Finance Ministry Revives Plan to Merge State General Insurance Companies

The Finance Ministry has revived its examination of merging Oriental Insurance, National Insurance and United India Insurance after their financial position strengthened following government support.  

The proposal, first announced in the 2018–19 Budget and later dropped in July 2020, is now undergoing preliminary review to evaluate whether consolidation can improve efficiency and scale. 

Review of Privatisation and Legislative Changes 

The government is also evaluating the plan to privatise a general insurance company as part of the privatisation agenda announced in the 2021–22 Budget. Parliament approved the General Insurance Business (Nationalisation) Amendment Act 2021 in August 2021, removing the requirement for the central government to retain at least 51% equity in a specified insurer and allowing greater private participation.  

To increase insurance penetration and attract overseas players, the government is preparing a bill to raise the insurance sector FDI limit from 74% to 100%, expected to be considered in the Winter Session of Parliament from 1 to December 19, comprising 15 working days. 

Financial Background and Current Assessment 

Between 2019–20 and 2021–22, the government infused ₹17,450 crore into the three insurers to stabilise their finances, followed by an additional ₹12,450 crore approved in July 2020 when the earlier merger plan was deferred.  

With their financial condition now improved, the ministry is conducting a detailed assessment of the merger proposal while examining all options related to consolidation and privatisation. No final decision has been taken. 

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Conclusion 

The renewed review of merger possibilities, privatisation plans and a proposed FDI increase signals potential structural changes in India’s general insurance sector, with key decisions expected after further evaluation and parliamentary discussion. 

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