Chennai : The objective of the central government of profitable growth and improved solvency of three public sector general insurance companies could be achieved by merging them, said the National Confederation of General Insurers’ Officers Associations (CONFED).
In a letter to Finance Minister Nirmala Sitharaman on Monday, the CONFED said, “The avowed objective of profitable growth and improved solvency ratio could be achieved by going ahead with the proposed merger of three insurers, which would bring down the inter-company competition and resulting loss in premiums, for enhancing profitable growth and contributing to improving the solvency margin.”
The central government recently decided to stop the merger process of the non-life insurers — National Insurance Company, Oriental Insurance Company and United India Insurance Company — and infuse Rs 12,450 crore fresh capital to beef up their solvency margins.
The CONFED also stated concern on the exit of employees. About 8,000 employees would retire by 2021. As the vacancies were not being filled, the operating offices were facing acute manpower shortage, it said.
These companies registered moderate growth of 6.39 per cent in FY20 despite a ‘disparaging campaign’ and substantial reduction in the workforce due to retirements, it said.
“These companies procured business despite the negative campaign by the private firms that post merger there will be confusion,” Vijay Prakash Sharma, CONFED president, told IANS.
Even as late as February 2020 we were told the merger process was moving at a rapid pace, and suddenly the government decided to scarp it for undisclosed reasons, he said and added, employees across the cadre had welcomed the merger plan.
“The solvency margin of these companies has taken a hit in the recent past on account of new stipulations for liability provisioning, including additional burden for motor TP (third party) claims, and other changes by the regulator in assets valuations as well as the challenge of unhealthy competition in the sector where no level-playing was made available to them against private players,” the CONFED wrote in the letter to Sitharaman.
The CONFED is an umbrella body of four officers associations in New India Assurance Company, National Insurance Company, Oriental Insurance Company and United India Insurance Company with over 20,000 members. (IANS)