Due to the deficit capital situation faced by three three general insurers- Oriental Insurance Company, United India Insurance and National Insurance Company, the government has not been able to approve the due wage revision of employees of PSU general insurance sector which would have normally happened soon after similar exercises were completed for the employees of Life Insurance Corporation(LIC) and PSU banking sector last year

New Delhi;

In a bid to improve financial health of the three state-owned general insurance companies, Oriental Insurance Company(OIC), United India Insurance(UII) and National Insurance Company(NIC), the Finance Ministry will infuse Rs 5,000 crore capital into them during the current quarter of the fiscal.

The government on Monday sought Parliament nod for net additional spending of over Rs 1.07 lakh crore, including Rs 5,000 crore towards providing additional capital to three of PSU general insurance companies in the third batch of supplementary demands for current fiscal year, confirmed ministry of finance officials.

As per the third batch of supplementary demands for grants tabled in the Lok Sabha, approval is being sought for gross additional expenditure of over Rs 1.58 lakh crore for meeting costs of fertilizer subsidy, capital infusion in National Bank for Financing Infrastructure and Development and for recapitalisation of Regional Rural Banks and three PSU gemeral insurers, said MoF officials.

There are four public sector general insurance companies– New India Assurance (NIA), NIC, UII and OIC and except NIA rest of the three don’t have required solvency ratios(1.5 per cent each) to do normal business.

With large underwriting losses, they depend upon regulatory forbearance from IRDAI and special capacity provided by GIC Re to do their day to day business.

“It is yet to be known which general insurer is getting how much,” said a CMD of a PSU general insurance company.

Due to the deficit capital situation, faced by the three three general insurers in the last few years, the government has not been able approve the wage revision of employees of PSU general insurance sector, with a workforce of over 60,000, which should have already happened soon after similar exercises were completed for the employees of Life Insurance Corporation(LIC) and PSU banking sector last year.

Back in April,2021,the management of LIC) and the unions representing around 1 lakh employees of the insurance behemoth had agreed on an overall 16 per cent wage hike, which would be effective from August, 2017.

Earlier, with the conclusion of the 11th Bipartite Wage Negotiations in Novemver, 2020,over 8.5 lakh employees, majorly from public sector banks (PSBs), got a 15 per cent pay hike from November 1, 2017

However, in case of PSU general insurance industry, the GIPSA, the coordinating agency for four PSU general insurers and GIC Re, has not even sent the proposal to the ministry of finance(MoF) as three of the member companies don’t have the capacity to bear the extra burden of paying higher salaries to their employees after the finalisation of the latest round wage negotiation for the entire industry.

The additional capital of Rs 5000 crore will now help these three companies to implement the wage revision which can be finalised soon, said MoF sources.

In the last wage revision finalised in February 2016, the employees of five public sector insurance companies had got a wage hike of 13.5 per cent with retrospective effect from August 2012, involving an outgo of Rs 675 crore including the arrears.

Besides, with negative solvency ratio, these capital starved insurers can’t launch Surety Bonds, which will be helping executing infrastructure projects that are being launched by the government.

The Union cabinet two years back proposed to increase the authorised share capital of NIC to Rs 7,500 crore and that of UII and OIC to Rs 5,000 crore each to give effect to the capital infusion decision.

Two years back, in a chage of mind, the government had shelved a two-year merger proposal of three PSU general insurance companies-NIC, OIC and UII.

After calling off the merger, the Union Cabinet had also approved capital infusion of Rs 12,450 crore into these three firms in tranches.

The capital infusion will enable these state-owned general insurance companies to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes and enhance the capacity to raise resources and improved risk management, the ministry of finance had said.

To ensure optimum utilisation of the capital being provided, the government had issued guidelines in the form of key performance indicators (KPIs) aimed at bringing business efficiency and profitable growth, the MoF had stated.