Two people familiar with the matter said the success of the initial public offering (IPO) of Life Insurance Corporation of India (LIC) could prompt the government to privatize one of its general insurance companies this year.
Following the listing of LIC, the government will begin work to identify one of its three general insurers – National Insurance Company, United India Insurance Company and Oriental India Insurance – for privatization. to start We’re working on it after its first quarter earnings, People said on condition of anonymity.
federal think tank NITI Aayog IUnited India Insurance is said to have been recommended for privatization to a core group of secretaries on disinvestment, the people said, though the name is yet to be finalised.
A Group of Ministers (GoM) will take the final call on the candidate for privatization.
United India Insurance’s financial condition is not the best, with the loss being reported 1,485 crore in 2019-20; Nevertheless, given its nationwide presence and strong market share across various insurance categories, the insurer is considered the best candidate for privatization. fell to its loss 985 crore in FY21And it is expected to decrease further in FY 2012.
with government intervention 5,000 crore capital in FY23 in three general insurance companies ( 3,700 crore in National Insurance, 1,200 crore more in Oriental Insurance 100 crore in United India), insurers’ financials and valuations are expected to improve further.
All the four public sector general insurers, including the listed New India Assurance, are in the process of appointing external consultants to work out a road map for business restructuring and performance improvement.
Emailed queries to the Department of Financial Services, the administrative departments of public sector insurers, as well as the Ministry of Finance remained unanswered till press time.
The Center had earlier considered merging National Insurance, United India Insurance and Oriental India Insurance into a single entity and later listing it on exchanges.
However, in mid-2020 the government 12,450 crore of them, bet on their profitable growth as independent entities.
Those cited above said that four to five private insurance companies have shown interest in the insurance privatization process, and some of them have even met officials of the Department of Financial Services over the past few months, giving confidence to the government to start privatization has gone. of a public sector insurer further than that of a public sector bank.
Privatization of insurance companies will also be easier, as Parliament has already amended the General Insurance Business Nationalization Act, allowing the government to reduce its stake in the general insurer to less than 51%.
This is in contrast to the privatization of public sector banks, where amendments to the Banking Regulation Act are yet to be introduced in Parliament.
There are 27 companies in India’s general insurance market, including four major PSU units, 23 private companies and six stand-alone health insurance companies.
The insurance density (ratio of premium to total population) in India is $73 while the average world insurance density is $650.
Insurance penetration in India is 3.69% as against the world average of 6.13%. The penetration in the general insurance sector is still less than 1%.