Corporate Governance Violations: Insurance Authority Summons Insurer's Board for Accountability
Nepal Insurance Authority has summoned the board of directors of an insurer for accountability after finding serious violations of corporate governance and policy irregularities. During on-site inspections, irregularities were found in business promotion, advertising, opaque commission expenses, investments with financial interests, asset laundering, risk assessment, and term insurance business. The board was called after management's response was unsatisfactory.
Kathmandu. Nepal Insurance Authority has summoned the board of directors of an insurer for accountability after finding serious violations of corporate governance and policy irregularities.
According to sources related to the Authority, during on-site inspections of life insurers, non-life insurers, micro-insurers, and reinsurance companies over the past few months, the following serious negligence has been found:
- Irregularities in business promotion and advertising expenses
- Opaque commission expenses
- Investments with financial interests
- Weaknesses in asset laundering
- Negligence in risk assessment
- Irregularities in term insurance business
In addition, the Authority has taken note of the issue that some insurers, in violation of the Labor Act 2074, the directive on corporate governance of insurers, and the employee regulations of insurers, have distributed salary and benefits by making illegal differential arrangements for the same position. Since labor exploitation leads to the outflow of skilled manpower and weakens internal controls, the Authority has felt the need to conduct a special study on the salary, allowances, and other benefits of employees at every level of the insurer.
Particularly, with the intention of evaluating excellent performance by cutting management expenses, CEOs have been seen adopting a policy of discrimination in service facilities even though they could not reduce the number of manpower. According to the source, this may make CEOs appear as heroes in the short term, but ultimately if any employee challenges it in the labor court, the CEO will have to bear all compensation personally.
According to the Authority, since the ultimate responsibility for negligent acts by senior management lies with the board of directors, the Authority has summoned the board for accountability on these issues. According to the Authority, written responses have already been received from the insurer's management regarding the irregularities found during the inspection. However, since the received response was not satisfactory, the board of directors is being called for further clarification and accountability.
If a satisfactory response is not received from the board as well, the board of the Insurance Authority will decide on action against the concerned insurer.
"We are likely to call them right after the Dashain holidays," an official of the Insurance Authority told Insurance Khabar, "The responsibility of the board of directors is not just to hold meetings and take allowances, but also to ensure that the ongoing activities are in compliance with the rules."
This time, the Insurance Authority has summoned only the board members (including the chairperson) except the independent director of the insurer. An official of the Authority said, "Independent directors were not summoned because they do not have an executive status."