IRDAI approves SBI Life to take over Sahara India Life Insurance, saving 2 lakh policies amidst financial strain.
SBI Life Insurance Company, one of India’s leading life insurance providers, is slated to take over approximately 2 lakh policy liabilities and assets of the beleaguered Sahara India Life Insurance Co. Ltd (SILIC). This decision by the Insurance Regulatory and Development Authority of India (IRDAI) comes as a major turn of events to the deteriorating financial health of SILIC and aims to safeguard the interests of its policyholders.
IRDAI’s Order: A Move Towards Stability
Prompt Action Ensuring Policyholders’ Safety
After reviewing SILIC’s mounting financial distress, the IRDAI ordered the immediate transfer of SILIC’s life insurance business to SBI Life. “After due consideration of all surrounding facts and circumstances, the Authority has decided that the life insurance business of SILIC is to be transferred to another suitable life insurer with immediate effect,” stated the IRDAI order dated June 2. SBI Life was identified as the acquirer insurer.
As per the directive, SILIC, along with its promoters and shareholders, is obliged to transfer all policyholders’ records to SBI Life within a stipulated timeframe of 21 working days. This implies that about 2 lakh policyholder liabilities and assets of SILIC will be transitioned to SBI Life before the month of July.
Sahara India’s Future in Insurance Business
In a rather bold move, the IRDAI-appointed administrator recommended that SILIC cease business operations. It was advised to “stop underwriting new business with immediate effect” and that the existing business should be transferred to SBI Life. Until the transfer completion, SILIC is allowed to accept renewal premiums and serve its current customers.
As of March 31, 2023, Sahara India Financial Corporation Limited (SIFCL) holds 50% shares of SILIC, while Sahara Care Limited (SCL) possesses a 40% stake.
SBI Life’s Role: A Strategic Takeover
Why SBI Life?
IRDAI’s decision to appoint SBI Life as the acquirer insurer came after careful scrutiny. This stems from SBI Life’s strong financial stability, large customer base, and a proven track record in life insurance services.
As per the administrator’s findings, SILIC’s promoters were found to be “not fit and proper”, while the shareholders and Board of Directors appeared unenthusiastic about a recovery plan. It was underlined that SILIC was “mainly surviving on the release of reserves” and had diverged Rs 78.15 crore under the guise of security deposits. The non-executive chairman, instead of the board, was reportedly managing SILIC’s affairs.
SBI Life’s takeover presents a reassuring outlook for SILIC’s policyholders who have been grappling with the uncertainty surrounding their policies.
The implications of this change are multi-faceted and while it offers an immediate resolution to SILIC’s policyholders, the broader repercussions on the Indian life insurance sector will unravel with time.
The IRDAI’s proactive decision underscores the regulator’s commitment to policyholders’ interests. As the insurance sector’s custodian, it ensures market integrity and promotes confidence among policyholders. The SILIC case will likely serve as a significant example for other financially distressed insurance companies. Meanwhile, SILIC policyholders can anticipate a seamless transition to SBI Life and expect continued services under their new insurer.