IRDAI Panel Recommends Ban On Mergers Between Insurers, Non-Insurers

A committee set up by the Insurance Regulatory and Development Authority of India has recommended a prohibition on mergers between insurance companies and non-insurance entities, citing serious concerns about potential moral hazard, people in the know told NDTV Profit.

Allowing mergers between insurers and non-insurers could create a moral hazard, whereby risk-taking and conflicts of interest increase, possibly undermining policyholder protection and sector stability, the panel has recommended.

The reason behind this recommendation is that India’s insurance sector has been undergoing rapid transformation and IRDAI constituted a committee to review consolidation norms within the industry.

State Bank of India's Former Chairman Dinesh Khara led committee's recommendation, if accepted, could bar any future transactions seeking to consolidate insurance and non-insurance businesses under a single corporate umbrella.

Additionally, IRDAI will seek comments from the government on the committee’s recommendation before taking formal action, according to people in the know.

If the recommendation is formalised, it may directly impact planned transactions such as the proposed merger of Max Financial Services with Max Life Insurance. Max Financial Services, the holding company of Max Axis Life, has previously explored cross-entity structures to unlock synergies in the insurance space.