Finmin asks PSU general insurers to cut flab, prune branch numbers: Sources

Finance Minister Nirmala Sitharaman

The finance ministry has asked public sector general insurance firms, especially National Insurance, Oriental Insurance and United India Insurance, to rationalise branches and cut down avoidable expenses to improve their financial health, sources said.

Earlier this year, the Union Cabinet decided to halt the merger process of three state-owned general insurance companies due to weak financial positions of these three companies. Instead, the government approved fund infusion of Rs 12,450 crore to meet regulatory parameters.

The finance ministry has asked these companies to cut the flab by rationalising branches and rein in other avoidable expenses like guest houses, etc, sources said.

Besides, sources said, they have been asked to expand their business through digital medium.

As part of capital infusion exercise, the government also approved raising authorised share capital of National Insurance Company Ltd (NICL) to Rs 7,500 crore and that of United India Insurance Company Ltd (UIICL) and Oriental Insurance Company Ltd (OICL) to Rs 5,000 crore each.

The Rs 12,450 crore capital infusion approved by the Cabinet in July includes Rs 2,500 crore provided to these companies during 2019-20. During this year, the government infused Rs 3,475 crore while announcing infusion of the balance Rs 6,475 crore in one or more tranches.

The government in Budget 2020-21 had made a provision of Rs 6,950 crore for capital infusion in these three insurance companies in order to maintain the requisite minimum solvency ratio.

Three PSU general insurers, with their large underwriting losses of Rs 14,443 crore, together have been responsible for the overall losses of over Rs 7,118 crore in 2019-20.

NICL, with a combined ratio of 160.8 per cent and underwriting losses of Rs 5,759 crore, has suffered losses of Rs 4,108 crore while OICL (141 per cent, Rs 4,197 crore) and UIIL (132 per cent, Rs 4,487 crore) have been hit with losses of Rs 1,524 crore and Rs 1,486 crore, respectively in 2019-20.

However, New India Assurance, the only exception out of the four public sector general insurers, posted a profit of Rs 1,418 crore in 2019-20.


(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)


Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel