The government has set up a panel to enable a break-up of the chairman and managing director position in state-owned insurers
The government has constituted a seven-member panel to select managing directors of public sector insurance companies. Similar to the structure in public sector banks, the idea is to split the role of chairman and managing director in state-owned insurers as well. Here, it is likely that there would be a non-executive chairman in the new structure.
Sources said that there could be a non-executive chairman who may not be involved in the day-to-day functioning of the insurance companies. Also, it is likely that this panel may identify a few companies in the initial stages for the CMD position split.
With this, there will be a management restructuring of the six entities in general insurance. Life Insurance Corporation of India (LIC) is under the purview of the LIC Act and has a chairman and three managing directors. In the private sector, the posts of chairman and managing director are held by separate entities.
The state-owned general insurance companies are New India Assurance, Oriental Insurance, National Insurance, United India Insurance, General Insurance Corporation of India (reinsurer), Agriculture Insurance Company of India and Export Credit Guarantee Corporation of India.
The panel is likely to be headed by Banks Board Bureau (BBB) chairman B P Sharma. It will also have representatives from the department of financial services and the insurance regulatory body.
The timeline for the process has not yet been announced though it is likely to take at least 4-6 months to complete the process. The committee will first meet and decide on the likely candidates for the post. Post this, the respective boards of the companies will have to be contacted to decide on the delegation of responsibilities to the managing director.
In banks, the idea was to improve corporate governance practices among the entities. Among insurance companies, the managing director would be responsible for the daily business activities while the chairman will be in-charge of larger business decision making.
In several state-owned entities, there is also a manpower shortage to take up these roles. It is desirable that senior management executives with at least two to three years of residual service take up these roles.At least three of the large PSU general insurers had recently seen a management reshuffle with chairman and managing directors being appointed.