According to a column published in The Indian Express, the budget proposal to combine 3 PSU general insurance may take a fast track process and is likely before the close of the next fiscal.
Three state-owned insurance company UNITED INDIA INSURANCE(UII), NATIONAL INSURANCE COMPANY(NIC) and ORIENTAL INSURANCE COMPANY (OIC) create the largest general insurance company in the country.According to an official the company is likely to lead approximately 15000 staff and being made redundant and result in saving of over Rs 3000 crores annually.
In recent years due to huge underwriting losses, these three companies have faced difficulties in maintaining their required solvency ratios.Four PSU general insurance companies were created in 1970 to provide competition in an environment marked by government-monopoly in the sector which was opened up much in later 1990s.
“With liberalization and opening up of the market to private players, unhealthy competition among four has resulted in the four companies rapidly going down in terms of profitability and solvency .perhaps two is better than four indulging in unhealthy competition,” said K K Srinivasan, former member Insurance Regulatory and Development Authority of India.
So the government is dedicated to merge the 3 companies ( United, National, Oriental ) which will be the largest insurance company in the country before the close of the next financial year.
With the unions of the companies are in favor of merger so it will happen in a smooth manner unlike the resilience seen in the banking industry.
“More than a physical merger, emotional integration of companies is more important to achieve the desired results,” said the chairman and CMD of a public sector insurance company, who did not want to be named.
“Cut throat competition among state-run general insurance companies will now come to an end.The cost of operations will come down.As of now, all the three companies put together have got 90 regional offices which will now come down to 30 .the requirement of staff will also come down and thus there may be 10000-15000 excess staff out of nearly 45000 staff currently working in the industry” said MN Sharma CMD UII.
There is still cloud on what they will do with the excess staff.And approximately 800-900 branches will also be shut down across the country.