Insurance Act, 1938 (4 of 1938) Section 40A - Bare Act

Act Info:

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¹[40A. Limitation of expenditure on commission

( 1 ) No person shall pay or contract to pay to an insurance agent, and no insurance agent shall receive or contract to receive by way of commission or remuneration in any form in respect of any policy of life insurance issued in India by an insurer after the 31 st day of December, 1950 , and effected through an insurance agent, an amount exceeding --

(a) where the policy grants an immediate annuity or a deferred annuity in consideration of a single premium, or where only one premium is payable on the policy, two percent of that premium,

(b) where the policy grants a deferred annuity in consideration of more than one premium, seven and a half percent of the first year's premium, and two per cent, of each renewal premium, payable on the policy, and

(c) in any other case, thirty-five percent of the first year's premium seven and a half percent of the second and third year's renewal premium and thereafter five percent of each renewal premium payable on the policy:

Provided that in a case referred to in clause (c) an insurer, during the first ten years of hi s business, may pay to an insurance agent, and an insurance agent may receive from such an insurer, forty percent of the first year's premium payable on the policy:

²[Provided further that in a case referred to in clause (c), where the rate of Commission payable on the first year's premium is equal to or less than twenty-one per cent, thereof, and the rate on the fourth and fifth years' premiums does not exceed six per cent, thereof, the Life Insurance Corporation of India may pay to an insurance agent, and the insurance agent may receive from it, commission on the sixth and subsequent years' renewal premiums payable on the policy at a rate not exceeding six per cent, of each renewal premium.]

( 2 ) No person shall pay or contract to pay to a special agent, and no special agent shall receive or contract to receive, by way of commission or as remuneration in any form, in respect of any policy of life insurance issued in India by an insurer after the 31 st day of December, 1950 , and effected through a special agent, an amount exceeding --

(a) in a case referred to in clause (a) of sub-section (1), one half per cent, of the premium,

(b) in a case referred to in clause (b) of sub-section (1), two per cent, of the first year's premium payable on the policy, and

(c) in a case referred to in clause of sub-section (1), fifteen per cent, of the first year's premium payable on the policy:

Provided that in a case referred to in clause (c), an insurer, during the first ten years of hi s business, may pay to a special agent, and a special agent may receive from such an insurer, seventeen and a half percent of the first year's premium payable on the policy.

( 3 ) No person shall pay or contract to pay to an insurance agent, and no insurance agent shall receive or contract to receive, by way of commission or remuneration in any form, in respect of any policy of general insurance issued in India by an insurer after the commencement of the³[Insurance (Amendment) Act, 1968 ], and effected through an insurance agent,⁴[an amount exceeding fifteen percent, of the premium payable on the policy where the policy relates to fire or marine insurance or miscellaneous insurance].

( 4 ) No person shall pay or contract to pay to a principal agent, and no principal agent shall receive or contract to receive, by way of commission or remuneration in any form, in respect of any policy of general insurance issued in India by an insurer after the commencement of the Insurance (Amendment) Act, 1950 , and effected through a principal agent an amount exceeding --

(a) in the case referred to in clause (a) of sub-section (3), twenty per cent, of the premium payable on the policy, and

(b) in the case referred to in clause (b) of that sub-section, fifteen per cent, of the policy,

less any commission payable to any insurance agent in respect of the said policy:

Provided that the⁵[Authority] may, in such circumstances and to such extent and for such period as may be specified, authorise the payment of commission or remuneration exceeding the limits specified in this sub-section to a principal agent of an insurer incorporated or domiciled elsewhere than in India, if such agent carries out and has continuously carried out in hi s own office duties on behalf of the insurer which would otherwise have been performed by the insurer.

( 5 ) Without prejudice to the provisions of section 102 in respect of a contravention of any of the provisions of the preceding sub-section by an insurer, any insurance agent who contravenes the provisions of sub-section ( 1 ) or sub-section ( 3 ) shall be punishable with fine which may extend to one hundred rupees.]

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1. Inserted by Act 47 of 1950, section 31 (w.e.f. 1-9-1950).

2. Inserted by G.S.R. 499 (E), dated 19th September, 1975, published in the Gazette of India, Pt. II, Section 3 (i), p. 2007.

3. Substituted by Act 62 of 1968, section 18, for "Insurance (Amendment) Act, 1950 (47 of 1950)".

4. Substituted by Act 41 of 1999, section 30, and Schedule I, for certain words (w.e.f. 19-4-2000).

5. Substituted by Act 41 of 1999, section 30, and Schedule I, for "Central Government" (w.e.f. 19-4-2000).

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