The Indian government is considering a plan to merge three state-owned insurance companies – Oriental Insurance, National Insurance, and United India Insurance – into a single entity. This move is aimed at achieving better efficiency and scale, as the financial health of these companies has improved. The Finance Ministry is conducting a preliminary assessment of the merger, which is in line with Finance Minister Nirmala Sitharaman’s privatisation agenda announced in the 2021-22 Budget.
The government had previously announced plans to privatise a general insurance company, and various options are being examined. The General Insurance Business (Nationalisation) Amendment Act, 2021, was approved by Parliament in August 2021, allowing for the privatisation of state-owned general insurance companies. The act also dropped the requirement for the central government to hold at least 51% of the equity capital in a specified insurer.
The idea of merging the three insurance companies was first announced by former Finance Minister Arun Jaitley in the 2018-19 Budget. However, the plan was dropped in July 2020, and the Union Cabinet instead approved a capital infusion of ₹12,450 crore into the three companies. Between 2019-20 and 2021-22, the government invested ₹17,450 crore in the three public sector undertakings to help them overcome financial distress.
Now that their finances have improved, the government is reconsidering the merger plan. The government is also keen to increase foreign direct investment (FDI) in the insurance sector, with a bill seeking to increase the FDI limit to 100% from the existing 74%. This move is aimed at facilitating the entry of new players from overseas and increasing insurance penetration in the country.
The Winter session of Parliament is set to begin on December 1 and will continue until December 19, with 15 working days. The government is expected to introduce several bills and amendments during this session, including the proposal to merge the three insurance companies and increase the FDI limit in the insurance sector. The government’s efforts to privatise and merge state-owned insurance companies are part of its broader agenda to improve efficiency and increase private participation in the sector.