In a major relief to lakhs of policyholders, the insurance regulator has issued guidelines to ensure that the government’s 10-bank merger will not affect any merging lender’s customer who is part of a bank’s group health policy. The circular will apply with prospective effect, which means that 64,000 Vijaya Bank credit card customers who have lost their policy benefits following the bank’s merger with Bank of Baroda won’t benefit.
“Upon the merger of these public sector banks (PSBs), the underlying group health policies of the merged banks shall continue to be serviced by the companies which issued the policies till the end of the policy period,” the Insurance Regulatory and Development Authority of India (Irdai) said. It added that the insurance companies shall make suitable arrangements with the acquiring banks to this effect.
On maturity of the current policy of the merged bank, the acquiring bank may renew it with the same insurance company for the customers of the merged bank. IRDAI’s earlier rules would have forced merging banks to discontinue some policies. The modified guidelines allow the policy to be continued for a period of 12 months from the date of the merger. “This is subject to the willingness of the acquiring bank to function as the corporate agent for the respective insurance companies,” Irdai said.
TOI had earlier reported that the government’s scheme to merge 10 banks into four might leave policyholders without insurance as Irdai does not permit group health portability, and if policyholders wanted continued coverage, they would have to pay 50-300% higher premium. This is what has now happened to Vijaya Bank customers who, after their policy expired on December 31, renewed it at 4x the original amount.
Responding to TOI, a Bank of Baroda spokesperson said, “After these clarifications, it will be endeavour of the bank to look for the option in the best interest of the customer. However, it will depend also on the insurance tie-up partners of erstwhile banks to be ready for such continuity for group health only.”
News Source: Economic Times, Url: https://bit.ly/2vb0Ymc