Explain the provisions regarding prohibition of rebates in insurance as per Insurance Act, 1938.

One of the important tools to support the cause of solvency of an insurer available in the Insurance Act, 1938 is to ensure availability of full/adequate premium with the insurer for coverage of a risk. Section 41 of the Insurance Act, 1938 seeks to achieve this by providing as under: No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take 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 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: Provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub-section if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bonafide insurance agent employed by the insurer. Any person making default in complying with the provisions of this section shall be liable for a penalty which may extend to ten lakh rupees." Every insurer, in its published prospectus, indicates details (such as coverages and pricing) of various insurance products offered and sold by it as approved by IRDAI. The pricing of a product as filed by an insurer before the Authority is based on actuarial calculations submitted by it and the Authority, while approving the product so filed by an insurer, considers the actuarial pricing selling below which it would not only be lossmaking for the insurer but would also, in the long run, be detrimental to its solvency, which is so essential for protecting the interests of the policy holders. This Section, apart from ensuring that the insurer gets its due pricing for the products sold by it and does not lose its solvency due to underpricing, also serves the purpose of disciplining the market by curbing the unhealthy practice of undercutting of prices for grabbing the business for other players.