State-run general insurers to submit turnaround plans

New Delhi: State-run general insurers will submit board-approved plans to the government detailing how they will scale back or exit unprofitable business segments, according to people familiar with the development, as mounting losses in the sector add to pressure for an overhaul.

New India Assurance, the only state-owned general insurance company to have remained profitable, last week reported a net loss of ₹1,267 crore in the second quarter of FY27. It had recorded a profit of ₹63 crore a year ago. The insurer had posted a loss of ₹256 crore in the first quarter.

In August, a parliamentary standing committee had recommended that the government should prepare a time-bound road map for these companies to achieve organic solvency and move away from perpetual reliance on accounting adjustments or emergency capital infusions.

The executives cited earlier told ET that the government will evaluate the performance of the four general insurance public sector companies (GIPSA) on parameters specified in the road map, which also include improving underwriting capacity, improvement in technology and organisational restructuring.

"Some verticals, including government health schemes, need sensible pricing, tighter claims oversight and properly structured reinsurance, rather than leaving excessive risk on the companies' own books," said one of the executives, requesting not to be named.

Another executive said there is a need to find more linkages between the state-run banks and insurers, including retail products. "Property claims need independent scrutiny to tackle leakage. At the same time, capital and solvency training must reach branch and regional managers, not remain confined to the head office," he said.

The solvency ratio of three public sector general insurers Oriental Insurance Company Ltd, United India Insurance Company Ltd., and National Insurance Company Ltd. has remained below the prescribed norms. As per the Insurance Regulatory and Development Authority of India (IRDAI), all insurance companies need to always maintain a surplus of 1.5 times their liability. The solvency margin -- the minimum margin of assets required by an insurer above its liabilities -- is akin to a bank's capital ratio.

In September, the government had reviewed the financial and business performance of the state-owned general insurers for FY26, covering underwriting performance across all lines of business, key performance indicators, digital initiatives and other operational issues.

The finance ministry had said that insurers were asked to strengthen their focus on profitable lines of business and adopt suitable measures to bring down the incurred claim ratio (ICR). Performance monitoring is already conducted through a robust and standardised KPI framework across state-owned general insurers, said a government official, adding that capital requirements are reviewed on a quarterly basis, with any decisions regarding capital hinging on these parameters.

The parliamentary standing committee had also recommended that state-run insurers should aggressively scale up AI-powered assessments and 360-degree digital inspections for motor and property insurance to curb the high loss ratios due to fraudulent claims.