In a bid to address conflicts of interest arising out of the appointment of common directors,the insurance regulator IRDA has said it should be the responsibility of the board of directors of the insurance companies to formulate policy to address conflict of interest situations that may arise due to common directors or officers between insurance companies, insurance company and insurance intermediaries and common promoters of health and general Insurers.
The IRDA on Friday has issued its draft regulations as part of IRDAI (Conflict of Interest) Guidelines, 2019 and wants all stake holders of the industry to provide suggestions on the proposed guidelines by 29th March, 2019.
The IRDAI has said that where a promoter of a general insurance company wants to be a promoter of a health insurance company or vice versa, the application for issuance of requisition of registration of certificate filed by such promoter has to be accompanied with a note duly approved board of directors providing the manner in which the segregation of business, if any, between the general insurance company and the standalone health insurance company shall take place.
A director or officer should, within thirty days after he / she becomes aware that a material conflict of interest exists, should eliminate the conflict of interest or resign from office.
Where the insurer becomes aware of the conflict of interest situation, immediate steps shall be taken by the insurer 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& Proper”.
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. Ten 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;
However, an insurance company and insurance intermediary which are not part of the same group, cannot have a common director;