“We are in discussion with the three general insurers. They have taken a series of steps to make their operations more efficient while bringing down their expenses. We may seek this through supplementary demand for grants within this fiscal year,” said an official aware of the developments, adding that the government will support its companies to turn things around.
The government had infused ₹5,000 crore in FY22 into three state-run general insurers, and so far it has pumped in around ₹18,000 crore into these loss-making firms. A large part of this capital was allocated to wage revisions.
Last fiscal year, four public sector government insurers-Oriental Insurance Co Ltd, National Insurance Co Ltd, New India Assurance Co Ltd and United India Insurance Co Ltd-hired Ernst & Young (EY) as the consultant for the assignment called ‘Organisational Efficiencies and Performance Management in Public Sector General Insurance Companies’. “Some of the suggestions made have been incorporated. We expect the insurers to implement them fully in the next fiscal, which will have a significant impact on their profitability,” said the above-quoted official, adding that the government also aims to privatise one insurer in FY24.
The government has already notified the General Insurance Business (Nationalization) Amendment Act, which will allow the government to cut its stake in state-owned general insurers to below 51%. The government is yet to firm up the name of the entity that would be taken up for privatisation. The NITI Aayog is said to have recommended United India Insurance to the core group of secretaries on disinvestment.
As per the latest industry figures, the share of state-run insurers in non-life premiums has come down significantly. The market share of New India Assurance fell to 13.94% at the end of the third quarter of FY23 from 15.82% for the same period in FY22.
“The other three insurers are also struggling, which has impacted their solvency margin, which is currently below the regulatory requirements,” said an industry executive anonymously.The solvency margin-the minimum margin of assets required by an insurer in excess of its liabilities-is like a bank’s capital ratios.