Any possibility of three companies- NIC, OIC and UII – getting merged with New India Assurance(NIA), the country’s largest general insurance company, is ruled out as latter has opposed it tooth and nail
New Delhi: Beginning its home work on the issue of merger of three PSU general insurance companies, Oriental Insurance(OIC), National Insurance(NIC) and United India Insurance(UII), the Ministry of Finance(MoF) has for the first time set up a merger cell for developing a comprehensive plan after undertaking due diligence of all knotty issues for its smooth implementation.
Recently, M Nagaraju, secretary, Department Financial Services, had said the government had to do its home work first before deciding about any merger plans in the PSU general insurance industry.
However,any possibility of three companies- NIC, OIC and UII – getting merged with New India Assurance(NIA), the country’s largest general insurance company, is ruled out as latter has opposed it tooth and nail.
In a recent meeting between PSU insurers and finance minister Nirmala Sitharaman, NIA has put its foot down on any possible proposal to merge all three companies with itself, sources said.
NIA officials have explained Sitharaman that any such move will be absolutely detrimental for the listed entity which has made efforts in recent years to strengthen its balance sheet.
Also, recently, there was an effort by a senior official of an international consulting agency to make all the multiline PSU general insurers including NIA and GIC Re to buy and deploy a common IT platform to facilitate a possible smooth merger.
All these companies, at present, are operating with different IT systems.
The official had given presentations on the new IT platform to CMDs of these companies many times in the last few months.
However, the PSU general insurers finally have turned down the proposal which would have been an expensive proposition, Rs 800 crore for the four general insurers, for them.
According to the sources, while doing its preliminary assessment on merger, the DFS has also asked these companies to submit proposals about their capital requirement.
These companies, which have been growing their topline, despite facing issues like solvency and net worth deficit for the last couple of years, are waiting for large capital infusion from the government for sometime.
In a few quarters in the last one years, some of these companies have turned profitable also.
The government infused Rs 17,450 crore between 2019-20 and 2021-22 in three PSU general insurance companies.
In the Budget for 2018-19, the then finance minister Arun Jaitley announced that the three companies — Oriental Insurance, National Insurance, and United India Insurance — would be merged into a single insurance entity to become the country’s largest general insurer.
However, the government dropped the idea in July 2020 due to technical reasons, and the Union Cabinet rather approved a capital infusion of Rs 12,450 crore into the three general insurance companies.
Stop this action of merging. Let them work as it is.
Essential task is FIX RATE for all kinds of subject matter. Ask TAC to create fix rate for all types of subject matter.
NO DISCOUNT IN ANY CASE OR IN ANY SHAPE MUST BE ALLOWED.
You will find the difference within short period if RATES are fixed and no discount is permitted.
At present all companies are swindling Govt Understanding companies clients by allowing upto 99.9% discount.
THIS DECICISION SHOULD BE TAKEN AS EARALY AS POSSIBLE TO PROTECTON AND DEVELOPMENT OF PSU INSURER, THIS MEREGER WO;; CONTROL MANAGEMENT EXPENSES,
AND UNHEALTHY COMPETITION AMOUNG THEM.
Certainly the merger of 3 PSUs would be cost effective going forward. The merged entity can rationalise the offices PAN India n relocate them to Tier 3 cities/Towns. Merged entity will have higher capacity to underwrite major risks with higher retention.
First let these insurance companies monetise their building assets and play their game in competitive business world to survive at their own. Even if they fail to fly, they need to be absorbed by the other players as per IRDA guidelines. Merging will turn out to be stop gap arrangements and later sell off to their favourites will be the ultimate goal.
Government of India is embarking on a landmark initiative to merge three Public Sector Undertakings (PSUs) into a single, cohesive entity. This bold step is not merely an administrative exercise; it is a strategic maneuver designed to unlock significant value, enhance operational synergy, and position the consolidated organization for long-term growth and competitiveness in the rapidly evolving market landscape.
The primary objectives of Merger should be:
Achieving Synergies: Eliminating redundancies in operations, infrastructure, and expenditure.
Optimizing Resource Utilization: Maximizing the effective deployment of capital, technology, and human resources.
Creating a Unified Market Force: Leveraging the combined strengths and market presence of all three entities.
Office Consolidation: Immediate steps will be taken to consolidate redundant physical office spaces across all merging entities. The goal is to create fewer, but more strategically located and technologically advanced, operational hubs.
Dedicated Digital Thrust: All consolidated offices will be tasked with running and supporting intensive digital initiatives. This includes investing in modernizing core systems, deploying customer-facing digital platforms, and leveraging data analytics for informed decision-making.
The major offices should be mandatorily headed by a senior executive, such as a Regional Manager or Deputy General Manager (DGM). This leadership is crucial for local strategy formulation and execution.
At the outset, it might appear to be a doable action for political reasons rather than a prudent commercial decision.
Posers:
Would it be sustainable?
Merger would create more problems than resolution.
Merger of 106 General Insurance entities in 1973 into 4 PSUs took almost 25 years for them to integrate completely to create uniform work culture.
New India alone could retain its own Tata work culture because for the merged entities it was a blessing in disguise being accepted to be part of a legendary company.
Ideally, GOI should think in terms of putting 3 companies individually on hammer.
100% private capital by foreign entity may surely find this attractive with ready infrastructure, manpower, built in share capital associated top line, howsoever unremunerative as of now.
The turnaround may take 6/7 years.
Biggest Beneficiary would be GOI because of realisation of Sale value apart from zero infusion of capital year after year for 3 Companies for Solvency Ratio. Capital loss avoided.
New India holding legacy will still retain position number 1 hence GOI has nothing to lose.
In fact, the article can be elaborated extensively as number of issues are involved.
certainly it is good idea to merge 3 PSU which will put an end to unhealthy competition and rate cutting…PSU should have level playing field viz a viz private insurers as well.
PSU are subject to various audits and none for pvt entities.
Nevertheless it will be a challenge to merge as all work on different IT platforms..Post merger complexities should also be taken care of beforhand.
Let’s hope for the best…thanks
views are personal…
Recent closure of cartain office has created problem particularly for marketing forces .agents have to move 30 kms away to deposit premium and allied
Fuctions.
Some agents migrted business to local inurance companies by taking another agency.more than 50% business is lost.not only this sometimes unbelievable incidence like accident also occured due to frequent travelling from home to office located far away.
It is need of the hour as purpose of creating 4 gen ins companies for the sake of competitiveness due to closed Govt.sector had already met with more than 27 companies in the sector.Moreover these 4 compete among each other besides competing with pvt cos.Moreover staff in each of these psu remained one fourth only,so merger will not only consolidate these cos.Moreover insurance being a social sector Govt needs specialized psu to cater its various social schemes aimed at insurance needs of masses & poor instead of profiteering being the only motive like pvt firms .Time has come to make these psus as a single entity and cut down millions of expenses .
Who is NIA to decide to not get merge with other three PSUs ? Their management is not running private proprietorship. If Govt. orders to merge all 4 of them then it will be good for whole nation . One public sector for general insurance is the need of time .
Apart from merger, there should be a level playing field for both PSU & Private General Insurance Companies by bringing premium rates under erstwhile Tariff Advisory Committee (TAC). R & D for introducing very innovative and affordable products is a must. Moreover, responsibility should be fixed on merged entity and it’s employees to outperform when it comes to servicing of customers; specially in processing of all Claims.
When there are almost 30 insurance companies in the private sector, what is wrong with having 3 companies in the public sector, which have built up their unique culture and traditions over 5 decades?
Whatever problems/challenges they may be facing today, is MERGER the only cure for all those ailments? Every General Insurance company (except perhaps the SAHI Cos) in India is facing tough challenges due to a variety of reasons, which have nothing to do with the alleged advantages of MERGER of PSUs.
PSU insurance companies have a very important role of preventing the private insurance companies from running amok on profiteering and endangering the long term interest of customers.
Who knows, a day might come, when a nicely merged entity may get sold off to some private interest, which is not at all good for the customers.
If all PSUs are sold, all Navratnas sold, all defense establiahments privatised, Corporations jobs out sourced, Government Schools, Hospitals , Colleges are privatised, most of the jobs like Quality and Meteorological, Space and Gobernment institutes are Privatised, most of the Government jobs are also privatised Railways and shiping Corporation and also Concor etc privatised, then only Tax collection would be left. Even collection amd accounting would require privatisation amd printing of currencied too!
All companies should be merged into one entity and re-named as gic of India
Offices should be merged in every location half of the offices rents will be saved
Lands and Loans should be given to construct own office building
Standard uniform premium rates, discounts and pay out structure
Development cadre should restore