The plan to merge government-owned general insurance companies is still uncertain. As per sources, discussions are continuing, but there is no clear decision yet on funding needs or whether such a merger would actually bring real benefits.
The proposal involves merging public sector insurers such as National Insurance Company, Oriental Insurance Company and United India Insurance Company. Although the idea has come up several times over the past few years, people familiar with the matter say the government is still only at an early review stage. There is no fixed plan or timeline for carrying out the merger.
The merger idea gained attention around 2018–19, when the government began reviewing the financial health of public sector insurers. At that time, many of these companies were facing continuous losses, poor claim-to-premium ratios and repeated dependence on government funds to meet regulatory solvency requirements.
Since then, the proposal has been discussed many times within the Department of Financial Services, during inter-ministerial meetings, and in talks with insurers, regulators and policy experts. However, even after nearly six years, the idea has not moved beyond initial discussions. Officials say that while the merger proposal keeps returning, it has never reached the stage of detailed planning or execution, as several key issues remain unresolved.
One of the biggest hurdles is the lack of agreement on valuation and merger structure. Earlier attempts failed because the insurers could not agree on appointing a consultant to value the companies and design the merger framework. Differences still exist on how the companies should be valued, how past losses should be treated, and how any benefits or risks of the merger would be shared.
There is also no clarity on whether all three insurers should be merged at once or whether the process should happen in phases. Without agreement on the basic structure, officials say it is difficult to move the proposal forward.
Capital requirements remain a major concern. All three insurers have relied on government funding in recent years to maintain solvency levels set by the insurance regulator, IRDAI. Officials worry that combining these companies could create a larger entity that may need even more capital support, especially if past losses are brought together.
There is also uncertainty over when capital should be provided—before the merger, during the process, or after completion. This makes it hard to judge whether the merger would reduce the government’s financial burden or increase it.
Some officials suggest linking any future capital support to improvements in performance, such as better claim management and stronger underwriting discipline. Others feel that each insurer’s financial position should be improved first before considering a merger, even if that delays the process.
Operational challenges add to the complexity. The insurers have overlapping branch networks, different IT systems and large workforces with varying service conditions. Merging these would require careful planning and support from employee unions, which have earlier raised concerns about consolidation.
For now, officials say the merger remains only an idea under discussion. No final decision has been taken on valuation, structure, funding or timelines, and no consultant has been appointed. Until there is clear agreement on these issues, the proposal is unlikely to move from discussion to action.
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