Govt Mulls Merger of Oriental, National & United India Insurance
Though it has not been finalised yet, the FM in consultation with insurance regulator Irdai is working on it tirelessly to strengthen the insurance sector in the country
New Delhi: The merger of three public sector general insurance firms — Oriental Insurance, National Insurance and United India Insurance — into a single entity is likely on the cards in the upcoming budget for financial year 2026-27. The Union finance ministry is mulling the proposal to improve the efficiency and health of general insurance companies in India, according to the sources.
As the government is in a move to strengthen and restructure the insurance sector in the country, the finance ministry is learnt to have expedited its capital infusion plan for the forthcoming budget. “With the entities now financially stronger than ever before, a fresh preliminary assessment on further consolidation is underway”, the sources said.
Besides, the sources also said the proposal to privatise a general insurance company, as announced by the government, can't be ruled out and the government is also considering various options on the table. “Though it has not been finalised yet, the finance ministry in consultation with insurance regulator Irdai is working on it tirelessly to strengthen the insurance sector in the country,” the source said.
In the Budget for 2018-19, the then finance minister Arun Jaitley had announced that the three companies — Oriental, National, and United would be merged into a single insurance entity. However, the Centre dropped the idea in July 2020, and the Union Cabinet instead approved a capital infusion of Rs 12,450 crore into the three general insurance companies.
Between 2019-20 and 2021-22, the government infused Rs 17,450 crore between three PSU general insurance companies to bring them out of financial distress. “As 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,” the sources said.
Even Union 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 attract more global players into the system and expand insurance access pan India, the government is also planning to introduce a bill in the winter session of Parliament to raise foreign direct investment or FDI to 100 per cent from 74 per cent at present. The winter session of Parliament which will start from December 1 to December 19 this year.