Review of PSU General insurers on cards to gauge capital needs

New Delhi: The government is set to review the financial and operational performance of state-run general insurers, a senior official told ET, adding the exercise is aimed at helping North Block determine the need for capital infusion to strengthen the solvency ratios of these companies.

"The financial performance of these companies has significantly improved. But their solvency ratios are still below the regulatory requirements. A decision will be made based on projections, and some amount may be allocated in the budget," he said. The three general insurers, Oriental Insurance, National Insurance, and United India Insurance, have solvency ratios below the stipulated 1.50.

"The companies will also need to redraw their plans once the Insurance Amendment Bill goes through, which will further open up the sector and increase competition in various segments," the official said.

The bill seeks to increase foreign direct investment (FDI) in insurance to 100% by removing the current limit of 74%, reducing the minimum paid-up capital that companies in the sector must have, and allowing insurers to carry out one or more classes of businesses and activities related to insurance.

"The bill is also slated for the budget session. All comments have been received on the draft," the above-quoted official said.

So far the government has put in ₹17,450 crore during 2019-20 to 2021-22 in Oriental Insurance, National Insurance and United India Insurance to focus on their growth. The underwriting losses for public sector general insurance companies were at ₹18,862 crore in 2023-24, and the profit stood at ₹157 crore.

Earlier, minister of state for finance Pankaj Chaudhary, in a statement in Lok Sabha, had said that companies have undertaken various steps for improving their profitability, which included adopting key performance indicators (KPIs) for companies and employees, enhancing their IT capabilities, launching new products, and setting up centralised hubs for underwriting and claims.

According to the latest report by the Insurance Regulatory and Development Authority of India, or IRDAI, in 2023-24, India's insurance penetration declined to 3.7% as compared to 4% in 2022-23. The insurance penetration for the life insurance industry marginally declined from 3% in the previous year to 2.8% during 2023-24. The penetration with respect to the non-life insurance industry remained the same at 1% during 2023-24 as in 2022-23, the report noted.