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After banks, insurance companies weigh legal backing for staff

The insurance sector is somewhat more complicated, and we have seen officials being under undue scrutiny for business decisions gone wrong.
NEW DELHI: After banks, insurance companies are looking to provide legal and financial support to their employees being probed by investigating agencies for business decisions – seemingly taken in good faith – gone wrong. The General Insurance Public Sector Association (GIPSA), a body of staterun general insurers, has approved such a policy and asked members to get board approval to implement it.

A senior executive with an insurance company confirmed the development and said the policy is similar to the one approved by the Indian Banks Association (IBA). “We have mostly followed that module in spirit, except for some minor changes which are meant for the insurance industry,” the official said.

The IBA proposed that lenders bear all legal expenses in such cases, including providing an advocate when required. The IBA’s action was triggered after Bank of Maharashtra CEO R Marathe and executive director RK Gupta were arrested by the state police. The charges against them were later withdrawn.

“The insurance sector is somewhat more complicated, and we have seen officials being under undue scrutiny for business decisions gone wrong,” said a GIPSA executive, making a case for quick approvals by the boards of member-insurers.

“Take the case of TS Vijayan, who bounced back from a demotion at LIC and multiple investigations into allegations of irregularities to become the insurance regulator,” the executive added. Another industry executive, however, said that unlike in banking, there aren’t such grey areas in the insurance sector.

“The insurance companies are reeling under heavy losses – it makes no sense to take such action and bear additional costs,” he said, adding that the government should instead set up an oversight committee to look into allegations against top management officials before any formal action is taken. The government is expected to merge National Insurance, Oriental Insurance and United India Insurance by 2019. The finance ministry reviewed the progress of the state-run general insurance companies in October and kickstarted ‘Insurance Manthan’ to optimise their performance.

Financial services secretary Rajiv Kumar said in a tweet at that time, “Aim is to develop comprehensive reform agenda in six themes to modernise Public Sector GICs. Committed to work towards safety net of all citizens.” The initiative’s six-point agenda includes sustainable and prudent business, talent management and customer orientation.
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