Delhi based Oriental Insurance Company has been given Rs 1200 crore while United India Insurance(UII) has been allocated just Rs 100 crore
A notification will soon be issued by the Finance Ministry for hiking the authorised capital these three general insurers
Before infusing the funds, MoF has asked all these companies to furnish board approved undertakings to their reduce net incurred claim ratio, total expense ratio, net losses and improve profitability and reduce solvency ratios without availing any forbearance
With capital infusion, PSU general insurers should be able to finalise their delayed wage revision plans soon
New Delhi;
With Kolkata based National Insurance Company(NIC) being allotted the largest amount of Rs 3,700 crore, the government has finalised its capital infusion of Rs 5000 crore into the three ailing PSU general insurers.
Delhi based Oriental Insurance Company(OIC) has got Rs 1200 crore while Chennai based United India Insurance(UII) has been allocated just Rs 100 crore.
Ministry of Finance sources have confirmed the fund allocations into three PSU general insurers, by way of fresh allotment of fresh share to the existing shareholder, just before the end of FY 2021-22.
A notification will soon be issued by the Finance Ministry for hiking the authorised capital these three general insurers.
For the National Insurance, authorised capital will now be ₹15,000 crore (1,500 crore shares with face value of ₹10 each) as against present ₹7,500 crore (1,500 crore shares with face value of ₹10 each). Similarly, for Oriental Insurance, it will be ₹7,500 crore (750 crore shares with face value of ₹10 each) from ₹5,000 crore.
In case of United India Insurance, authorised capital will be raised to ₹7,500 crore (750 crore shares with face value of ₹10 each) from ₹5,000 crore.
”During the period from March 2020 to March 2022, the government has infused Rs 17,450 crore capital into the public sector insurance companies to improve their solvency ratio,” Minister of State for Finance Bhagwat Karad had said recently in the Lok Sabha.
The fund infusion of Rs 5,000 crore was supposed boost the solvency ratio of these three PSU general insurers as none of them have the required solvency ratio of 1.5 per cent and have been provided with extra regulatory by the IRDAI and reinsurance support of GIC Re to their day to day business.
“But, how such fund infusions will help these companies to improve their solvency ratios and ’’ said industry sources adding that with capital infusion, PSU general insurers should be able to finalise their delayed wage revision plans soon.
Asia Insurance Post had contacted two CMDs of PSU general insurers who are receiving recapitalisation fund, but did not get any specific response from them.
However, the way Rs 5000 crore has been distributed among the three PSU general insurers, it wouldn’t help them each achieving a solvency ratio of 1.5 per cent soon, said industry analysts.
Before infusing the funds, MoF has asked all these companies to furnish board approved undertakings to their reduce net incurred claim ratio, total expense ratio, net losses and improve profitability and reduce solvency ratios without availing any forbearance.
The three state-owned general insurance players will have to meet certain regulatory milestones,set by the regulator to be able to get fund infusion, said Irdai Member (Non-life) T M Alamelu.
”For these three public sector general insurance companies, we have asked for revised business plans. The fund infusion would depend on their compliance with certain milestones we have laid out so that there is a calibrated way of coming out of this situation,” said Alamelu.
Irdai chairman Debasish Panda said the government has asked for some information on state-owned general insurance companies from Irdai and the same has been shared with them.
”The government is very much aware of the present financials of insurance companies. The regulator has given some forbearance with the advice also that may be they have to infuse more capital in order to perform better,” Panda said.
Earlier, indicating turn around signs of these companies, Karad said public sector insurance companies sustained a total loss of Rs 3,450.68 crore during the one and a half financial year period from April 2020 to September 2021, as against a total loss of Rs 7,552.02 crore during the preceding one and a half financial year period (from October 2018 to March 2020).
”Thus, their overall profitability registered an improvement of Rs 4,101.34 crore during the initial one and a half financial year period of the pandemic, despite absorbing the impact of the pandemic in terms of Covid-related claims,” Karad said.
Govt should first of all scrapp MISP which is the root cause of decrease of solvency ratio as well as loss of premium. Motor dealers are not allowing discount to customers and retaining profit in own pocket. Govt and IRDAI is mum on this aspect. PSU insurers are very laborious but govt is intentionally destroying them since 2017. We hope that Mr Panda will solve these problems and strengthen PSUs.
Govt.should set a flat cretaria for all general insurance companies (public/ private) to allow fixed rate of od discount in motor insurance & keep it apply for MISP,s also. There is a wrong practice to grant 90 & 95% OD discount in motor policy which results loss of premium and icr . This should also be applicable to fire department rating.
The Govt. should checkmate the malpractice by the private insurers in offering cashback, while procuring business, also in offering kickbacks to motor dealers in MISP. This will set the level playing field to both pvt. and psu insurers.
The first n foremost step should be to tighten the brokers who have spoilt the general insurance market and exploited their own vested interest. Their brokerage needs to be fixed at 2 to 3 % and no ARIC. No where in the world such high marketing expenses are paid.Similarly the MISPs rules should be rationalized and IRDA should ensure no pay backs.