The decision, a first in the insurance industry, was taken after the regulator came to the conclusion that the insurer was acting in a manner “likely to be prejudicial to the interests of the holders of life insurance policies”. The action was taken under Section 52 A of the Insurance Act, the insurance regulator’s order said.
R K Sharma, general manager, Irdai, was appointed the administrator to look after the business of Sahara Life Insurance
The decision was made after Sahara Life’s CEO Sanjay Agarawal and CFO KK Bajpai met Irdai
officials on June 12. The duo admitted to the regulator that there was a lot of chaos in the company since FY15 due to the arrest of Subroto Roy, chairman of the company.
In addition, a lot of key officials had quit the company and replacements were difficult to find as the headquarters were in Lucknow.
In FY15, Irdai
had raised concerns about the financial position, declining business and governance aspect of the company as a part of the off-site monitoring process of the financial year. The investment committee, as well as the chairman, had not met for a period of four years. In view of the declining business performance of the company, the regulator had asked the insurer to furnish a detailed business plan for the three years (2016-17 to 2018-19) which it was not able to file.
Moreover, questions were raised about the increase in certain line items under current assets in FY15 as against FY14.
Dissatisfied by the insurer’s response to the concerns raised, the regulator sought details by May 31, 2016, which it did not even after two reminders.
On March 9, the Irdai
issued a show cause notice to Sahara, which was again not responded to. The regulator then gave a final opportunity to the insurer to respond on June 10, and have the insurer a chance of personal hearing and asked the chairman, independent directors and the CEO to be present. Sahara’s CEO requested to reschedule the meeting on June 12 or 13, and Irdai
held the hearing on Monday. When Irdai
presented the charges, the insurer revealed that the absence of chairman of the board, appointed actuary, chief financial officer and various other important people handling the business of the insurance company caused a chaos in the financial position of the company in the last couple of years starting from FY14.
The company had paid Rs 71.25 crore for opening 646 new offices across India as it wanted to expand business. However, this was without Irdai’s approval. A rental payment of Rs 80 crore was made to a group company. The insurer had written to the group company for a refund of the deposit but no refund has been received as of now.
Following this, the regulator concluded on June 12 that the insurer’s financial standing as per its financial statements did not reflect the right view.
"The administrator shall act as per powers and duties as per the applicable provisions... And manage the business with the greatest economy compatible with efficiency and regular reporting to the Irdai," the order signed by PFRDA chairman T S Vijayan said.
In a related FAQ (Frequently Asked Questions), the regulator said that all the policyholders' requests for settlement of claims and other benefits would be processed, as per respective terms and conditions of the policy within a period of 30 days.
Also, the insurer will continue to offer all the policy servicing activities as per respective policy terms and conditions. The regulator also said the administrator would manage the business with the greatest economy compatible with efficiency and regular reporting to the Irdai.
The insurer had sold 665 polices worth Rs 1.53 crore during April-May 2017, and collected premium worth Rs 44.68 crore from 16,058 customers in 2016-17.
(With inputs from PTI)