The Indian Finance Ministry is considering a merger proposal for three state-owned general insurance companies: Oriental Insurance, National Insurance, and United India Insurance. This move comes after the companies showed signs of financial recovery, following a capital infusion of ₹17,450 crore by the government between 2019-20 and 2021-22. The merger aims to improve efficiency and scale in the sector.
The proposal was first announced by former Finance Minister Arun Jaitley in the 2018-19 Budget, but was put on hold in 2020 in favor of a capital infusion. However, with the companies’ financial health improving, the Finance Ministry is revisiting the merger plan as part of a broader strategy to enhance efficiency in public sector insurance firms.
In addition to the merger, the Finance Ministry is also considering a proposal to privatize one of the general insurance companies. This move is part of a larger privatization agenda announced by Finance Minister Nirmala Sitharaman during her 2021-22 Budget speech. The General Insurance Business (Nationalization) Amendment Act, 2021, which allows for the privatization of state-owned general insurance companies, was passed by Parliament in August 2021.
Furthermore, the government is pushing a bill to raise the Foreign Direct Investment (FDI) limit in the insurance sector, aimed at facilitating the entry of new foreign players into the market and boosting insurance penetration and social protection. The bill is expected to be introduced during the Winter session of Parliament, scheduled from December 1-19.
The proposed merger and privatization are intended to strengthen the Indian insurance sector, which has faced challenges in recent years. The government’s efforts to improve efficiency and attract foreign investment are expected to have a positive impact on the sector, enabling it to better serve the needs of Indian citizens and contribute to the country’s economic growth. Overall, the proposed changes are part of a broader effort to reform and strengthen the Indian insurance sector, and are expected to have significant implications for the industry and its stakeholders.