Irdai issues norms to protect group policyholders of merging state banks

The insurance regulator has come up with guidelines to protect the interests of group insurance policyholders of merging state-run banks. The regulator said upon the merger of public sector banks (PSBs), group health insurance policies of customers of the merged banks shall continue to be serviced by the insurer till the end of the policy period.

"The insurance companies shall make suitable arrangements with the acquiring banks to this effect," said the the Insurance Regulatory and Development Authority of India (Irdai)

The regulator has also said the arrangements of the merged banks can be continued with the respective insurance companies for a period of twelve months from the date of merger, subject to willingness of the acquiring bank to function as the corporate agent for the respective insurance firms.

Moreover, Irdai has said a bank in its capacity as a group organizer may have group insurance arrangements with any number of insurance firms. Also, at the end of the current policy period of the group insurance policy, the acquiring bank may continue with the same group insurance policy with the same insurance firm. And, the acquiring bank may also simultaneously continue to have insurance coverage for its existing customers with its existing insurance company. The acquiring bank can also offer this insurance coverage to the customers of the merged bank with the consent of its insurer.

According to the government’s merger plan, Union Bank will absorb Andhra Bank and Corporation Bank. Union Bank has a 25.10 per cent stake in Star Union Dai-Ichi Life Insurance, while Andhra Bank has 30 per cent in IndiaFirst Life Insurance. The bank will, however, have to choose between Star Union Dai-Ichi and IndiaFirst after the merger comes into effect.

Similarly, Punjab National Bank (PNB), Oriental Bank of Commerce (OBC), and United Bank of India will amalgamate into one, with PNB as the anchor bank. PNB has a 30 per cent stake in PNB Metlife and OBC has 23 per cent in Canara HSBC OBC Life Insurance. Syndicate Bank will merge into Canara Bank and Indian Bank will absorb Allahabad Bank. Canara Bank has 51 per cent in Canara HSBC OBC Life.