Thursday, Apr 18, 2024 | Last Update : 09:29 PM IST
IRDAI issues norms on conflict of interest
The person found guilty shall no more be "fit and proper".
Chennai: If a conflict of interest arises when insurance companies have common directors, they should not be allowed to participate in the day-today activities of the company, proposes IRDAI.
IRDAI has proposed a few guidelines to address conflicts of interest arising out of the appointment of common directors between insurance companies, insurance company and insurance intermediaries and common promoters of health and general Insurers.
A director or officer shall eliminate the conflict of interest or resign from office within thirty days after he / she becomes aware that a material conflict of interest exists.
When the insurer becomes aware of the conflict of interest situation, immediate steps shall be taken to ensure that the powers / authority delegated to such a director or officer is ceased and he / she is not allowed to participate in the day-to-day activities of the company. Also, an enquiry, headed by an independent director, shall be conducted on such a director or officer. The person found guilty shall no more be "fit and proper".
As per the guidelines, it is the responsibility of board of directors of the insurance companies to formulate policy to address conflict of interest situations that may arise when insurers have common directors or officers.
Where a promoter of a general insurance company wants to be a promoter of a health insurance company or vice versa, the promoter should file an application for issuance of requisition of registration of certificate. This should be accompanied with a note duly approved by board of directors on the manner in which the segregation of business between the two companies shall take place.
However, no permission is required where the person proposed to act as the common director is an independent director in both the companies under the same group and the remuneration payable to such a director does not exceed Rs 10 lakh per annum. Permission for common non-executive director of an insurance company and insurance intermediary is required where the insurance company and insurance intermediary are part of the same group.
If an insurance company and insurance intermediary are not part of the same group, they cannot have a common director.
