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The Union government is contemplating a move to restructure three PSU insurers—National Insurance, Oriental Insurance, and United India Insurance. But its options are strictly limited: either go for mergers or privatisation.
According to reports, several options are being weighed by the finance ministry that include merging two insurers with New India Assurance, merging all three, or consolidating only two while preparing the third for privatisation. If experts are to be believed, the government’s approach follows the same pattern as was used in the public-sector bank consolidation.
With the insurance sector now being fully open to 100% FDI, there is a huge pressure on these PSUs to modernise or perish, as global insurers are bound to expand aggressively in this country.
The hitch is, as per government sources, that the Centre wants to establish a structure that suits its policy of limiting the number of state-owned companies in non-strategic sectors to one or two, while retaining a minimum of four in strategic sectors. Needless to point out that the insurance sector falls under the non-strategic category.
The revival plan is not new, as it was first mooted in 2018. But nothing could be done in the wake of the three insurers facing mounting losses and weak solvency margins, forcing continued government support. The prime reason behind reopening this plan has been these PSUs’ intermittent quarterly profits in FY25.
As a source points out, this time the debate is more pragmatic, as the focus is on what is feasible to achieve.
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