United India Insurance Can Be The 1st Govt Insurance Company Sold To Private Investors; Privatization Process Starts?

The Indian government has initiated discussions on plans to sell off a general insurance company and United India Insurance could be the top choice for privatisation. 

Privatization Of A Public Sector General Insurer

Sources said that the Centre is initiating work on the privatisation of a public sector general insurer.

“United India Insurance is being seen as the first candidate for privatisation in the general insurance sphere. The Centre could go in for an Air India kind of stake sale, ” according to sources. 

So far, the discussions have already started on the privatisation of a general insurance company, but a formal proposal has yet to be formulated.

Why Would This Happen? 

Sources said, “Given the financial health of the three PSU general insurance companies, it is essential that the government take steps. A proposal is likely to be finalised in the coming months, “.

Recently,the Centre has completed the initial public offer of Life Insurance Corporation of India.

 Now it seems to be working on the stake sale in IDBI Bank, said the source.

They noted  that the general insurance space will be the next focus area for privatization. 

If we recall then Finance Minister Nirmala Sitharaman announced that, other than IDBI Bank, the Centre proposes to take up the privatisation of two public sector banks and one general insurance company during the Union Budget 2021-22.

Possible Strategy For Insurance Companies 

Coming to the four State-run general insurance companies, three firms—National Insurance, Oriental Insurance, and United Insurance—are unlisted.

So far, the Centre has been looking at possible strategies for them. 

They thought about a proposal for a merger, but it was shelved later on. 

During April this year, the Centre had enhanced the authorised share capital of the three firms to facilitate a capital infusion of Rs 5,000 crore in a bid to help improve their financial health.

Considering the move, National Insurance was to get capital of Rs 3,700 crore, Oriental Insurance would receive Rs 1,200 crore, United Insurance Rs 100 crore as capital.

United India Insurance reported a 16.9 per cent year-on-year increase in gross premium paid, amounting to Rs 1,626.77 crore in April 2022, according to IRDAI data. 

The company reported a net loss of Rs 227.52 crore for the third quarter of 2021-22 as against a net loss of Rs 621.49 crore in the third quarter of 2020-21.