Privatization Of Insurance Firms Starts: United India Insurance Can Be Sold To Private Firms

Latest reports reveal that the government is considering United India Insurance as one of the state-run insurers for privatization. 

Privatization Process 

Apart from this, the other public sector insurers could also be taken up for privatization.

The names mainly include National Insurance or Oriental Insurance, as per the information provided by the sources close to the development.

Sources said, “United India Insurance is one of the top choices for privatization. Discussions are on, with the other options being National Insurance or Oriental Insurance,”.

Since this process of privatization will take some time, including legislative amendments.

So, any move towards privatization and divestment of public sector insurers is likely to happen in the second half of the fiscal year.

Prior to this, during the Union Budget 2021-22, Finance Minister Nirmala Sitharaman had announced that other than IDBI Bank, the government would take up the privatization of two PSBs and one general insurance company in the year 2021-22.

Exclusions From Privatization

Moving ahead, the New India Assurance and state-run re-insurer General Insurance Corporation of India, both listed entities are unlikely to be taken up for privatization according to the sources.

Since “The idea is to take up one of the insurers, which are not doing well, but are still attractive enough for investors,”.

Capital Fusion For Three Insurer

The Chennai-based United India Insurance registered a 4.59 percent de-growth in gross direct premium underwritten in 2020-21 at Rs 16,710.94 crore as per the IRDAI data.

In case of Oriental Insurance, it has witnessed an 8.93 percent drop in gross direct premium underwritten in 2020-21 at ?12,452.11 crores.

On the other hand, National Insurance saw a 7.08 percent drop at Rs 14,180.98 crore last fiscal.

Earlier, the Centre was working on a proposal to merge these three public sector insurers but later decided against it. 

Contrary to the earlier plan, the Union Cabinet has come up with a capital infusion plan of Rs 12,450 crore (including ?2,500 crores infused in 2019-20) for these three insurers.

Not only that, but they have also approved an increase in the authorized share capital of NICL to Rs 7,500 crore and that of United India and Oriental to Rs 5,000 crore, respectively, to give effect to the capital infusion.