The Narendra Modi government is considering an earlier proposal to merge the three state-owned general insurance companies into a single entity, following their improved financial health, to achieve better efficiency and scale.
The Centre had infused ₹17,450 crore between 2019-20 and 2021-22 in three PSU general insurance companies — Oriental Insurance Company Ltd (OICL), National Insurance Company Ltd (NICL) and United India Insurance Company Ltd (UIICL), to bring them out of financial distress.
In the 2018-19 Union Budget, the then finance minister Arun Jaitley had announced that the three companies — Oriental Insurance, National Insurance and United India Insurance — would be merged into a single insurance entity.
However, the government dropped the idea in July 2020 and the Union cabinet rather approved a capital infusion of ₹12,450 crore into the three general insurance companies.
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.
It is to be noted that finance minister Nirmala Sitharaman, while announcing the 2021-22 Budget, had announced a big-ticket privatisation agenda, including 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.
The amended legislation dropped the requirement that the central government should hold not less than 51 per cent of the equity capital in a specified insurer.
Also, it provided for allowing greater private participation in public sector insurance companies and enhancing insurance penetration and social protection, among other objectives.
To facilitate the entry of new players from overseas to cater to the demand for insurance and increase penetration, the government has lined up a bill seeking to increase the FDI limit to 100 per cent from 74 per cent in the insurance sector in the upcoming winter session.
