Business News Desk – Modi government is now preparing to give a new look to the government enterprises of another sector. This sector is general insurance. Moneycontrol has learned that the government is planning to give a new look to three big general insurance companies. For this, the capital requirements of these companies have been reviewed recently. And now the government is considering investing its money in these companies or raising funds through other means. If this happens, then after defense, railways and power sector, this can be another big bet of the government. According to the information, the government is also considering the possibility of merging some general insurance companies with New India Assurance. Along with this, the possibility of putting new capital in these insurance companies in proportion to their profits is also being considered. Earlier, between FY 2020 and 2022, the government had invested about Rs 17,500 crore in these non-life insurance companies.
Incidentally, the government first introduced the plan to integrate general insurance companies in FY 2018. The proposal was also announced in the 2018 budget, but it did not get the cabinet approval at that time. However, now the news is coming that the government is moving ahead with this plan again. According to an estimate, government general insurance companies may need about Rs 25,000 crore to comply with the rules of insurance regulator IRDAI. This capital is especially required to meet the conditions related to solvency.
Some time ago, a report by rating agency ICRA came out. It was said that other insurance companies except New India Assurance may need Rs 9,500-10,000 crore to meet solvency conditions by March 2025. Apart from this, losses or low profits in this sector also remain a challenge. If the government moves forward on the rejuvenation plan, it will also have to find a solution to this problem. Recently, National Insurance Company had a net loss of Rs 293 crore in the June quarter. However, New India Assurance remained in profit. It remains to be seen how the merger plan between listed and unlisted companies will be implemented.
The three companies where the government wants to improve business health by infusing fresh capital and through business reforms are Oriental Insurance, National Insurance and United India Insurance. Now let’s talk about the market share of these companies. The market share of government-owned general insurance companies is continuously declining. In FY 2024, the market share of these companies declined to 31.18 per cent from 32.27 per cent last year. At the same time, the market share of private insurance companies increased to 53.52 per cent during this period, from 51.36 per cent a year ago.
Now all hopes rest on the steps taken by the central government to revive these companies. Given the way the government has focused on banking, railways and many other PSU business sectors in recent years, investors’ expectations have increased significantly.
