MUMBAI: Govt has decided against the merger of non-life public sector companies as proposed in the Budget of FY19. This was disclosed by the
department of financial services
to the parliamentary standing committee on finance.
The decision gains significance in view of the fact that govt had earlier attributed part of their losses to the unhealthy competition between public sector companies which were undercutting each other for top-line growth.
The standing committee on finance last week released its report on performance review and regulation of the insurance sector. In the report, the committee has recommended that govt amend laws to reduce GST on health and term insurance, to reduce capital requirements for micro insurers and enable the issue of composite licences allowing insures to undertake both life and non-life.
In his Budget speech in 2018, then finance minister
Arun Jaitley
had said, “Three public sector general insurance companies National Insurance Company,
United India Assurance Company
and Oriental India Insurance Company will be merged into a single insurance entity and will be subsequently listed.”
However, govt continued to infuse capital into the non-life companies in subsequent years. In 2021,
Nirmala Sitharaman
said that govt would divest stake in one public sector general insurance company but did not specify whether it would follow a consolidation.
Responding to the committee, the department of financial services said that the cabinet had taken a decision in 2020 itself not to proceed with the merger.
Incidentally, the additional secretary department of financial services deposing before the parliamentary committee said that the problem with the general insurance companies was that of their portfolio – of which 50% is health, 40% motor and only 10% is other lines of business.
