Reliance Health to Stop Selling New Policies, Says IRDAI
Updated On Jan 31, 2020
As per a Press Release dated 6th November, IRDAI (Insurance Regulatory and Development Authority of India) has asked Reliance Health Insurance Company Limited (RHICL) to not to sell any new insurance policy from now on. It can only serve its old policies and will have to transfer all the liabilities of the policyholders to the authority.
Reliance Health Insurance is a part of Reliance Group of Anil Ambani, which is suffering from huge liquidity issue.
What is the reason behind IRDAI stopping RHICL from selling policies?
The insurance regulator says that Reliance Health, which started operating in October 2018, is unable to continue with the required solvency margin since June 2019. The Press Release issued by the regulator said, "After it came to the knowledge of IRDAI in the later part of August 2019, a direction was issued to RHICL to restore the required level of solvency margin within a period of one month. However, despite repeated follow-up, this has not been carried out so far. Thereafter, the insurer was issued a show-cause notice and given another opportunity to present its case”.
Leaving aside improvement, RHICL has only witnesses further deterioration in its financial condition. This has led IRDAI to issue some directions to the insurer stated below, in order to protect the interest of the policyholders:
1. Not to sell new policies, and
2. To transfer all the liabilities of the policyholders with financial assets to RGICL w.e.f. November 15, 2019. Until then, RHICL has been barred from using the assets for any kind of payment apart from the claims. There has been a rough calculation that the underlying assets are enough to meet the claims of the existing policyholders that may occur in future.
What about the existing policyholders?
The insurance regulator IRDAI says, "RGICL has been directed to service the claims of the RHICL policyholders promptly and efficiently with effect from 15th November 2019. IRDAI will be closely monitoring the situation to ensure a smooth transfer of the portfolio, settlement of claims and protection of the interest of the policyholders."
For the policyholders of Reliance Health, IRDAI said, "the regulatory authority would like to assure them that all their interests have been adequately protected and all genuine claims will continue to be duly honoured."
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