Govt tells public general insurers to cut costs

NEW DELHI: 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, people familiar with the matter said.

Earlier this year, the Union cabinet decided to halt the merger process of three stateowned general insurance companies due to weak financial positions of these three companies. Instead, the government approved fund infusion of ₹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, the people said.

Besides, the insurers have been asked to expand their business through digital medium, the people added.

As part of capital infusion exercise, the government also approved raising authorised share capital of National Insurance Co. Ltd (NICL) to ₹7,500 crore and that of United India Insurance Co. Ltd (UIICL) and Oriental Insurance Co. Ltd (OICL) to ₹5,000 crore each. The ₹12,450 crore capital infusion approved by the Cabinet in July includes ₹2,500 crore provided to these companies dur ing 2019-20.

During this year, the government infused ₹3,475 crore while announcing infusion of the balance ₹6,475 crore in one or more tranches. Three PSU general insurers, with their large underwriting losses of ₹14,443 crore, together have been responsible for the overall losses of over Rs 7,118 crore in 2019-20.