Interpretation of ‘First Ten Years of Business’ u/s 40 A of the Insurance Act, 1938

The Insurance Regulatory and Development Authority (“IRDA”) has, vide its circular dated November 18, 2010, clarified the concept of ‘first ten years of business’ in context of Section 40 A of the Insurance Act, 1938 (“Act”). Section 40A of the Act deals with the limits on payment of commission or other remuneration to the insurance agents. Section 40A also provides certain relaxations from complying with the prescribed limits during first ten years of the business of the insurer.

In the above circular, IRDA has clarified that for the purpose of computing first ten years of business of the insurer the relevant date would be date on which the insurer is granted the certificate of registration.