The Three PSU GI Companies (National Insurance Company (NIC), United India Assurance and Oriental India Insurance Company) has positioned itself a good place on Indian Insurance Market for more than a decade. Each of these companies has their own crowns in their respective areas.
Yet, these companies suffers from a severe financial parameter distress over the past years. Maintaining a proper solvency ratio, retention capacity and profitability from Underwriting are the biggest hurdles of each these Companies.
So, the Merging would be a initial step to evade these hurdles. This Merging would create a mammoth entity in Non-life Insurance space and their synergy would provide them a 33.3% market share in whole General Insurance Industry.
The Merging will help the Insurance Companies to focus on lowering the operational expenses, the areas where they are lagging on and the areas where they are good at. Over the past years, especially among the PSU General Insurance Companies, the Inter-Company Competition is a biggest concern so this would eliminate it.
Due to the poor underwriting and poor risk management practices, the stability of maintaining the solvency ratio gone to the steep level and the retention capacity has gone to alarming rates among the three PSU GI companies so the Merging would be a ideal deal to maintain it.
As the companies merges, the resource pool could become broader and high retention capacity can be easily yielded. On considering the past performance, obtained by these three PSU Companies on their respective markets framing the right ideal stratergy would become ease. Similarly, the Underwriting loss can be minized. The Speculation of innovative products with right price fixing can also be achieved. So, these merging would result in better valuation and better scalability for the Merged Companies.
Since, the three insurers wrote a whopping premiums of Rs 41,500 crore in the past fiscal year(2017), ideally after the merging we can expect more premiums from them on future.
Thus, it will be a win-win situation for both the Indian Govt and Indian Customers. Because for customers, one can expect better customer services and products from Companies side.For the Govt, the financial burden can be minimized and better governance can be achived. Not only that, the Govt can yield a good amount of revenue(by listing on stocks & selling their shares) and future plans of securing the lives of billions can be easily made, as strong foundation for growth and profitability is laided.
Eventually this would create a positive impact & healthy competition among the Insurance Industry.
Demo Infographic :