The Ministry of Finance has directed state-owned general insurance companies to prioritize profitable ventures and enhance profitability rather than solely pursuing top-line growth.
Government Financial Support
The government recently provided Rs 7,250 crore in installments to three public sector general insurance companies: National Insurance Company Limited, Oriental Insurance Company Limited, and United India Insurance Company.
Performance Monitoring and Capital Infusion
A government official expressed optimism that these companies may not need additional capital infusion, which is why no provision was made in the Budget. Financial Services Secretary Vivek Joshi stated, “We have been monitoring the performance of state-owned general insurance companies, and as a result, they have started looking up. We will watch their performance this year.”
Recruitment and Operational Changes
There has been a significant retirement of employees and a ban on hiring new staff. However, companies are now encouraged to recruit in a balanced manner to strengthen further.
Improved Financial Performance
The financial performance of these three general insurance companies has significantly improved:
- Oriental Insurance earned a profit of Rs 18 crore in FY24, compared to a loss of Rs 5,000 crore a year ago.
- National Insurance Company narrowed its loss to Rs 187 crore from Rs 3,800 crore.
- United India Insurance reduced its loss to Rs 800 crore from Rs 2,800 crore in the preceding year (FY23).
- New India Assurance maintained strong performance, increasing its profits from Rs 1,000 crore in FY23 to Rs 1,100 crore in FY24.
Focus on Profitable Business Lines
The finance ministry has asked these companies to focus on profitable lines of business. Joshi noted, “Earlier they used to take business to show growth. Now we are asking them to come out of loss-making segments like motor and health insurance.”
Government Investment and Reforms
The government has injected a total of Rs 17,450 crore into these insurance firms to improve their financial stability. Public sector general insurance companies are undergoing various reforms, including organizational restructuring, product rationalization, cost rationalization, and digitalization.
Key Performance Indicators
To ensure efficient capital utilization and drive profitable growth, all public sector general insurance companies have implemented a set of key performance indicators linked to reforms, effective from 2020-21, when the maximum capital infusion was made.
Privatization Plans
Among the four state-owned general insurers, only New India Assurance Company is listed on the stock exchanges, while the other three are entirely government-owned. The government has declared its intention to privatize one general insurance company.
