Most of the workforce favor the proposal of merger of four state-owned general insurance companies to create a new entity.
The market share of the public sector non-life insurers is going down every year & fell below their private peers for the first time in the last financial year. Employee unions of the state-owned non-life insurers say a merger will end competition among them and help them reclaim their market leadership.
As per the data available, the share of all public sector general insurance companies, including Agriculture Insurance Company and Export Guarantee Corporation of India, stood at 45.35 per cent. That of private insurers stood at 54.65 per cent in FY19.
The sources from a state-owned insurer said the government has been vetting the initial merger of United India Insurance, Oriental Insurance and National Insurance, followed by a take-over by New India Assurance. Some other options discussed earlier included creating two public sector general insurance companies, apart from the original vision of merging the three companies, said the official.
State-owned insurers are said to be struggling with staff shortage and capital constraints, the private sector gained a sizeable market share in the last two years through schemes like Prime Minister Fasal Bima Yojna and Ayushman schemes of the Govt which are the major source of profitable premium income.
As per the employee unions. the merger of all the companies would be a preferred option than merger of three, as it will become a strong entity and after capital infusion, will be able to underwrite big businesses.
“From the company’s point of view it makes more sense to merge the three (National Insurance, Oriental Insurance and United India) but from the shareholder’s point of view, any time it makes more sense to merge all four.
The financial condition of the three companies is also worrisome. The solvency ratio of two companies has slipped below the regulatory requirement of 1.50 & there is combined re-capitalization requirement of 10-15 thousand crores for all the insurers.
According to a top official of a public sector general insurance firm, the merger of four companies would lead to optimum utilization of a large workforce of public sector companies which is around 70000 at present. The Govt. has also asked the insurers to restructure their business, clean up balance sheets and optimally utilize the workforce, said the official.