Following the government’s Budget2018-19 announcement of merging three general public-sector insurance companies, a committee consisting of senior officials of the three companies has been formed to assess the modalities of the merger process.
The formation of the committee, the first step towards forming an insurance behemoth, follows a meeting of the finance ministry with the heads of the three general insurance companies — National Insurance Company (NIC), United India Insurance and Oriental Insurance Company — a few weeks ago. The committee will have its first meeting shortly.
Some of the issues which the committee members would immediately delve into include managing a total investable pool of about Rs 750 billion, and managing a workforce of around 42,000 employees. This apart, issues like products, office integration and brand quality are other aspects which are slated to be discussed.
“We hope that by end of FY19 we will have much more clarity on the merger. The committee will decide on various aspects of merger, ” said a senior official of a general insurance firm.
Despite huge investments, the public sector general insurance firms are facing high claim ratio, falling profitability and poor solvency ratios. At the end of 31st March 2017, the total investments of the four public sector general insurance companies (including New India Assurance) was Rs 1,389 billion, according to the recent IRDA annual report. At the end of March 2017, the solvency ratio of National Insurance was 1.90, Oriental Insurance was 1.11, while United India Insurance had a solvency ratio of about 1.15. IRDA mandates a minimum solvency requirement of 1.50.
The market share of public sector general insurance companies fell from 57 percent in 2010 to 50 percent in the first half of 2016-17, according to ICRA. Private insurers have been aggressive in capturing the retail market, which has led to an increase in their market share.
Source: Business-Standard