The IRDAI has released draft rules for common directors in the insurance sector to prevent conflict of interest that such directors may find themselves involved in.

The draft IRDAI (Conflict of Interest) Guideline 2019, state:

1. 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 shall be accompanied with a note duly approved by the 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;
2. It shall 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;
3. A director or officer shall, within 30 days after he/she becomes aware that a material conflict of interest exists, a. eliminate the conflict of interest; or b. resign from office.
4. 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”;
5. No permission is required where the person proposed to act as the common director is an independent director in both the companies in the same group and the remuneration payable to such a director does not exceed INR1m ($14,330) per annum;
6. Permission for a 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;
7. However, an insurance company and insurance intermediary which are not part of the same group, cannot have a common director;
8. Further, common directorships amongst insurance companies, an insurance company and its promoter company, and insurance companies and insurance intermediaries are allowed subject to conditions stated in the guidelines.