Paytm-backed QORQL Pvt Ltd is set to acquire general insurance company Raheja QBE for ₹568 crore. The acquisition and transfer process is expected to conclude by 31 March 2021, subject to approval from the Insurance Regulatory and Development Authority of India (Irdai).
The insurance company, which primarily focuses on corporate covers such as project liabilities forayed into the retail insurance space with auto and health products in February. In FY20, the insurer underwrote a gross premium of ₹158.12 crore compared with ₹115.98 crore in FY19.
While there have been instances in the past where one insurance company acquired another, it may sound unusual for a payments company to buy out an insurer. However, Paytm already has a broker license and has been selling insurance products through its platform for a while. If you are a Raheja QBE policyholder, here's what the acquisition means for you.
Note that insurance is a highly regulated industry and there are regulations put in place by Irdai to protect consumer interest. Naval Goel, founder and CEO, PolicyX said the acquisition won’t impact the terms and conditions of existing policies. “Paytm is a more digital-oriented company, and therefore, policyholders can expect better digital-friendly products and services from the company in the next few years."
Pankaj Chauhan, founder and CEO, EPOCH Insurance Brokers said the acquisition is likely to have a positive impact and a brand like Paytm will ensure a smooth transition and hassle-free claims management to existing customers. “The only small negative impact could be psychological on the minds of the policyholders because a non-insurance entity has taken charge. In my view, Paytm’s large database could help them come up with new and innovative products," he said.
When one company acquires another, it also takes over both the assets and liabilities of the company. In the case of insurance companies, a major part of the liability is backed by reinsurers. With reinsurers covering long-term liabilities of insurance companies, Chauhan believes policyholders will not have to suffer in case a liquidity issue arises at any point. However, it’s advisable to keep a check on the products that were launched recently as the acquirer may want to make some changes to the product construct or drive it in a different direction. “Policyholders should expect a lot of product-related changes and therefore at the time of renewal, they should check for better products from competitors as well," said Goel.
Experts said in the past when HDFC Ergo acquired Apollo Munich Health Insurance, there was no major impact on the existing policyholders. In fact, at the time of renewal, the acquisition gave more product options to customers as they could pick from a gamut of policies offered by both the insurers combined. Goel said policyholders should keep in mind that their claims are secure since it is a regulated industry. “Irdai will approve the acquisition only if the acquirer is financially capable of handling all the claims arising from the current policies."
Yashish Dahiya, group CEO and co-founder, Policybazaar said the policyholders and shareholders of Raheja QBE will now have someone who is well-capitalized to support the company. “I believe the management will remain the same, which shouldn’t change anything significant for the policyholders. Paytm already has access to a large customer base and this will allow them to deal directly with the customers which is very important in the insurance business," said Dahiya.