Sahara Life Insurance had several investment issues but IRDA has not pressed charges after getting clarifications from the insurer. Sahara Life Insurance needs to make several changes to comply with the regulations



The Insurance Regulatory and Development Authority (IRDA) had many observations on investment related issues with Sahara Life Insurance, promoted by Subrata Roy’s Sahara Group. IRDA has not pressed charges after getting clarifications from the insurance company.

There were three violations for which penalty of Rs12 lakh was imposed and several other violations which were let off. Read the first part: Sahara Life Insurance caught for multiple violations; penalised for a mere Rs12 lakh.

Here are more issues which are mostly to do with investments. These were discussed by IRDA with the insurance company:

•   Grace period of 90 days allowed in case of policies with group billing instead of 30 days.
  Decision: The insurer while admitting the mistake submitted that they have done this to ease the administrative issues and remittance delays in policies with group billing and in no way adversely affected policyholder. The insurer has been directed to strictly adhere to the “file and use” procedure.

•  Premium quotations in group schemes are not seen or approved by Appointed Actuary.
  Decision: The premium quotations in group schemes are as per approved premium rates of the authority under “File & Use”, it still needed to be approved by appointed actuary. The insurer has been directed to strictly adhere to “the file and use” procedure.

•   Delay in delivery of policy documents to customers.
  Decision:  The observed cases clearly reveal the negligence of the insurer in delivery of the policy that violates provision of IRDA. The insurer is also directed to adhere strictly to the Protection of Policyholders’ Regulations.

• Wrong categorization of securities (below AA rating) as government securities.
  Decision: The insurer’s submission that securities below AA rating have been categorized as other approved securities as they are guaranteed by the state governments is considered and the charge is not pressed.

• The investment in debentures issued against the security of negative line on the assets and mortgage property of the company, without financial analysis and risk analysis.
  Decision: The insurer’s submission that financial and risk analysis is done on portfolio level periodically is considered and the charge is not pressed.

•  Substantial investment exposure in a single mutual fund exceeding the stipulated maximum exposure of ULIP fund.
  Decision: The insurer submitted that their present system is not able to classify mutual funds into approved investments and other investments automatically which led to only categorization error and confirmed that the exposure limits as specified in Regulations are not breached. The insurer has been advised to put in place the required systems as mandated and confirm.

•  Not having proper systems to control and value the investments. Being done manually in excel sheets.
  Decision: The insurer’s submission that it has already implemented Treasury Management Software and that their Investments are operated from Mumbai, hence the software could not be shown to the inspection team which visited the Lucknow office is considered.

•  NAV declared deviates from what is defined in ULIP guidelines as expenses incurred in purchase/sale of securities on a specific day not being included.
  Decision: The insurer has submitted that the expenses incurred in purchase/sale of securities are included as appropriation and expropriation charges on any day when such transactions are there. NAV calculation is fully automated system. It has also submitted that in many types of transactions no transaction charges are applicable such as mutual funds, FDs and even some debt deals. The submissions of the insurer have been accepted and the charges are not pressed.

•  Declaration of good health (DGH) not collected under a group product—Sahara Jamakarta Samooh Bima.
  Decision: The insurer’s confirmation that the DGH is collected as it is part of the membership form of the Group Policy Holder is considered and the charge is not pressed.

•   Payment other than commission to corporate agents
  Decision: The insurer’s submission that this was payment for publicity expenses on behalf of the insurer and a one-off instance is considered and the charge is not pressed.

•  The insurer allowed Sahara group companies to sell insurance without a license.
  Decision: The insurer’s submission that the specified person of corporate agent Sahara India only is selling the policies and CMSD, the group company just helps them to find the prospective clients is considered and the charge is not pressed.

•   Delay in calling for requirements in new business proposals.
  Decision: Taking into account the fact that it is an isolated instance, a lenient view is taken and the charge is not pressed.