With the Winter session of the Parliament due to begin next month, the government is considering a renewal of an earlier push to merge the country’s three state-owned insurance companies into a single entity, among other Bills and Amendments on its plate.
The Finance Ministry may merge the three – Oriental Insurance, National Insurance and United India Insurance – in order to achieve better efficiency and scale since their financial health has improved, sources say.
Additionally, the proposal to privatise a general insurance company, as announced by the government, is also being examined, sources said, adding that various options are on the table, but nothing has been firmed up yet.
This is in line with Finance Minister, Nirmala Sitharaman’s big-ticket privatisation agenda, which she had announced in the 2021-22 Budget, that included the privatisation of two public sector banks and one general insurance company.
Subsequently, the General Insurance Business (Nationalisation) Amendment Act, 2021, to allow privatisation of state-owned general insurance companies, was approved by Parliament in August 2021, which also dropped the requirement that the central government should hold not less than 51 per cent of the equity capital in a specified insurer.
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It also provided for allowing greater private participation in public sector insurance companies and enhancing insurance penetration and social protection, among other objectives.
Back in the Budget for 2018-19, the then finance minister, Arun Jaitley, announced that the three companies – Oriental Insurance, National Insurance, and United India Insurance – would be merged into a single insurance entity.
However, it dropped the idea of merging them in July 2020, and the Union Cabinet approved instead a capital infusion of ₹12,450 crore into the three.
Between 2019-20 and 2021-22, the government pumped in ₹17,450 crore in the three public sector undertakings (PSUs) to bring them out of financial distress.
Now that their finances have improved, the finance ministry is doing a preliminary assessment of the merger of these entities with a view to improving their efficiency, according to sources.
The government is also keen to facilitate the entry of new players from overseas to cater to the demand for insurance and increase penetration, for which it has lined up a bill seeking to increase the FDI limit to 100 per cent from the existing 74 per cent in the insurance sector in the upcoming Winter session.
The Winter session of Parliament is slated to begin on December 1 and continue till December 19. The session will have 15 working days.
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