Insurance
Sexual harassment insurance premium rises based on profile of key personnel

Companies employing likes of Phaneesh Murthy and Tarun Tejpal will have to shell out higher premium for directors and officers insurance. Past record of mismanagement or harassment by the key personnel will hike the premium

Sexual harassment cases involving Phaneesh Murthy, Tehelka’s Tarun Tejpal and former Supreme Court judge AK Ganguly have highlighted the need for corporates to buy Directors and Officers (D&O) insurance to cover several business risks and liabilities. The annual growth of D&O insurance in India is at a spectacular 30% to 40%. While the chances of litigation are definitely higher in the US than in India, exposure to scams, hefty legal fees charged by senior advocates and global practices is an impetus for buying insurance rather than taking the risk of having to defend a possibly frivolous lawsuit claiming crores in damages. Some D&O policies may be silent about covering lawsuits due to sexual harassment and hence buyers need to be aware of it. Each policy is usually tailored for the respective clients and hence the clause can be added.
 

Register and attend upcoming (18th December) Moneylife Foundation seminar in Mumbai - SEXUAL HARASSMENT AT THE WORKPLACE
 

What D&O covers and reasons for increase in significance? Satyam scam was a wake-up call for companies. Corporate liability is not just related to sexual harassment, but includes wider aspects like Mis-statement in prospectus, Inaccurate statement of financial conditions, Errors in annual accounts, Conflict of interest, Lack of judgment, diligence, good faith, Mismanagement of funds, Unfair allotment of shares, Using insider information, Unwarranted dividend, salary, compensation payments, Unfair dismissal of an employee and so on. All these are cases for D&O cover.

According to Sushant Sarin, Sr VP - Commercial Line, TATA AIG General Insurance, “Directors and officers take out D&O insurance to protect themselves against a multitude of wrongful act, error or omission allegations against them in the course of their official duties. Sexual harassment allegations are no doubt covered but represent only one of multiple types of allegations. In our experience, D&O insurance is fast becoming recognized by Company managements as a policy they must have to secure themselves against personal liability for managerial acts. That this policy also responds to allegations of sexual harassment makes it that much more important as a risk management tool in addition to setting up Vishakha committees etc.”
 

There is a new reason to consider buying D&O insurance – new Companies Bill 2013. According to Dr Amarnath Ananthanarayanan, CEO and MD, Bharti AXA General Insurance, “New Companies Bill, 2013 has also created a conducive environment for selling D&O insurance in India - a lot of new measures have been taken to bring more clarity; for example, for the first time duties of directors have been defined in this bill, the concept of class action suits has been introduced, the definition of officer-in-default has been widened, restriction on the companies to indemnify its directors has been removed. In view of the above, in my opinion the D&O business is expected to grow significantly say by 60-70%.”
 

Sanjay Datta, Chief – Underwriting and Claims, ICICI Lombard, says, “There has been an increase in interest in the D&O cover across the board both because of the recent high profile cases and also because of New Company’s Act. There is a lot of interest from customers on how the policy deals with these situations. We have written over 500 policies so far this year and have seen about a 30% increase in D&O business.”
 

D&O premium as per key personnel profile Sushant Sarin, says, “Corporate governance standards followed by companies are a factor in pricing the insurance cover. It is a norm to cover all directors and officers of a company rather than only some.” According to Dr Amarnath, “Director’s profile is an important factor while underwriting D&O policy. However, the underwriting philosophy may vary from one insurer to the other in terms of acceptance of risk.”
 

Sanjay Datta, says, “Though the policy covers not only the board of the company, we do look at the profile of the board and the important executives of the company. We are more cautious about underwriting risks where any of the key personnel have a past record of mismanagement or harassment. For a basic cover, a $1 million policy would cost about $2,000.”

 

What D&O won’t cover? Tata AIG view – “Under law, any contract that is against public policy is void. Accordingly, since it would be against public policy to cover fraud, an insurance contract cannot do so. However, this rule applies only if and when fraud has been established. Merely an allegation of fraud does not suffice to void a contract. When faced with an allegation of fraud, a director or officer will want to defend him/her against such allegation. For this, s/he would want to use the services of a capable lawyer which would mean considerable expense. The D&O policy pays such defense expenses incurred by directors and officers. If capable defense helps them establish their innocence the policy has served its purpose.”
 

Bharti AXA – “Any fraudulent act or omission or any wilful violation is excluded from the scope of D&O policy. The D&O cover usually provides for defence cost unless specifically excluded under the policy.” ICICI Lombard – “The D&O policy covers defence costs incurred by or on behalf of directors and officers in defending allegations of fraud. But the cover in the policy ceases in case the director has been convicted for or if he confesses to criminal acts including fraud.”
 

Read

Phaneesh Murthy iGate scandal: Time for Directors and Officers insurance?
 

Phaneesh Murthy: Let off by Infosys, sacked by iGate over sexual harassment charges


Phaneesh Murthy saga: Why insurers should refuse to cover serial offenders of sexual harassment

User

COMMENTS

ABHA CHAWLA MOHANTY

3 years ago

HOW MANY PUBLIC SECTOR UNDERTAKINGS esPECIALLY INSURERS FURNISH DIRECTORS profile???,..,DIRECTORS AND OFFICERS LIABILITY WILL BE SELF SERVING??

SuchindranathAiyerS

3 years ago

Whereas the "sexual harassment" and "domestic violence" laws enable the convenient black mail of men and there are women who are more than willing to take advantage, it doesn't take much for an enterprising insurance industry to put a few women up to hiking up the revenues rather than their whatever?

REPLY

Laazarus Dias Education Akademy

In Reply to SuchindranathAiyerS 3 years ago

Dear Suchindranath the calculation of premium is done by a highly qualified person called an Actuary (In india we have approx 250 persons qualified ) The calculation is based on a very complicated probability and statistical calculation. Do you think Women can be put up in a sexual harrasment case. Dont think so that any women worth her salt will get herself entangled in such a thing. Very rare that it will happen

ABHA CHAWLA MOHANTY

In Reply to Laazarus Dias Education Akademy 3 years ago

LAAZARUS DIAS EDUCATION AKADEMY,SIRS,YOU HAVE SUCCINCTLY PUT FORTH THE RATIONALE,..TROUBLE IS THE MANY SERVING OFFICERS DO DISSERVICE TO INSURANCE SECTOR BY MEDIOCRITY OF THINK ,AND, SERVICE,..THE MANDARINS OF FINANCE MINISTRY COULD NOT CARE LESS,,,UNLESS THE BOARDS OF ESpecially of insurance sectors held accountable AND "LIABLE "notwithstanding , their, clout ,sniggering and snide of insurance covers shall rule,..

Gopalakrishnan T V

3 years ago

a very innovative business with lot of business opportunities.

BSE to suspend trading in 28 companies for non-compliance

Trading in securities of the 28 companies will be suspended from 30th December due to non-compliance of the listing agreement, says BSE

BSE has said it will suspend trading in securities of 28 companies for the companies’ failure to comply with various provisions of the listing agreement. “Trading in securities of these 28 companies will be suspended from Tuesday, 30 December 2013 (being 15 trading days from issue of notice); on account of non- compliance with the provisions of the Listing Agreement,” BSE said.

 

The 28 companies which will face suspension are mentioned in below table.

 

Sr. No

Scrip Code

Company Name

1

532919

Allied Computers International (Asia) Ltd

2

501622

Amalgamated Electricity Company Ltd

3

531678

Anand Credit Ltd

4

517565

Ashco Niulab Industries Ltd

5

532542

Crew B.O.S. Products Ltd

6

531470

Emporis Projects Ltd

7

531337

Iris Mediaworks Ltd

8

531269

KLG Systel Ltd

9

530039

Lords Chemicals Ltd

10

514446

LS Industries Ltd

11

501209

Maestros Mediline Systems Ltd

12

530497

Marvel Capital & Finance India Ltd

13

530375

Nakshatra Infrastructure Ltd

14

501482

Parekh Distributors Ltd

15

504288

Polar Industries Ltd

16

532435

Sanmit Infra Ltd

17

511503

Secure Earth Technologies Ltd

18

523359

Sharp Industries Ltd

19

532029

Sindhu Trade Links Ltd

20

522042

SM Energy Teknik & Electronics Ltd

21

532249

Sql Star International Ltd

22

513530

Stelco Strips Ltd

23

531013

Sun Granite Exports Ltd

24

533639

Taksheel Solutions Ltd

25

522091

United Van Der Horst Ltd

26

521046

Vanasthali Textile Industries Ltd

27

530487

Vibros Organics Ltd

28

512345

Yash Trading & Finance Ltd

 

As per the rules and bye-laws of the exchanges and the provision of Securities Contracts (Regulation) Rules, 1957, a company listed on an exchange is required to comply with various clauses of the Listing Agreement, failing which trading in securities of such defaulting companies is liable for suspension.

 

These 28 companies have not fulfilled the BSE requirements for continuous listing till the quarter ended June 2013, BSE said in a statement.

 

As per the stock exchange, if the companies comply with listing norms on or before 19 December 2013, trading in their securities would be suspended for five trading days up to 3 January 2014. However, if they fail to do so, the suspension would continue till such time the company complies with the procedure laid for revoking suspension.

 

“Suspension of trading in securities of a company will be revoked only if the company has complied with all the provisions of the Listing Agreement up to the latest quarter for which the compliances are required,” BSE said.

User

COMMENTS

Dayananda Kamath k

3 years ago

these rules again show that regulators are the sponsorors of fraud on investors. why a share is to be delisted for the errors of the company management. prosecute the wrong doers and not the investor. that is why they come again and again to dupe the hapless investor.

Nilesh KAMERKAR

3 years ago

What kind of investor protection is this?

Why should outside and passive investors be penalised for the misdeeds of controlling shareholders.

Vaibhav Dhoka

3 years ago

Suspension of trading leads to ultimate loss to small investors.Instead tho directors should be criminally prosecuted.And recovery of dues must be made through civil procedure.

Infosys’ revenue growth will still be choppy, the management tells analysts

Infosys management indicated that the challenges to growth were more internal rather than external, as it would take time for the company to absorb the recent organisational changes, finds Nomura

Infosys indicated that despite the improvement in the demand environment it’s near term revenue growth will still be choppy, says Nomura in a research note based on interaction with the management of the company. This is for two reasons: 1) 3Q and 4Q are seasonally weak quarters due to the holiday season; and 2) impact on revenues from recent internal changes viz. a) creation of five new P&L units, b) consolidating Lodestone into Consulting and System Integration, and c) ongoing cost rationalization, all of which have led to people movement across the company.

 

According to Nomura, Infosys management indicated that the challenges to growth were more internal rather than external, as it would take time for the company to absorb the recent organizational changes. There has not been any impact from the senior management exits, however, as Infosys has expanded its leadership team by promoting several executives to more than fill the gap caused by the exits, according to management, reports the research note.

 

Productivity improvement is likely to play an important role in improvement in margins for the company, reports the research note.  Infosys sees bigger returns from this lever, by increasing offshore revenue mix and reducing onsite costs by right sizing role ratios. However, these changes are likely to be gradual and over the medium to long term, as internal teams have to be comfortable with the changes. Also, Infosys will have to continue to make investments in the business to increase margin profile. Infosys is clear that they cannot afford to remain below industry in revenue growth.

 

According to the research note, Infosys is likely to do well in the following market segments: manufacturing and retail, telecom, consulting and system integration, healthcare and financial services. Infosys has seen a significant uptick in win ratios in Infrastructure management services (IMS) and has won end-to-end deals consisting largely of IMS.

 

On stock market performance of Infosys, Nomura has reiterated its ‘Buy’ rating on account of the company’s return to near industry growth rates. This is likely to be maintained with: traction improving in the commoditised segments where it was lagging peers; and upside possibilities from a pick-up in discretionary spending. Margin upsides at Infosys are also likely from cost-optimisation initiatives. Nomura expects near-term stock performance to be driven by margins rather than significant growth in revenues.

User

COMMENTS

Suiketu Shah

3 years ago

NM style of underestimating (in public) their growth is the way it shd be.Interestnig very very few "experts" recommend Infosys as they donot need "experts pushing their shares.Their performance in last 6 months esp speaks for itself and more to come in 2014 with an even weaker rupee.

S V TANEJA

3 years ago

Besides the changes in the working/functioning the Company should also explore takeover of good companies. Such investment would put its ideal money to good and profitable use.

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