In August last year, finance minister Nirmala Sitharaman announced the merger of ten public sector banks (PSBs) into four large banks. The government decided to merge Oriental Bank of Commerce and United Bank with Punjab National Bank; Syndicate Bank with Canara Bank; Andhra Bank and Corporation Bank with Union Bank of India; and Allahabad Bank with Indian Bank.
Soon after this announcement came, there was uncertainty regarding what will happen to the group health insurance policies bought by the customers. Whether the policies would continue as it is or would policyholders have to move to individual policies became a matter of concern. But should you really worry?
Clearing the air on this, the Insurance Regulatory and Development Authority of India (Irdai) on Tuesday issued a circular to all general and health insurers in the interest of group insurance policyholders of the merged banks.
The circular said that the underlying group health insurance policies of the customers of the merged banks shall continue to be serviced by the respective insurers till the end of the policy period. Insurers have been asked to make suitable arrangements with the acquiring banks to ensure this is done. Irdai also said that a bank may have group insurance arrangements with any number of insurance companies, which means that policyholders need not worry about porting their policies immediately.
"This step comes as a big relief for customers who have bought health insurance policies from PSU banks. Existing customers need not worry about continued coverage from their health insurance policy. The regulator has kept the customer's interest in mind without letting it affect their ongoing policy. However, we always advise customers to buy individual retail products as that isolates them from any corporate activities like bank mergers," said Amit Chhabra, head, health insurance, Policybazaar.com, an online insurance marketplace.
Further, the circular states that at the end of the ongoing policy period, the acquiring bank at its option may continue with the same group policy and the same insurer for the customers of the merged bank. Also, the acquiring bank may simultaneously continue to cover its existing customers with its current insurance company. The same policy can later be offered to the customers of the merged bank as well.
Note that after the current policy expires and customers decide to move to the insurer with which the acquiring bank has a tie up, there could be some change in premiums.
"Merger of PSBs might lead to some confusion regarding group insurance bought by customers of banks getting merged. These guidelines are to make people aware about the status of group policies and which company will service the policy. Policyholders need not worry about anything as guidelines are very clear," said Biresh Giri, appointed actuary, head of product development and CRO, Acko General Insurance. Shweta Jain, CEO and founder, Investography, said that this guideline comes as a big relief for policyholders of the merged banks and will give them clarity on the way ahead.