Govt Keen On Privatizing General Insurer This Year

0
7
- Advertisement -


Success with the initial public offering (IPO) of Life Insurance Corp. of India (LIC) may prompt the government to privatize one of its general insurance companies this year, two people aware of the matter said.

After the listing of LIC, the government will start work to identify one of its three general insurers—National Insurance Co., United India Insurance Co. and Oriental India Insurance—for privatization and begin the work on it after their first-quarter earnings are in, the people cited above said on condition of anonymity.

Federal think tank NITI Aayog is said to have recommended United India Insurance for privatization to a core group of secretaries on disinvestment, the people said, though the name is yet to be finalized.

A group of ministers (GoM) will take the final call on the candidate for privatization.

- Advertisement -

United India Insurance is not in the best of financial health, reporting a loss of 1,485 crore in 2019-20; still, the insurer is considered the best candidate for privatization, given its nationwide presence and strong market share in various insurance categories. Its losses dropped to 985 crore in FY21, and is estimated to have further narrowed in FY22.

With the government infusing 5,000 crore capital in FY23 in the three general insurers ( 3,700 crore in National Insurance, 1,200 crore in Oriental Insurance and 100 crore in United India), the insurers’ financials and valuations are expected to improve further.

All four public sector general insurers, including the listed New India Assurance, are in the process of appointing external consultants to prepare road maps to restructure the business and improve performance.

Questions emailed to the department of financial services, the administrative department for public sector insurers, as well as the finance ministry remained unanswered till press time.

The Centre had earlier considered merging National Insurance, United India Insurance and Oriental India Insurance into a single entity and subsequently listing it on exchanges.

However, in mid-2020, the government infused 12,450 crore in them, betting on their profitable growth as independent entities.

The people cited above said that four to five private insurers have shown interest in the insurance privatization process, and some of them have also met with officials of the department of financial services over the past few months, giving confidence to the government to launch the privatization of a public sector insurer ahead of a public sector bank.

Privatizing insurance companies will also be easier, as Parliament has already amended the General Insurance Business Nationalisation Act, allowing the government to dilute its stake in a general insurer below 51%.

This is unlike the privatization of public sector banks, where an amendment to the Banking Regulation Act is yet to be introduced in Parliament.

India’s general insurance market has 27 companies, including the four major PSU entities, 23 private players and six stand-alone health insurers.

The insurance density in India (ratio of premium to total population) is $73 compared with the average world insurance density of $650.

Insurance penetration in India is at 3.69%, compared with the world average of 6.13%. The penetration in the general insurance sector is still less than 1%.

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

Liked it? Let's talk about it on our forum! If you Dare!

I DARE!!!

Denial of responsibility! - If you are a regular visitor then ignore this...
Read Full Details



“If you have any Query Related This Post then here is the Source Link

- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here