In a letter to the Board, the non-life insurance company has said it had to temporarily stop issuing new policies as it had diverted its entire human resources to settling old claims which had piled up over the years. [break]
In a complete turnaround from its earlier threats of shutting down the entire company, Everest Insurance, in the letter, also said it was currently focused on improving the financial health of the company.
“For this, we are mulling over cutting down the workforce and certain portfolios in the company,” an official of the Insurance Board said, referring to the content of the clarification extended by Everest.
Whether this indicates the company´s intention of gradually folding up business is not known. But the Insurance Board officials have time and again said it is not easy for a publicly listed company to shut down its business operations.
“For that, it has to take the consent of all its shareholders from a special general meeting,” the Board officials said.
Everest Insurance, which had recently faced regulatory action for extending Rs 40 million in advance payment against an insurance claim filed by one of the firms run by one of its promoters, has been on collision course with the Insurance Board ever since it issued a directive on corporate governance.
The directive, among others, bars insurance companies from generating business from its promoters, prevents one person from assuming the position of board director in multiple insurance companies and restricts more than one member of a family from assuming post of board director in the same company.
Everest has said these instructions and other provisions in the directive that restrict board members to be part of various internal committees has made it difficult for the company´s directors to do business.
Citing these reasons, the company had partially halted business operations and had even threatened to shut down the entire business. Following this, the Board had sought clarification from the company arguing how the set of instructions, which had not affected businesses of other insurance companies, affect one particular company.
Although the company has now softened its tone, the Insurance Board officials have said this does not mean action will not be taken against the company.
“We will formally take a decision in this regard through a board meeting which could be held as early as tomorrow (Tuesday),” a high-ranking official of the Board said on condition of anonymity.
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