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PSU general insurance firms told to slash avoidable expenses, improve financial health

The ministry has asked these companies to expand their business through digital medium. They've also been asked to cut the flab by rationalising branches and rein in other avoidable expenses like guest houses, etc, PTI reported citing sources.

twitter-logoBusinessToday.In | November 29, 2020 | Updated 16:24 IST
PSU general insurance firms told to slash avoidable expenses, improve financial health

General insurance firms, especially National Insurance, Oriental Insurance and United India Insurance, have been asked to rationalise branches and cut down avoidable expenses to improve their financial health by the finance ministry.

The ministry has asked these companies to expand their business through digital medium. They've also been asked to cut the flab by rationalising branches and rein in other avoidable expenses like guest houses, etc, PTI reported citing sources.

Earlier this year, the Union Cabinet decided to halt the merger process of three state-owned general insurance companies due to their weak financial positions. Instead, the government approved fund infusion of Rs 12,450 crore to meet regulatory parameters.

As part of capital infusion exercise, the government also approved raising authorised share capital of National Insurance Company Ltd (NICL) to Rs 7,500 crore and that of United India Insurance Company Ltd (UIIC) and Oriental Insurance Company Ltd (OICL) to Rs 5,000 crore each.

The Rs 12,450 crore capital infusion approved by the Cabinet in July includes Rs 2,500 crore provided to these companies during 2019-20. During this year, the government infused Rs 3,475 crore, while announcing infusion of the balance Rs 6,475 crore in one or more tranches.

The government in Budget 2020-21 had made a provision of Rs 6,950 crore for capital infusion in these three insurance companies to maintain the requisite minimum solvency ratio.

NICL, with a combined ratio of 160.8 per cent and underwriting losses of Rs 5,759 crore, has suffered losses of Rs 4,108 crore, while OICL (141 per cent, Rs 4,197 crore) and UIIC (132 per cent, Rs 4,487 crore) have been hit with losses of Rs 1,524 crore and Rs 1,486 crore, respectively in 2019-20. However, New India Assurance, the only exception out of the four public sector general insurers, posted a profit of Rs 1,418 crore in 2019-20.

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