Due to lack of funds, three non-life insurance companies owned by the state have been shutting offices to cut costs. National Insurance, Oriental Insurance and United India have had their solvency ratio shrink below the mandated level, but can go ahead with doing business because of government ownership.
The boards of these three companies in January 2020 had given the go ahead to merge but the process was put on hold due to the COVID-19 pandemic. Senior officials believe it is unlikely that the government would be able to privatize any company because of the state of finances and liabilities. As such, the option may only be to transfer the operations to New India Assurance.
However, the three non-life insurance companies are facing uncertainty on multiple fronts. According to ToI, the Delhi High Court order setting aside directors’ appointments by the Banks Board Bureau on the grounds of jurisdiction has brought into question the appointment of the chief executives.
Lack of capital has made it difficult for these companies to grow business or implement an overdue wage revision for employees. It should also be noted that the government’s announcement of privatizing some has been left hanging. The Finance Minister Nirmala Sitharaman, in the Budget speech for FY22, had said the government would move ahead with the privatization of two public sector banks and one general insurance company in FY22.
Moreover, the Delhi High Court in response to a writ petition filed by National Insurance general manager said appointments made pursuant to that of directors challenged in the writ petition are liable to be set aside. The order said liberty is with the respondent No. 1 to make selection and appointments of general manager and directors in accordance with law.