IRDAI Notifies Appointment or Continuation of Common Director(s) u/s 48A of Insurance Act 1938

The Insurance Regulatory and Development Authority of India(IRDAI) has notified Appointment or Continuation of Common Director(s) u/s 48A of Insurance Act 1938.

The second proviso of section 48A of the Insurance Act, 1938 provides that “the Authority may permit an agent or intermediary or insurance intermediary to be on the Board of an insurance company subject to such conditions or restrictions as it may impose to protect the interest of policyholders or to avoid conflict of interest.”

Applications for new appointments or renewals of common directors who represent insurance agents, intermediaries, or intermediaries on the board of insurance companies are submitted to the Authority for approval in accordance with section 48A of the Insurance Act of 1938.

The Authority, in exercise of powers conferred under section 14(1) of the IRDA Act, 1999 hereby provides the following framework for appointment of common director under section 48A of the Insurance Act, 1938:

a. The appointment or continuation of common director representing insurance agent, intermediary or insurance intermediary on the board of insurance company shall be deemed to have been permitted, unless otherwise provided for in this Circular, subject to following conditions:

i. While serving as a director for the insurance firm, the proposed director shall not serve as the Chief Insurance Executive / Specified Person or any other officer in charge of soliciting insurance business for or on behalf of the insurance agent, intermediary, or insurance intermediary.

ii. As a result of this appointment, there should be no conflict of interest or prejudice against the policyholders‘ interests.

iii. Without the Authority’s previous consent, the insurer may not pay non-executive directors any compensation. However, insurers are allowed to pay sitting fees in accordance with the relevant regulations.

iv. The disclosure requirements outlined in the IRDA (Preparation of Financial Statement and Auditor’s Report of Insurance Companies) Regulations, 2002, the Corporate Governance Guidelines for Insurers in India, and any other applicable laws currently in effect must be followed.

v. A resolution is passed approving such appointment by the Board of insurance company/agent/intermediary/insurance intermediary.

vi. The common director shall recuse himself/herself from the discussion and voting on any matter/discussion pertaining to:

1. Any area having potential conflict of interest;

2. Insurer/ Agent/ Intermediary/ Insurance intermediary where she/ he is holding common directorship.

vii. The maximum number of directorships allowed by current legislation, including the Companies Act of 2013, cannot be exceeded at any moment in time by a common director.

viii. The Insurer/ Agent/ Intermediary/ Insurance intermediary shall comply with all other applicable laws.

b. No one may be nominated as a nominee or common director if they are already serving or are being considered for serving as Executive Director or Whole-Time Director on the Board of the insurer, agent, intermediary, or insurance intermediary.

c. The appointment of the common director as chairperson of the board of the insurance company, agent, intermediary, or intermediary may be made subject to the establishment of all necessary safeguards to protect policyholder interests and prevent any potential conflicts of interest that may result from such an appointment.

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 Authority not later than 30th April of the succeeding financial year.

This Circular will come into force from the date of issuance of the same and will supersede the Circular IRDA/F&A/CIR/MISC/141/08/2018 dated 30.08.2018.