The NDA government at the centre had indicated that it had plans to merge the three state-owned insurance companies in the non-life insurance space. That merger is yet to take place for whatever reasons. The companies, National Insurance, Oriental Insurance and United India Insurance however need to be provided with more capital to help them maintain their solvency margins as per IRDA norms. It is estimated that the requirement would be of the order of ₹10,000 crore to ₹12,000 crore. This amount may be provided for in the Union Budget to be presented by Finance Minister Nirmala Sitharaman on February 1, 2020. The last time funds were allocated to these three companies was ₹2,500 crore and this was done through supplementary demands in the 2018-19 budget.
Observers feel this amount to be sanctioned through the budget is more aimed at the proposed merger since, in the absence of it, the merger was not feasible to go through.
The government wants to merge the three non-life insurance companies and list the combined entity on the bourses. The expectation is that the combined entity would be worth ₹1.2-1.5 lakh crore and would be the largest entity in this space in the country.
The three insurance companies offer their customers 200 insurance products and collect a premium of ₹41,461 crore annually. They enjoy a combined market share of 35%.
The companies have 6,000 offices across the country and employ 44,000 people.
The government may watch how the combined entity performs at the stock exchange and based on that, include it for disinvestment in the coming years.
The government has a big task on its hands already in trying to stop the excessive bleeding in the public sector companies. It has taken up Air India for a 100% disinvestment. The telecom companies have been funded to the extent of around ₹70,000 crore to turn them around with the hope that they will cut down on their massive outgo on salaries and other expenses.