The Indian finance ministry is reconsidering a proposal to merge three state-owned general insurance companies, namely Oriental Insurance, National Insurance, and United India Insurance, into a single entity. This move is being considered due to the improved financial health of these companies, with the goal of achieving better efficiency and scale. Between 2019-20 and 2021-22, the government infused Rs 17,450 crore into these companies to help them recover from financial distress.
The idea of merging these companies was first announced by former finance minister Arun Jaitley in the 2018-19 Budget. However, the plan was dropped in July 2020, and instead, the Union Cabinet approved a capital infusion of Rs 12,450 crore into the three general insurance companies. Now, with their finances improved, the finance ministry is conducting a preliminary assessment of the merger proposal to enhance their efficiency.
In addition to the merger proposal, the government is also exploring the option of privatizing a general insurance company, as announced by finance minister Nirmala Sitharaman in the 2021-22 Budget. This is part of a larger privatization agenda, which includes the privatization of two public sector banks. According to sources, various options are being considered, but no decision has been made yet.
The potential merger and privatization of these state-owned general insurance companies are expected to have significant implications for the Indian insurance sector. The merger could lead to improved efficiency and scale, while privatization could attract foreign investment and increase competition in the market. However, the outcome of these proposals is still uncertain, and the government is likely to carefully consider the potential benefits and challenges before making a decision.