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

Mr. Rao, CEO of Vistara Life Insurance Ltd., is accused of delaying genuine death claims. IRDAI is satisfied that removal is needed to protect policyholders and records its reasons in writing. Which statement is correct under section 34B of the Insurance Act, 1938?

The Authority must give the CEO a reasonable opportunity to make a representation before removal, though it may restrain him from acting in the interim if delay would be detrimental. He gets no compensation for loss of office, and any bar lasts up to five years.

  1. AHe may be removed only after a reasonable opportunity to make a representation, though the Authority may bar him from acting pending that representation if delay would be detrimentalCorrect
  2. BHe may be removed without any opportunity of being heard
  3. CHe is entitled to compensation for loss of office on removal
  4. DHe is barred from management of any insurer for a fixed period of ten years

Explanation

Section 34B(2) requires a reasonable opportunity of representation before removal, with a proviso allowing interim restraint if delay would be detrimental. Under 34B(7) no compensation is payable on removal. The bar on management lasts for such period not exceeding five years as the order specifies, not a fixed ten years.

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