Insurers approach Irdai over common directorship rule in new Bill

Insurance companies have sought clarification from Irdai on a provision barring directors from holding board roles across insurers, banks and investment firms, citing governance and compliance concern

Insurance companies, through their industry bodies — the Life Insurance Council and the General Insurance Council — have sought clarification from the insurance regulator on a provision that bars a director or officer of an insurance firm from simultaneously holding a similar position at another insurer in the same line of business, a bank, or an investment company, according to sources familiar with the development. Industry representatives contend that the clause could mainly impact bank-backed insurers, where several directors currently sit on both the bank’s and the insurance company’s boards. 

“The Life and General Insurance Council has sent letters to the regulator seeking clarification from the Insurance Regulatory & Development Authority of India (Irdai) on the common directorship clause in the new bill, almost 10-15 days ago. Even though the norm has come from the government, since we are seeking clarification from the regulator and they could seek clarity from the government. We want to remain compliant with the norms,” these sources said, requesting anonymity.

 

Bank-backed insurers face board-level challenges 

Many of the country’s largest banks — including SBI, ICICI Bank, HDFC Bank and Axis Bank — either have insurance arms or hold significant stakes in insurers, leading to senior bank executives sitting on the boards of these companies. The new provision could put these board positions in jeopardy, and the industry is now worried about the implications for upcoming board meetings and overall governance.

 

Law not yet in force, say legal experts 

According to legal experts, although the Insurance Amendment Bill has been passed by both Houses of Parliament and received the President’s assent, it is not yet in force. It will only take effect once the Central Government issues a formal notification, similar to the implementation process for labour codes and the DPDP Act. Therefore, current insurers and board members need not take immediate action, and board meetings and appointments can proceed as usual.

 

Key insurers with overlapping board members 

SBI Life Insurance and SBI General Insurance have C S Setty, chairman of State Bank of India (SBI), and Ashwini Tewari, managing director of SBI, as nominee directors on their boards. Similarly, HDFC Life Insurance and HDFC ERGO General Insurance have Keki Mistry, non-executive director of HDFC Bank, on both boards, while Kaizad Bharucha, deputy MD of HDFC Bank, sits on HDFC Life Insurance’s board. Renu Sud Karnad of HDFC Ltd sits on HDFC ERGO’s board. ICICI Prudential Life Insurance and ICICI Lombard General Insurance have Sandeep Batra, executive director of ICICI Bank, on both their boards.

 

Mails sent to the Irdai as well as to Life and General Insurance Councils remained unanswered till the time of publication.

 

What the Insurance Amendment Bill 2025 proposes 

Under Section 32A (1) of the Insurance Amendment Bill 2025, a director or officer of an insurer shall not be a director or officer of any other insurer carrying on the same class of insurance business, or of a banking company, or of an investment firm. While this provision is intended to enhance governance, it has raised concerns in the industry. Restructuring boards could be time-consuming, and some experts argue that if the parent entity loses control over policies, it could be detrimental to the sector.