The Indian Finance Ministry is reconsidering a proposal to merge three public sector general insurance companies: Oriental Insurance, National Insurance, and United India Insurance. The goal of the merger is to improve operational efficiency and scale. This plan was initially announced in the 2018-19 Budget by then Finance Minister Arun Jaitley but was put on hold in July 2020 in favor of a capital infusion of ₹12,450 crore. Between 2019-20 and 2021-22, the government invested ₹17,450 crore into these companies to stabilize their finances.
Now, with signs of financial recovery, the merger plan is being reassessed. Simultaneously, the government is also reviewing a proposal to privatize a general insurance company as part of its broader divestment strategy. Although discussions are underway, no final decision has been made. The General Insurance Business (Nationalisation) Amendment Act, passed in August 2021, has paved the way for potential privatization by removing the requirement for the government to hold at least 51% stake in these entities. This amendment aims to increase private sector participation and deepen insurance penetration in the country.
Furthermore, the government is expected to introduce a bill in the upcoming Winter Session of Parliament, which starts on December 1 and will last for 15 working days. This bill aims to raise the Foreign Direct Investment (FDI) cap in the insurance sector from 74% to 100%. This move is expected to attract more foreign investment into the insurance sector, potentially leading to greater efficiency and competitiveness. The reconsideration of the merger and the potential for privatization and increased FDI reflect the government’s efforts to reform and strengthen the insurance sector, aligning with its broader economic and financial policies.