The Hindu : IRDA plans corporate governance code

Online edition of India's National Newspaper
Wednesday, Mar 10, 2004

Business

Business

IRDA plans corporate governance code

NEW DELHI, MARCH 9. The Insurance Regulatory and Development Authority is planning to come up with a corporate governance code in line with that of the market regulator Securities and Exchange Board of India.

"When the IRDA framed the guidelines, it was consistent with international standards. But corporate governance is an issue that has to be looked into,'' the IRDA Chairman, C. S. Rao, said on the sidelines of an international insurance summit here.

He said the guidelines would make the board of directors accountable to the day-to-day functioning of insurers. "It has to be harmonised with SEBI's corporate governance guidelines,'' he added.

Earlier, the two regulators have coordinated in framing investment norms for insurers especially in derivative products.

On the need for a super-regulator, Mr. Rao said, "It was up to the Government to decide. Today, we have the High-Level Committee on Capital Markets that has representation from all the regulators.''

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

Mr. Rao admitted that the minimum capital requirement for Indian companies was deliberately kept high at Rs. 100 crores to ensure that only serious and top quality companies enter the country.

Agents offering

rebates warned

Meanwhile, the IRDA today warned agents that are flouting rules by offering rebates to boost sale of insurance products and said there will be no further review on the new rates of agency commission and brokers remuneration that comes into effect from April one.

"Rebating is totally against law. We will take action against agents who are offering rebates in cash or kind if we come across such incidents,'' Mr. Rao said on the sidelines of the summit.

He said the IRDA could cancel the licence of the agent or ask the insurers to discontinue such agency.

There had been incidents of agents offering special rebates in the form of colour TVs and other freebies to allure consumers in some parts of the country.

The IRDA also thumbed down the general insurance industry's demand for another review of the rates of agency commission and brokers remuneration.

"The guidelines have been already reviewed. I do not think there is any need for further review,'' Mr. Rao said.

PTI

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