New India Assurance and Niva Bupa have invested in the Bima Sugam India Federation.
The suspense as to the amount raised and the list of insurers --life/general/health insurers who have subscribed to the controversial about Rs 330 crore (Rs 3.3 billion) private placement of equity by Bima Sugam India Federation.
The issue is controversial as Bima Sugam India Federation is registered as a private limited company and Indian insurers are prohibited by the Insurance Act from investing in such companies.
Conflicting views were expressed by industry officials on the issue with some saying the majority of insurers have subscribed to the private placement and some saying insurers are on wait and watch mode.
This correpondent can spot only two out of the eight listed insurers and unlisted government owned insurers announcing their acquisition of equity shares in Bima Sugam India Federation on the BSE after February 21, 2025.
Public sector general insurer The New India Assurance Company Limited in a regulatory filing has said that it has invested a total of Rs 5 crore in Bima Sugam India Federation in two tranches -- Rs 100,000 on November 7, 2024 and Rs 4.99 crore (Rs 49.9 million) on March 6, 2025.
'Bima Sugam will act as a one-stop solution platform for people to access all the products of all the insurance companies. It will be a digital platform to be regulated by IRDAI where the customers can buy insurance policies and get their claims settled and will also be useful for all the stakeholders like Insurers, Agents, Depositories, etc,' New India Assurance said in its filing.
Similarly, Niva Bupa Health Insurance Company Limited in a regulatory filing on February 28, 2025 has said it has invested Rs 5 crore (Rs 50 million) in the Bima Sugam India Federation through private placement totalling to 1.51% stake in the latter.
'Bima Sugam India Federation is an initiative of Insurance Regulatory and Development Authority of India (IRDAI) incorporated to create a unified digital marketplace that seamlessly connects customers, insurers and intermediaries, fostering financial security nationwide. It aims to become the largest online market for insurance products and services,' Niva Bupa Health said.
The other listed insurance companies are: ICICI Prudential Life Insurance Company Ltd, ICICI Lombard General Insurance Company Ltd, HDFC Life Insurance Company Limited, Life Insurance Corporation of India Limited, SBI Life Insurance Company Limited, Star Health and Allied Insurance Company Limited and Go Digit General Insurance Limited.
Bima Sugam India Federation in a communication to the 58 insurance companies had earlier said that the private placement offer opens on Februaury 21, 2025 and closes on February 28, 2025 and requested them to subscribe.
Meanwhile, IRDAI continue to remain silent on the matter of insurers investing funds in a private limited company contravening the Insurance Act with several industry experts including its first Chairman N Rangachary pointing out the legal position.
"It is imprudent on the part of Indian insurance companies to invest out of the shareholders' fund in a private limited company. The insurers cannot invest in a private limited company from their policyholders' fund," Rangachary, IRDAI's first chairman, had told this correspondent.
It was Rangachary who laid the regulatory path for insurers after the sector was opened up for private players.
The path laid more than twenty years ago has stood the test of time with no major failures.
IRDAI has categorically recommended and silently mandated Indian insurers to invest in the Bima Sugam India Federation.
"The statutory embargo as enshrined under section 27A(4) of the Insurance Act is unequivocal that an insurer is prohibited from investing in a private company. The section does not carve out an exception for investment in a non-profit organisation," D Varadarajan, a Supreme Court lawyer specialising in insurance and corporate laws.
Varadarajan was also a member of the K P N Committee on Insurance Laws and Reforms and other expert groups constituted by IRDAI.
"Hence, tweaking of investment regulations in purported exercise of regulation making to perpetuate investments in Bima Sugam, in my considered view suffers from the vice of excessive delegation and would tantamount to backdoor legislation by the regulator, which is abhorrent to the power of Parliament, and cannot be countenanced at law or at all," Varadarajan added.
"As per the Insurance Act Section 27A (4) an insurer shall not out of his controlled fund or assets invest or keep invested in the shares or debentures of any private limited company," former IRDAI chief general manager S N Jayasimhan told this correspondent. "The term controlled funds includes shareholders funds as well."
"Nevertheless, the question is how can IRDAI direct insurers to invest in a particular company? If permitted now, IRDAI is taking the role of investment committee under the board of the insurer." Jayasimhan added.
"Also, IRDAI will be held responsible for the performance of such investment. All that IRDAI can do is to lay down the prudential norms, for where an onsurer can invest and fix limits for individual investments, group, promoter group and industry sector," Jayasimhan explained.
IRDAI in a letter in October 2023 informed the General Insurance Council that the competent authority has accorded general approval under Regulation 3(d) of IRDAI (Investment) Regulations, 2016 to the insurers for investing in the proposed company (Bima Sugam Platform) to be formed under section 8 of the Companies Act, 2013, provided the insurers comply with the exposure and prudential norms specified under Regulation 9 IRDAI (Investment) Regulations, 2016.
It is common knowledge that the regulations cannot override the Act governing the sector.
Speaking about the unclear business model, a CEO of a private insurer said the way the entire portal is structured, it will work only in the case of standard insurance products and not where the policies offer different risk covers.
"What is the cost, revenue model for the Bima Sugam India Federation is not known. How it will be funded and till now how much has been spent and wherefrom it got the resources were not disclosed. But companies have been asked to contribute about Rs 330 crore and another Rs 200 crore (Rs 2 billion) over the next three years," the official added, speaking on condition of anonymity.
It is not known who had nominated the directors on the board of Bima Sugam India Federation and how did the board come into being, industry officials question.
Venkatachari Jagannathan can be reached at venkatacharijagannathan@gmail.com
Feature Presentation: Rajesh Alva/Rediff.com
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