IRDAI Issues Show Cause Notice to Care Health Insurance

Saluja, apart from her role as a non-executive director at Care, serves as the executive chairperson of Religare Enterprises, the parent company of Care Health Insurance.

India's insurance regulator, IRDAI, has served a show cause notice to Care Health Insurance (Care), a subsidiary of Religare Enterprises, regarding the grant of stock options to Rashmi Saluja, chairperson of Religare.

Sources familiar with the matter revealed that the notice stems from allegations that Care violated regulatory directives.

Saluja, apart from her role as a non-executive director at Care, serves as the executive chairperson of Religare Enterprises, the parent company of Care Health Insurance.

The show cause notice demands an explanation from Care regarding potential penalties and regulatory actions under the Insurance Act and IRDAI Act of 1999.

Why the Controversy

The dispute arises amidst a prolonged battle for control between Religare's board and the Burman family, prominent shareholders of Dabur.

Reportedly, the Burmans have accused Religare's board of unlawfully granting stock options to Saluja.

According to reports, the show cause notice, issued last month, alleged that Care failed to comply with IRDAI's directives.

Notably, IRDAI had previously prohibited Care from allotting ESOPs to Saluja, citing her role as a non-executive director on Care's board.

Despite IRDAI’s directive, Care proceeded to issue the ESOPs to Saluja under her capacity as an employee of Religare Enterprises, a move IRDAI considers a defiance of its instructions.

Earlier disclosures revealed that Care had sought IRDAI's approval to grant ESOPs to Saluja in December 2021, which was not granted by the regulator.

Subsequently, Care allocated ESOPs worth INR 250 Cr, amounting to approximately 2.5% of the insurer's shareholding, prompting IRDAI's investigation.

Proxy advisory firm InGovern highlighted discrepancies in the ESOP issuance, noting that the exercise price per share was INR 45.32, significantly lower than the INR 110 per share price of a rights issue conducted the same year by Care Health Insurance.

The Burman family, alleging irregularities, has demanded the cancellation of $22.7 million ESOPs issued to Saluja.

Recently, the securities appellate tribunal directed Religare Enterprises to apply for an open offer and change in control by July 22, aligning with SEBI's directives.

In May, the IRDAI announced plans for major reforms in the health insurance sector, aiming to make insurance more accessible and consumer-friendly. However, specific details of the proposed reforms are yet to be disclosed.

Additionally, the IRDAI omitted the age restriction on health insurance for individuals who are 65 years old and above. This move is aimed at enabling access for older individuals and enhancing coverage for high-risk health conditions.