The Indian government has revived its plan to merge 3 insurance companies — namely Oriental Insurance Company (OIC), National Insurance Company (NIC), and United India Insurance Company (UIIC) — into a single entity. The move, being reviewed by the Ministry of Finance (MoF), aims to improve scale, efficiency and financial performance in the public-sector general insurance space.
What’s the plan?
- According to sources, the Finance Ministry is conducting a preliminary assessment of merging the three PSUs — Oriental Insurance, National Insurance and United India Insurance — into one entity.
- These firms, historically under financial stress, received large capital infusions from the government between 2019-20 and 2021-22. For example, about ₹17,450 crore of government support was provided during that period
- The original merger idea had been announced in the 2018-19 Budget but was put on hold in 2020. Now, with improved financial health of the companies, the plan is back on the table
- Alongside the merger, the government is also considering other structural reforms in the insurance sector — including possible privatisation of one general insurance company and increasing foreign-direct investment (FDI) limits.
Why is this happening?
- Improved finances: The three companies are no longer in as distressed a position as before, post the capital support, making consolidation feasible.
- Need for scale and efficiency: A merged entity would have greater scale, operational synergies, lower duplication and stronger competitive position in general insurance.
- Broader sector reforms: The insurance industry is under pressure to expand penetration, improve profitability and attract private/foreign capital. The merger aligns with these strategic goals.
Key details & timeline
- Which firms: Oriental Insurance, National Insurance, United India Insurance.
- Mode: A full merger into a single public-sector general insurance company is being contemplated.
- Status: Under review; no formal decision taken yet. (Sources say “preliminary assessment” at the MoF.)
- Timeline: Not explicitly defined. The government is likely to firm up a proposal ahead of the upcoming Winter session of Parliament.
Potential benefits & risks
Benefits
- Larger combined entity with stronger balance sheet and diversification of risk.
- Operational synergies (cost savings, streamlined back-office, improved product offerings).
- Better scale may enable the merged entity to compete more effectively with private insurers.
- Could accelerate insurance penetration in India by leveraging a stronger public‐sector vehicle.
Risks / Challenges
- Merging three large PSUs involves complex HR, IT, culture and regulatory integration issues.
- Legacy issues (claims backlog, underwriting practices) might persist and impact the merged entity.
- Morale concerns among employees, union resistance or disruptions could arise.
- The actual timeline and implementation might get delayed, reducing potential benefits in the short term.
- In parallel, if privatisation or FDI reforms proceed, the merged entity’s structure and ownership may become more complex.
Background context
The three insurers involved were nationalised decades ago as part of India’s general insurance nationalisation regime. Over time, they faced financial strain due to underwriting losses, low premiums, and competition from private players. The government had to inject capital to stabilise them. The 2018-19 Budget had already flagged a merger of these PSUs, but the plan was deferred in 2020 when the focus shifted to capital infusion instead. Now, as their finances improve, the government is revisiting the consolidation plan.
Additionally, the regulatory environment has evolved: The General Insurance Business (Nationalisation) Amendment Act, 2021 eased rules allowing increased private/foreign participation, signalling a broader reform in the insurance sector. Business Standard
What to watch next
- How the government finalises the merger structure: will it be a simple amalgamation, or will one company absorb the others?
- Impact on policyholders: Service continuity, claims settlement, pricing, product offerings.
- Reaction from employees and unions of the three firms.
- The scope of privatisation or FDI reforms that may accompany or follow the merger.
- Market reaction: How private insurance companies respond, and whether this triggers further consolidation in the sector.
- Government announcements in the upcoming Parliament session for detailed legislation or notifications.
Implications for investors and policy-holders
- For policy-holders, a stronger merged entity could mean improved financial strength, better service and more product choice (if the merger is executed well).
- For investors and the insurance ecosystem, this merger signals that the public sector insurance domain is moving into a phase of consolidation and reform — possibly increasing competitive pressure, spurring innovation and potentially opening avenues for private players.
- For broader financial markets, the move may raise questions about how the combined entity will manage risk, profitability and whether any government support will be required again in future.
