IRDAI issues a framework for new appointment or continuation of common director representing insurance agent, insurance intermediary under Insurance Act 1938
The Insurance Regulatory and Development Authority of India ( “IRDAI”) has laid down the following framework for new appointment or continuation of common director representing insurance agent, intermediary or insurance intermediary on the board of insurance company under section 48A* of the Insurance Act, 1938 :
1. The appointment or continuation of common director representing insurance agent, intermediary or insurance intermediary on the board of insurance company will be deemed to have been permitted, subject to following conditions:
a) The proposed director should not be working in the capacity of the Chief Insurance Executive / Specified Person or any other officer responsible for soliciting insurance business for or on behalf of the insurance agent, intermediary or insurance intermediary while holding the position of director in the insurance company.
b) There should be no conflict of interest or prejudice against the interest of the policyholders because of such appointment
c) Insurer shall not pay any remuneration to non-executive directors without prior approval of the Authority. However, insurers are permitted to pay sitting fees, as per applicable norms.
d) The disclosure requirement as laid down under the Corporate Governance Guidelines for Insurers in India, IRDA (Preparation of Financial Statement and Auditor’s Report of Insurance Companies) Regulations, 2002 and any other extant applicable laws shall be complied with.
e) A resolution is passed approving such appointment by the Board of insurance company/agent/intermediary/insurance intermediary.
f) The common director should recuse himself/herself from the discussion and voting on any matter/discussion pertaining to:
i. Any area having potential conflict of interest.
ii. Insurer/Agent/Intermediary/Insurance intermediary where she/he is holding common directorship.
g) The number of directorships held by the common director should not exceed, at any point of time, the maximum number of directorships specified under the extant law including the Companies Act, 2013.
h) The Insurer/Agent/Intermediary/Insurance intermediary should comply with all other applicable laws.
2. An individual, already acting or proposed to act as Executive Director / Whole-Time Director on the Board of the Insurer/Agent/Intermediary/Insurance intermediary, cannot be appointed as nominee/common director.
3. The common director may be appointed as Chairperson on the Board of the insurance company / agent / intermediary / insurance intermediary subject to necessary safeguards, to be put in place at all the times, to protect the interest of policyholders and to avoid the conflict of interest as may arise due to such appointment.
4. The Insurers shall file a certificate on an annual basis, duly certified by the CEO, confirming compliance with the provisions of this circular on financial year basis. The compliance shall be filed with IRDAI not later than 30th April of the succeeding financial year.
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*Section 48A of the Insurance Act – Life Insurance agents not to be directors of life insurance companies –
No insurance agent who solicits or procures life insurance business, and no chief agent or special agent shall be eligible to be or remain a director of any insurance company carrying on life insurance business:
Provided that any director holding office at the commencement of the Insurance (Amendment) Act, 1946 (6 of 1946), shall not become ineligible to remain a director by reason of this section until the expiry of six months from the commencement of that Act.
Source : Insurance Regulatory and Development Authority of India
