The Indian government is set to review the financial and operational performance of three state-run general insurers: Oriental Insurance, National Insurance, and United India Insurance. The review aims to determine the need for capital infusion to strengthen the solvency ratios of these companies, which are currently below the regulatory requirements of 1.50. Despite significant improvement in their financial performance, the solvency ratios of these companies remain a concern.
The government has already invested ₹17,450 crore in these companies between 2019-20 and 2021-22 to support their growth. However, the underwriting losses for public sector general insurance companies were ₹18,862 crore in 2023-24, with a profit of only ₹157 crore. To address this, the companies have undertaken various measures to improve their profitability, including adopting key performance indicators, enhancing IT capabilities, launching new products, and setting up centralized hubs for underwriting and claims.
The government’s review of the insurers’ performance is also timed with the upcoming Insurance Amendment Bill, which aims to increase foreign direct investment (FDI) in insurance to 100% and reduce the minimum paid-up capital required for insurance companies. The bill is expected to be introduced in the budget session and will further open up the sector to competition.
The insurance industry in India has seen a decline in penetration, with overall insurance penetration declining to 3.7% in 2023-24 from 4% in 2022-23. The life insurance industry saw a marginal decline in penetration from 3% to 2.8%, while the non-life insurance industry remained steady at 1%. The government’s review of the state-run insurers and the introduction of the Insurance Amendment Bill aim to address these challenges and strengthen the insurance sector in India.
The official review of the insurers’ performance will be based on projections, and some amount may be allocated in the budget to support their growth. The government’s efforts to strengthen the insurance sector are crucial, given the decline in insurance penetration and the need to increase access to insurance products for the Indian population. The upcoming Insurance Amendment Bill and the government’s review of the state-run insurers are expected to play a key role in shaping the future of the insurance industry in India.