Merging Insurance Giants: A Step Towards Greater Efficiency

The Indian Finance Ministry revisits a proposal to merge three state-owned general insurance companies to enhance efficiency. Following significant financial improvement from capital infusions, the government assesses the potential merger while exploring privatization options, alongside increasing foreign investment limits to boost the insurance sector.

The Finance Ministry is revisiting plans to merge three state-owned general insurance companies, aiming to improve efficiency and scale following their financial recovery. Oriental Insurance, National Insurance, and United India Insurance were beneficiaries of substantial government capital injections totaling Rs 17,450 crore between 2019 and 2022.

An earlier merger proposal, announced by former Finance Minister Arun Jaitley in 2018, was shelved in 2020 in favor of a Rs 12,450 crore capital infusion. As finances stabilize, the merger's feasibility is being reassessed, along with privatisation considerations for one general insurance company.

In a related move, the General Insurance Business (Nationalisation) Amendment Act, 2021, facilitates greater private investment by removing the mandate for the government to maintain a majority stake in insurers. Additionally, legislation to raise the foreign direct investment cap in the insurance sector to 100% is on the agenda for the upcoming Winter parliamentary session starting December 1.

(With inputs from agencies.)