Move to prevent conflict of interest

The Hindu Business Line
March 10, 2019


Soon, there will be tough norms for common directors in the insurance sector to prevent conflict of interest.
The Insurance Regulatory and Development Authority of India (IRDAI) has released a draft of the IRDAI (Conflict of Interest) Guidelines, 2019.
If a promoter of a general insurance company wants to be a promoter of a health insurance company or vice-versa, his application for registration 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 take place.
As per the draft guidelines, it will be the responsibility of the board of the insurance companies to formulate a 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 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, the draft said.

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