A set of guidelines to address conflicts of interest
arising from appointment of common directors in the insurance sector is on
the cards with the Insurance Regulatory and Development Authority of India
issuing an exposure draft.
The draft IRDAI (Conflict of Interest) Guidelines,
2019 prescribes do’s and don’ts in the event of there being common directors
between insurance firms, insurance company and insurance intermediaries and
common promoters of health and general insurers.
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 certificate filed by
such promoter needs to be accompanied by a note approved by the board of
directors. The note should detail the manner in which segregation of
business between the general insurer and the standalone health insurer would
The draft guidelines said it would be the
responsibility of the board of the insurance companies to formulate policy
to address conflict-of-interest situations. For a director or officer who
becomes aware of a material conflict of interest, two options will be
available either to eliminate the conflict or resign in 30 days.
In cases where the insurer becomes aware of the
conflict of interest situation, “immediate steps shall be taken by the
insurer to ensure 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.” An enquiry, headed by an independent director, is also to be
conducted and if found guilty, the director or officer would no longer be
“fit and proper” to continue.
Common directorships among insurance firms; an
insurance company and its promoter company; and insurance firms and
insurance intermediaries will be subject to conditions.
No permission, would, however, be needed when the
common director is an independent director in both the companies under the
same group and where the annual remuneration is below ₹10 lakh.