The push for major reforms in the public-sector general insurance industry has gained momentum once again. The Finance Ministry is reconsidering its old proposal to merge the three public-sector general insurance companies—Oriental Insurance, National Insurance, and United India Insurance—into a single entity. This move is being viewed as an effort to strengthen their improved financial position and enhance operational efficiency.
Merger Proposal Revived After Financial Improvements
Between 2019–20 and 2021–22, the government infused a total of ₹17,450 crore in capital support to rescue these companies from a financial crisis. Due to their weak condition, the government had abandoned the merger plan in 2020 and decided instead to inject an additional ₹12,450 crore. Now that their financial health has improved, the Finance Ministry is conducting a preliminary review to evaluate how a merger could deliver large-scale operational efficiencies, cost reductions, and better competitiveness.
Privatization Plan Still Under Consideration
According to sources, work is also underway on the previously announced privatization of one general insurance company. However, no final decision has been made yet, and the government is weighing all potential options.
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Legal Changes to Boost Private-Sector Participation
In her 2021–22 Budget speech, Finance Minister Nirmala Sitharaman announced large-scale privatization, including the privatization of two public-sector banks and one general insurance company. As part of this, Parliament approved the General Insurance Business (Nationalization) Amendment Act, 2021 in August 2021. This amendment removed the requirement for the government to retain a minimum 51% stake in insurance companies, opening the door for increased private investment and expanded insurance coverage.
Proposal to Raise FDI Limit From 74% to 100%
To attract foreign investment and allow new global players to enter the Indian insurance market, the government is preparing to introduce a bill in the upcoming Winter Session to raise the FDI limit from 74% to 100%. According to the government, greater foreign capital and technology will help expand insurance penetration and improve social security for citizens. The Winter Session of Parliament will run from December 1 to December 19, with a total of 15 working days. The bill to increase the FDI limit is expected to be tabled during this session.