Irda to issue corporate governance norms

Insurance Regulatory and Development Authority (Irda) said it would soon issue corporate governance guidelines for insurers and warned that it would penalise agents and insurance companies, who were offering rebates to sell their polices.

Speaking to reporters on the sidelines of the two-day Insurance Congress of Developing Countries, Irda chairman CS Rao also ruled out the possibility of a review of the new rates of agency commission and brokers' remuneration that come into effect from next month.

"The decision has already been reviewed by an expert committee and we have also looked into the issue. I don't think there is any need for a further review," he said.

Last week, Irda had allowed companies with a capital of Rs 10 lakh to Rs 3 crore to bargain for a special discount of 5 per cent when they covered their risks directly with an general insurer.

Insurance brokers have since been protesting against the decision.

Rao said Irda would harmonise the corporate governance rules with those of other regulators like the Securities and Exchange Board of India (Sebi) but did not fix any timeframe for issuing the guidelines.

"When Irda framed the guidelines, they were consistent with international standards. But corporate governance is an issue that has to be looked into," Rao said.

He said the guidelines would make the board of directors accountable to the day-to-day functioning of insurers.

The Irda chief also said the regulators in emerging markets needed to gradually harmonise their regulations with international standards as laid down by the International Association of Insurance Supervisors, as physical barriers were fast disappearing with rapid growth in trade and commerce.

On rebating, or passing off a part of commission to policyholders, Rao said the regulator would take a tough stand against any complaint that came to it.

"Rebating is totally against the law. We will take action against agents who are offering rebates in cash or kind if we come across such incidence," he said, adding that the regulator could cancel the licence of the agent or ask the insurers to discontinue such agency.

There have been incidents of agents offering special rebates in the form of freebies like colour TVs and microwave ovens to allure consumers.

"The remedy should come from policyholders," Rao said.