The Finance Ministry is re-evaluating a long-pending proposal to merge the three state-owned general insurance companies-Oriental Insurance, National Insurance and United India Insurance-into a single large entity, following a noticeable improvement in their financial stability. According to sources, the government has initiated a preliminary assessment to determine whether a merger could enhance operational efficiency, reduce duplication, and create a stronger, more competitive insurance organisation.
Between 2019-20 and 2021-22, the Centre infused Rs 17,450 crore into the three insurers to help them recover from mounting losses and strengthen their solvency profiles. Earlier, in July 2020, the government shelved the merger plan announced in Budget 2018-19 and instead approved a capital infusion of Rs 12,450 crore to stabilise the companies. With their finances now showing improvement, the consolidation proposal has returned to the table.
Privatisation of a General Insurer Also Under Review
Alongside the merger assessment, the government is also examining options related to its earlier announcement to privatise one general insurance company, part of the broader disinvestment agenda unveiled in the Union Budget 2021-22. The move was enabled by the General Insurance Business (Nationalisation) Amendment Act, 2021, which removed the mandatory requirement for the Centre to hold at least 51% stake in a general insurer, opening the door for increased private and foreign participation.
Sources said several strategies are being studied, though no final decision has been made yet.
Government Pushes for Reform as Insurance Sector Awaits FDI Hike
To accelerate reform and expand insurance penetration, the government is preparing to introduce a bill in the upcoming Winter Session of Parliament seeking to raise the FDI limit in insurance to 100%, up from the current 74%. The proposal is aimed at attracting new global insurers, improving competition and boosting product innovation across the sector.
The Winter Session, scheduled from December 1 to December 19, will comprise 15 working days and is expected to take up key legislative items, including the proposed amendment.
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