans. D.
The Authority evaluates the financial condition, management character, business volume, and public
interest before granting registration, Explanation: Section 3 Registration (2A) If, on receipt of an application
for registration and after making such inquiry as he deems fit, the Authority is satisfied that— (a) the
financial condition and the general character of management of the applicant are sound; (b) the volume of
business likely to be available to, and the capital structure and earning prospects of, the applicant will be
adequate; (c) the interests of the general public will be served if the certificate of registration is granted to
the applicant in respect of the class or classes of insurance business specified in the application; and (d)
the applicant has complied with the provisions of sections 2C, and has fulfilled all the requirements of this
section applicable to him, the Authority may register the applicant as an insurer and grant him a certificate
of registration.
9. What option is available to an individual who is dissatisfied
with the Authority's decision to reject their registration
application as per the Insurance Act?
A. They can file a complaint with the Authority within sixty days
B. They have no recourse once the decision is made
C. They can appeal to the Securities Appellate Tribunal within thirty days
D. They can directly challenge the decision in Court
E. They must reapply for registration with additional documentation
Ans. C.
They can appeal to the Securities Appellate Tribunal within thirty days, Explanation:
Section 3 Registration (2C) Any person aggrieved by the decision of the Authority refusing
registration may, within thirty days from the date on which a copy of the decision is
received by him, appeal to the Securities Appellate Tribunal.
10. Which of the following capital requirements is
mandated for registration of insurers in India,
according to the insurance Act?
A. A paid-up equity capital of rupees one hundred crore for general insurance or life insurance
B. A paid-up equity capital of rupees one hundred crore exclusively for health insurance
C. A paid-up equity capital of rupees two hundred crore for re-insurers
D. Either a or b or c
E. Either a or b
Ans. D.
Either a or b or c, Explanation: Section 6. Requirement as to capital— (1) No insurer not being an
insurer as defined in sub-clause (d) of clause (9) of section 2, carrying on the business of life
insurance, general insurance, health insurance or re-insurance in India or after the commencement
of the Insurance Regulatory and Development Authority Act, 1999, shall be registered unless he has
— (i) a paid-up equity capital of rupees one hundred crore, in case of a person carrying on the
business of life insurance or general insurance; or (ii) a paid-up equity capital of rupees one hundred
crore, in case of a person carrying on exclusively the business of health insurance; or (iii) a paid-up
equity capital of rupees two hundred crore, in case of a person carrying on exclusively the business
as a re-insurer.
11. According to section 27 of the Insurance Act what is the
investment requirement for every insurer regarding their
assets?
A. The sum of liabilities on life insurance policies must be invested
B. The sum of liabilities on life insurance policies plus maturing policies must be invested
C. The sum of liabilities on life insurance policies minus unpaid premiums must be invested
D. The sum of liabilities on life insurance policies plus maturing policies minus unpaid premiums and
loans granted must be invested
E. The sum of liabilities on life insurance policies minus unpaid premiums and loans granted must be
invested
Ans. D.
The sum of liabilities on life insurance policies plus maturing policies minus unpaid premiums and loans
granted must be invested, Explanation: 27. Investment of assets. — (1) Every insurer shall invest and at all
times keep invested assets equivalent to not less than the sum of— (a) the amount of his liabilities to
holders of life insurance policies in India on account of matured claims, and (b) the amount required to
meet the liability on policies of life insurance maturing for payment in India, less— (i) the amount of
premiums which have fallen due to the insurer on such policies but have not been paid and the days of
grace for payment of which have not expired, and (ii) any amount due to the insurer for loans granted on
and within the surrender values of policies of life insurance maturing for payment in India issued by him or
by an insurer whose business he has acquired and in respect of which he has assumed liability in the
following manner, namely: — (a) twenty-five per cent. of the said sum in Government securities, a further
sum equal to not less than twenty-five per cent. of the said sum in Government securities or other
approved securities; and (b) the balance in any of the approved investments, as may be specified by the
regulations subject to the limitations, conditions and restrictions specified therein.
12. Which of the following statements accurately reflects the
prohibition concerning insurers' investment of policyholders' funds
outside India according to the provisions laid down under the
Insurance Act?
A. Insurers are encouraged to invest policyholders' funds outside India for better returns
B. Insurers can invest a portion of policyholders' funds outside India with regulatory
approval
C. Insurers are prohibited from investing policyholders' funds outside India, whether
directly or indirectly
D. Insurers are required to invest all policyholders' funds outside India to diversify risks
E. Insurers are allowed to invest policyholders' funds outside India only if they maintain a
certain reserve ratio
Ans. C.
Insurers are prohibited from investing policyholders' funds outside India, whether directly or
indirectly, Explanation: Section 27E. Prohibition for investment of funds outside India—No
insurer shall directly or indirectly invest outside India the funds of the policyholders.
13. Which of the following statements accurately describes a
requirement for insurers regarding the maintenance of assets
within India as per the Insurance Act?

A. Assets in India must be held in the name of trustees approved by the Authority
B. Insurers must maintain assets in the name of their shareholders
C. Assets in India must be kept in the name of a public officer approved by the Authority or in
the corporate name of the insurer
D. Assets in India must be held in the name of the regulatory body overseeing insurance
operations
E. No requirement has been specifically been laid down

Ans. C.
Assets in India must be kept in the name of a public officer approved by the Authority or in the
corporate name of the insurer, Explanation: 31. Assets of insurer how to be kept — 2 [(1) None
of the assets in India of any insurer shall, except in so far as assets are required to be vested in
trustees under sub-section (7) of section 27, be kept otherwise than in the name of a public
officer approved by the Authority, or in the corporate name of the undertaking, if a company or
an insurance co-operative society, as the case may be.
14. Which of the following scenarios could lead to the
suspension or cancellation of an insurer's registration,
according to the Insurance Act section 3?

A. Transferring business without Authority approval

B. If the insurer is in liquidation or is adjudged as an insolvent
C. Failure to maintain assets exceeding liabilities as per section 64VA
D. All a b & c
E. Both a & b
Ans. D
All a b & c, Explanation: Section 3 Registration: (4) The Authority may suspend or cancel
the registration of an insurer either wholly or in so far as it relates to a particular class of
insurance business, as the case may be, —
(a) if the insurer fails, at any time, to comply with the provisions of section 64VA as to
the excess of the value of his assets over the amount of his liabilities, or (b) if the
insurer is in liquidation or is adjudged as an insolvent, or (c) if the business or a class of
the business of the insurer has been transferred to any person or has been transferred
to or amalgamated with the business of any other insurer without the approval of the
Authority, or (d) if the insurer makes default in complying with, or acts in contravention
of, any requirement of this Act or of any rule or any regulation or order made or, any
direction issued thereunder, or (e) if the Authority has reason to believe that any claim
upon the insurer arising in India under any policy of insurance remains unpaid for three
months after final judgment in regular court of law, or (f) if the insurer carries on any
business other than insurance business or any prescribed business, or (g) if the insurer
makes a default in complying with any direction issued or order made, as the case may
be, by the Authority under the Insurance Regulatory and Development Authority Act,
1999, or (h) if the insurer makes a default in complying with, or acts in contravention of,
any requirement of the Companies Act, 2013) or the General Insurance Business
(Nationalisation) Act, 1972 or the Foreign Exchange Management Act, 1999 or the
Prevention of Money Laundering Act, 2002, or (i) if the insurer fails to pay the annual
fee required under section 3A, or (j) if the insurer is convicted for an offence under any
law for the time being in force, or (k) if the insurer being a co-operative society set up
under the relevant State laws or, as the case may be, the Multi-State Co-operative
Societies Act, 2002, contravenes the provisions of law as may be applicable to the
insurer.
15. As per the Insurance Act what is the requirement for
carrying out the insurance business in India?
A. Any person can commence insurance business in India without obtaining a certificate
of registration from the Controller
B. Insurers operating in India must obtain a certificate of registration from the Authority
within three months of commencing their business
C. There is no requirement for insurers to obtain a certificate of registration for carrying on
insurance business in India
D. Insurance business in India can only be carried out by obtaining the certificate of
registration from the Controller
E. Insurance business in India is entirely unrestricted, and no certification is needed from
any regulatory body
Ans. B.
Insurers operating in India must obtain a certificate of registration from the Authority within three
months of commencing their business, Explanation: Section 3. Registration — (1) No 4 person shall,
after the commencement of this Act, begin to carry on any class of insurance business in India and
no insurer carrying on any class of insurance business in India shall, after the expiry of three months
from the commencement of this Act, continue to carry on any such business, unless he has obtained
from the Authority a certificate of registration for the particular class of insurance business.
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