Govt shelves plan to merge 3 insurance firms; focus on profitability

The Modi government has shelved its plan to merge three state-owned general insurers in the wake of coronavirus pandemic in India and the weak business sentiment in the insurance sector. The merger plan, envisaged by late former finance minister Arun Jaitley, has been dropped for now and the Centre now wants to make these companies profitable.

As per the earlier plan, National Insurance Co Ltd, United India Insurance Co Ltd, and Oriental Insurance Co Ltd were to be merged into a single entity before listing it on the stock exchanges. However, the Union Cabinet on Wednesday approved fund infusion worth Rs 12,400 in them.

Officials have cited several reasons for not being able to carry out the merger in the present scenario, including their weak financial position and their use of different technology platforms, which could be a challenge in combining these companies.

"...given the current scenario, the process of merger has been ceased so far and instead focus shall be on their solvency and profitable growth, post capital infusion," The Print quoted an official as saying.

These three state-owned insurers have also been facing massive losses for the past few years on higher claim payouts than the premium received, forcing the government to recapitalise to keep to keep them afloat.

The Union Cabinet has approved capital infusion of Rs 12,450 crore in three state-owned general insurance companies to strengthen their capital base and make them more stable. The recapitalisation will make the three state-owned general insurance companies more stable, Union Minister Prakash Javadekar said.

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