Page 7 - Insurance Times June 2019

IRDAI

Third party motor insur- IRDAI asks Cos to cap bonuses of top executives, link
ance may further hit variable pay
The variable pay of CEOs, managing After withholding on signing off on last
Auto sector
directors and executive directors of year's bonuses, a detailed note has
Insurance regulator IRDAI's proposal
insurers must be been sent on regard-
to increase
based on their per- ing computing of bo-
third party
formance vis-à-vis nuses and what fac-
(TP) motor
that of the industry, tors need to be taken
insurance
said the insurance in before finalizing the
from 10 to
regulator. It also pay outs.
20% on dif-
asked them to set an
As per the informa-
ferent segment will come into effect.
upper limit for bo-
tion received from the
This is likely to hit auto sector badly
nuses so that boards
sources, requests for
as it is already reeling under impact
do not hand out special deals to top
revision of remuneration or any of the
of slow down and fuel hike, said ex-
executives.
fixed pay and variable components will
perts, adding that the hike is being
Bonus of some of the CEO's has been not be entertained by the regulator
opposed by transporters' association
refused to be approved by the Insur- after the end of the year.
citing various reasons.
ance Regulatory and Development
The pay-bonus proposals will require
Usually, third party motor insurance Authority of India (IRDAI) in the life
to clearly specifying the fixed pay and
rates are declared from April 1st of insurance segment, as the proposals
variable components and the maxi-
every financial year, but this year it did not quantify the maximum payable
mum variable pay as well. Where any
was not in effect due to Lok Sabha amount, making it hard to analyze
variable pay component is structured
elections, but now it will be imple- between fixed and variable pay.
as noncash, such as options, the basis
mented.
The sources also informed that the for arriving at the number of such
Reacting over this IRDAI proposal, bonus proposals had also come after options together with the granting
GirishVagh, Head, commercial ve- the end of the financial year. The RBI price or date must be specified.
hicles, Tata Motors, said, "The slow- previously proposed to prescribe a
"While the proposals need to clearly
down in auto sector has come due threshold for variable compensation
specify the fixed pay and variable com-
to several reasons and insurance is for the CEOs and whole-time directors
ponents as also the maximum variable
one minor fact. In commercial ve- of private and foreign banks. pay, it is also necessary that the perfor-
hicles, our customer buy vehicles for Source said, "IRDAI has issued a fresh mance grid/parameters together with
business after witnessing that their circular asking the companies to com- weights are clearly specified and map-
operate economics is better, and ply with the compensation structure ping between the performance grid,
they will have profit after paying EMI and it does not want them to ap- achievement matrix and applicable per-
on monthly basis and see if freight proach the regulator after the end of centage of variable pay component is
is available." the financial year." given," IRDAI said in its circular.
The Insurance Times, June 2019 7