Chennai, Aug 1 - The Indian insurance regulatory authority seems to have clearly missed or misread the early warning signals of the happenings in private life insurer Sahara India Life Insurance Company Ltd, senior industry officials said.
A cursory reading of the Insurance Regulatory and Development Authority's (IRDAI) order against Sahara India Life in 2012 shows the regulator has clearly missed the wood for the trees, officials said on condition of anonymity.
The regulator had fined Sahara India Life Rs 12 lakh for various violations observed during an onsite inspection in 2010 -- some of the them pertaining to corporate governance issue, industry officials said.
An onsite inspection -- nearly six years after Sahara India Life was licenced to operate -- observed that it was not functioning as an independent accounting and legal entity.
Officials of group companies were authorising payments for the life insurer. Stationery of group companies was being used.
The regulator had termed these violations of prudent accounting norms.
However, the IRDAI did not press the charges further as it was satisfied with the life insurer's explanation that also confirmed that Sahara India Life's officers themselves were verifying/passing bills.
"Taking into account the fact that overall expenses are also within the limit of Rule 170 of Insurance Rule, 1939 charge is not pressed. However, the insurer be cautioned to stop all these practices and confirm the same," then IRDAI Chairman J. Hari Narayan ordered on Feb 27, 2012.
Interestingly, payment of rent to group companies by Sahara India Life was also considered and approved by IRDAI in 2012 itself.
The insurance regulator had observed that rent payment to group companies was without formal agreements.
However, the IRDAI in its order said it was not pressing the charge as Sahara India Life had submitted all rent agreements along with compliance to inspection observation.
The insurance regulator was satisfied with the explanation given by Sahara India Life on observations pertaining to the payments made to Sahara group companies.
The regulatory had then penalised Sahara India Life for issues like delays in claim settlements.
But in its July 28 order, the IRDAI had concluded that the promoters of Sahara India Life are no more fit and proper and a sum of Rs 78 crore has already been siphoned off in the name of security deposits.
Refuting the charge, Sahara India Life in a statement on Sunday said: "In fact this amount was kept as security deposit to one entity -- Sahara India -- who has provided furnished, computerised office accommodation at around 150 places."
According to the group, this arrangement is very beneficial for Sahara India Life while IRDAI concluded otherwise.
"This security deposit amount is absolutely repayable to Sahara Life," the statement said.
The IRDAI on July 28 had ordered transfer of Sahara India Life's business portfolio to ICICI Prudential Life Insurance effective from July 31 (Monday).
Last month, the IRDAI had appointed its own official as an administrator of Sahara India Life. The administrator had initially ordered Sahara India Life to stop accepting new business.
The IRDAI had ordered transfer of Sahara India Life's insurance business to ICICI Prudential Life based on the administrator's report.
Aggrieved by IRDAI's order, Sahara India Life had approached the Securities Appellate Tribunal (SAT). The SAT on Monday ordered maintenance of status quo till it hears the case on August 7.
According to industry officials, the regulator should have exercised additional control over Sahara India Life in 2015 itself after the Securities and Exchange Board of India (SEBI) ordered cancellation of certificate of registration of Sahara Mutual Fund as it found the fund house, Sahara Asset Management Company (AMC) and Sahara Sponsor, not "fit and proper" to carry on the business.
Ordering the transfer of life insurance business to ICICI Prudential Life, the IRDAI has not considered the fate of Sahara India Life's employees or its agents, industry officials added.