The Govt. had announced to merge the three public sector non-life insurance companies in 2018 but the task could not be completed due to various difficulties.
The plan encountered hurdles & was stopped after the Department of Financial Services (DFS), which looks into the operations of state-owned insurance firms, asked DIPAM to examine the proposal afresh and solve complex operational issues first rather than going ahead with the plan in haste.
Then again this year, after the formation of new BJP govt., it was thought to merge all three co’s like national insurance, united India insurance & oriental insurance to merge with new India assurance & keeping only a one large non-life insurer like LIC of India.
“The idea to merge PSU insurers is fraught with problems as one giant entity would be difficult to administer and manage. Moreover, this might lead to branch rationalization/closure and major job losses in the sector,”
So after facing hurdles in merger, another idea is also being floated which is a de-merging of the big insurance co’s into smaller units to make state-owned units focus on increasing the insurance inclusion in the country and then look at the strategic sale of few operations to the private sector. It is assumed that strategic sale of smaller units may be easier to undertake and can get better valuations.
The uncertainty in the sector is also affecting the public sector insurers which are keeping most of its activities on hold. So the market share of the public sector as compared to the aggressive private players is declining day by day. The losses are also on rise & over all financial health is a big worry. However the industry sources are expecting some concrete announcement in the yearly budget in July 2019.