Government mega merger plan for general insurance firms hits fresh roadblock 

25-June-2019 by Virtue Ventures

The government's plans for the insurance merger of three general insurance firms to create one large and strong entity seems to have hit a roadblock. The Department of Financial Services (DFS), which oversees the operations of state-owned insurance firms, has not to proceed with the insurance merger plan and let it.

The fresh impediment has already removed the insurance merger plan from this year's disinvestment calendar prepared by the Department of Investment and Public Asset Management (DIPAM). Sources now say that with the Finance Ministry raising fresh concerns, it would be difficult for the merger plan to go through even next year when a new government comes in at the Centre. 

The government had announced the merger of three public sector general insurance firms National Insurance Company, United India Insurance Company and Oriental India Insurance Company, in Budget 2018. The move was billed as the biggest ever merger in the insurance sector with the new entity having a valuation exceeding Rs 1 lakh crore. It intended to complete the exercise in FY19 itself. 

The DFS is concerned that a merger without looking at the exercise from different angles could lead to problems for the new entity emerging from the coming together of three general insurance firms. there are also issues of further cutting losses and making operations of companies efficient and low cost. These have DFS in its letter that virtually stalls the process and seeks more time to complete the merger.