The insurance regulator IRDAI has identified LIC, ICICI Prudential, HDFC Standard Life, Bajaj Allianz, Kotak Mahindra and SBI Life as potential candidates to take over Sahara India Life's business.
The IRDAI took over the administration of Sahara on 12 June, in a first of its kind move in the insurance sector.
“The IRDAI has reasons to believe that Sahara India Life Insurance Co is acting in a manner likely to be prejudicial to the interests of holders of life insurance policies,” Mr TS Vijayan, Chairman of the regulatory agency said in an order issued then.
On 23 June, the IRDAI barred Sahara from writing new business.
The IRDAI order last month pointed out three major infractions, reported Livemint. These were:
- First, the chairman of the board and investment committee, Subrata Roy, had not attended any of the meetings of the board and investment committee during the four years ended March 2015. Roy was jailed in March 2014 (in a dispute between the Sahara Group and another regulator, the Securities and Exchange Board of India) and granted parole on 6 May 2016, and could not have attended meetings during the time he spent in prison; the IRDAI said it was a serious lapse in governance on the part of the company not to have appointed another chairman. In fact, according to the IRDAI, it was only at its behest that a new chairman OP Srivastava was appointed.
- Two, the business of the insurer was declining. Sahara’s renewal business was declining: the insurer collected INR1.40 billion (US$21.7 million) in renewal premium in the financial year ended 31 March 2014 (FY14) but by the end of March 2016, the figure had fallen to INR1.14 billion. The IRDAI directed the insurer to furnish a detailed business plan for the three years from 1 April 2016 to 31 March 2019 to address its concerns. According to the regulator’s order, the insurer had not furnished any plan.
- Third, the IRDAI noticed an increase in the insurer’s expenses. Security and other deposits increased from INR1 million in FY14 to INR713.4 million in FY15. The regulator observed a further increase in FY16 to INR782.4 million. The order stated that the insurer claimed it was expanding its business by opening new offices and had given a security deposit of INR712.5 million for opening 646 offices across India. But the regulator said that it had not approved the expansion plans.