Irdai may limit Kiwi Insurance's retail health offerings as promoters hold stakes in Star Health too

New Delhi, Jul 17 Insurance sector regulator Irdai may restrict Kiwi General Insurance from offering retail health products to avoid direct overlap, as the promoter of the non-life firm, WestBridge Capital, also holds a majority stake in leading standalone health insurer Star Health and Allied Insurance, sources said.

Under existing regulations the same promoter cannot hold stake in two similar nature insurance firms.

With about 60 per cent stake in Kiwi General Insurance, WestBridge now effectively holds a significant stake in companies that will both operate in the retail health insurance segment. It currently holds about 40 per cent stake in Star Health and Allied Insurance Company Ltd, as per information available on the BSE.

However, public sector banks have got regulatory forbearance from Insurance Regulatory and Development Authority of India (Irdai) following the consolidation exercise undertaken in 2020.

"This is the first time in the industry that the regulator is faced with a scenario where it not only has to prevent a private sector promoter conflict of interest but also ensure the protection of policyholders and minority retail investors, given that Star Health Insurance is a listed company, sources said.

A mail sent to WestBridge Capital seeking their response on some of these issues remained unanswered.

It is to be noted that the Irdai in its 132nd board meeting earlier this week approved the R1 licence for Kiwi General Insurance.

Following the preliminary approval, debate in the industry has started about whether the final approval from the regulator would be with the rider given the prevailing regulatory environment.

"If the current nominees of Westbridge on the board of star health insurance also join the board of Kiwi General Insurance, then it may pose corporate governance issues," said an executive with an insurance firm.

Another industry expert said that with controlling stakes in both these firms, there may be a potential for merger.

"If that doesn't happen then the only option is that WestBridge dilutes its holding in Star Health below promoter level," the person said, adding, the regulator can also restrict Kiwi General Insurance from offering retail health products to avoid direct overlap.

"The timing of WestBridge's new insurance company licence is surprising, as the upcoming Insurance Laws (Amendment) Bill is expected to allow composite licences, enabling firms like Star Health to expand into general insurance under a single license," an executive of another firm said.

Given that this legislative reform is expected in the coming months, it is unclear why WestBridge has chosen to pursue a new licence through Kiwi instead of expanding Star Health's scope, he said.

There are about 34 general insurance companies operating in the country. Of these, 7 are standalone health insurance companies while two are government-owned specialised general insurance players -- Agricultural Insurance Company of India Ltd and ECGC Ltd.