IRDAI asks Reliance Health Insurance to stop selling new policies

The Insurance Regulatory and Development Authority of India (IRDAI) has asked Reliance Health Insurance Company (RHCIL) to stop selling new policies and transfer the entire policyholders’ liabilities to the authority. IRDAI announced this through a press release on November 6. From now on, the insurer can only service its old policies. You can read the press release here .

Reliance Health Insurance is part of Anil Ambani's Reliance Group, which is facing major liquidity issues.

Why IRDAI has stopped Reliance Health Insurance from selling policies
According to IRDAI, Reliance Health Insurance , which commenced operations in October, 2018, has not been able to maintain the required solvency margin since June, 2019. "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," stated the insurance regulator's release.

As there has been no improvement but further deterioration in the financial position of RHICL, in order to protect the policyholders’ interest, IRDAI has now issued the following directions to Reliance Health Insurance:

1. To stop selling new policies and;

2. To transfer the entire policyholders’ liabilities along with financial assets to Reliance General Insurance Co. Ltd (RGICL) with effect from November 15, 2019. Till that time, RHICL has been prohibited from using its assets for any payment other than claim settlement. It is estimated that the underlying assets are sufficient to meet the claims of the existing policyholders that may arise in future.

What happens to existing policyholders?
IRDAI said, "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 smooth transfer of the portfolio, settlement of claims and protection of the interest of the policyholders."

As far as policyholders of Reliance Health Insurance are concerned, IRDAI has 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."