The Insurance Regulatory and Development Authority of India has approved for SBI Life Insurance Company Ltd to acquire Sahara Life Insurance Company Limited. SBI will take over liabilities of around INR 2 lakh policies that are backed by the insurer’s assets.
SBI Life has commented on India’s insurance regulator’s decision the move is merely a transfer of assets and liabilities and not a merger.
IRDAI recently made the announcement that is to take place immediately. The regulator has also set up steps to adopt for a smooth switch between the companies. Furthermore, a committee will be organized comprising an actuary, life member and F&I member to oversee this order.
Impact on SBI Life Insurance Co. Ltd.
Experts believe the transfer will not have a huge impact on the existing business of SBI Life Insurance. This is because the amount of policy liabilities being transferred is quite small compared to SBI’s current load.
It would rather be an opportunity for SBI to offer the customers their own products based on the user’s age. Experts believe that SBI Life Insurance’s balance sheet is stronger than other players in the market, making it the best candidate for the transfer. The company recently started offering a new scheme for senior citizens, signifying its dedication to providing the best.
The company has been given instructions to take all necessary steps for the transfer of liabilities. This includes setting up a devoted cell to address any of the queries of Sahara India Life Insurance Co. Ltd’s policyholders. The insurance regulator will continue monitoring the situation and take decisions as deemed necessary.
SBI Life Insurance was not the first choice for the transfer. In an earlier order, the IRDAI has chosen ICICI Prudential Life as the best candidate for the job. What encouraged the change is not known.
The backstory on Sahara India Life Insurance Co. Ltd.
Sahara India Life Insurance has been operating at a loss for quite some time now. There has been a higher premium on insurance claims which if allowed to continue would worsen the situation for the company. It could even lead to the loss of capital in the company.
Sahara India got its registration certificate way back in 2004 which enabled it to issue life insurance. However, over time when problems cropped up in its governance and financial property, the company was given an administrator in 2017.
The situation showed no signs of improvement and in 2021, Sahara India Life Insurance was directed to not underwrite new business. Fresh instructions were given to the company to meet IRDAI’s regulatory requirements.
IRDAI mentioned that Sahara India Life Insurance was given a lot of time to make good on its issues. The company failed to comply with the guidelines and did not the right steps to protect its insurance holders. Sahara India Life Insurance’s balance sheet is also reportedly in a poor state which if allowed to continue would lead to the company not discharging its liabilities. This will further endanger the policyholders and their interests.
The decision for the transfer was made after much discussion and speculation by the IRDAI.