News eDaily06 Mar 2018

India:Competition to be more intense following merger of govt-owned insurers

06 Mar 2018

Competition in the insurance industry will intensify and general insurance companies will have to turn their focus to addressing insurance needs and servicing the uninsured markets in rural India, according to Mr Rajiv Kumar, Managing Director and CEO of Universal Sompo General Insurance.

He made these comments in an interview with Livemint in relation to the proposed merger of three state-owned general insurers, namely, National Insurance, United India Insurance and Oriental India Insurance, by 31 March 2019.

He said: “Considering the competition among the three is cut-throat, the merger will shift attitude and efforts to one singular objective, which would be to bring under the fold of the merged entity the maximum possible number of uninsured people and assets. 

“But subsequently, this will also create a monopolistic situation and will increase its bargaining power (for co-insurance, reinsurance) and private insurers may have to take account of this.”

Echoing the same view, Mr Naresh Makhijani, partner and head, financial services, KPMG India, said that the merged entity will control about one-third of the total non-life insurance market in India. He said: “Such a merger may result in a monopoly-like situation with a low focus on customer service. It also leads to concerns about ‘too big to fail’ due to the continuous operating losses reported by these entities.”

According to insurance experts, some other challenges the merged entity would have to face include:

  • All three insurers are currently using different technology platforms, which will have to be brought in sync upon the merger.
  • There is a need to address redundant employees in the public sector general insurance companies following the merger. Salaries and terms and conditions of employment have to be rationalised.
  • Ensuring a smooth renewal and claim settlement process, keeping in mind the huge database of customers of the merged entity will also pose a challenge. The merged entity will have to strive for complete cultural convergence.
  • Products sold by the three insurers are different and hence, servicing products with varied characteristics could be a challenge for the single entity.
  • Merger of physical assets could pose a daunting task.

On a brighter note, Mr Premanshu Singh, CEO of, said that the merger will facilitate improved solvency levels, which are currently lower than the limits prescribed by the insurance regulator for these companies on an individual basis. Underwriting discipline will also be achieved and risk retention will be enhanced.


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