At least three private players have shown interest in participating in the strategic sale of public sector insurance companies, raising hopes that the government may advance initiation of its disinvestment this fiscal.
Sources said one new and two other large private sector insurance companies have met officials of the department of financial services last month enquiring about the disinvestment of a public sector insurer. Though the talks have been preliminary in nature, it had encouraged government to see whether insurance disinvestment could be kick-started now.
"Private players have approached to get clarity on disinvestment we will soon come with exact time line," said an official source asking not to be named.
Finance minister (FM) Nirmala Sitharaman in her Budget 2021 speech had announced strategic divestment in two public sector companies and financial institutions, including two public sector banks (PSBs) and one insurance company.
Now that the strategic disinvestment of Air India has reached its finality, the focus is on financial institutions with sale of one PSB and one insurer.
Though the name of insurance company for privatisation had not yet been finalised, government think tank NITI Aayog has recommended privatisation of State-owned insurer United India Insurance Company.
Though United India Insurance is not in best of its financial health reporting a net loss of Rs1,485 crore in 2019-20, its gross premium income grew nearly 7% year on year in FY20 to Rs 17,515 crore. The insurer's gross premium underwitten in 2020-21 fell nearly 5% year-on-year to Rs 16,711 crore. The insurer has also seen its net worth erode from Rs5,731 crore in 2015-16 to Rs1,443 crore in 2019-20.
However, the insurer is considered best candidate for privatisation as it would provide immense value to the aquirer with a nationwide presence and strong market share in certain general insurance categories. Moreover, it's not listed making the transaction process easier.
The Centre was earlier working on a proposal to merge public sector insurers. Under this, the plan was to merge National Insurance Company, United India Insurance Company and Oriental India Insurance into a single insurance entity, and subsequently listing it on exchanges. However, in mid 2020, the government infused Rs12,450 crore in the three entities looking forward to their profitable growth as single entities.
The general insurance market in the country comprises 27 companies including the four major PSU entities, 23 private players and six are stand-alone health insurers.
The insurance density in India (ratio of premium to total population) is $73 compared with average world insurance density of $650. Insurance penetration in India is at 3.69% compared with the world average of 6.13%. The penetration in the general insurance sector is still less than 1%.
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