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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part I)

Following IRDAI findings of deliberate stalling of claims, the Authority, for reasons recorded in writing, orders the removal of Mr. Rao, CEO of an insurer, to protect policyholders. Which statement is correct under the Insurance Act, 1938 as reproduced?

Mr. Rao must first be given a reasonable opportunity to make a representation, and after removal he cannot claim compensation for loss or termination of office, notwithstanding any contract or articles. He is also barred from managing any insurer for up to five years.

  1. AMr. Rao can claim compensation for loss of office under his contract
  2. BMr. Rao must be given a reasonable opportunity to make a representation before the order, and cannot claim compensation for loss of officeCorrect
  3. CMr. Rao may continue in management of other insurers immediately after removal
  4. DThe Authority cannot appoint a replacement without the insurer's shareholders' consent

Explanation

Section 34B(2) requires a reasonable opportunity of representation before the removal order, and 34B(7) bars compensation for loss or termination of office despite any contract. Under 34B(3) he is barred from managing any insurer for up to five years, and 34B(5) lets the Authority appoint a replacement.

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