Govt May Revive Plan To Merge State-Run General Insurers, Create a LIC-Like Giant: Report

The government is supposedly working on a model to bring together the country’s four state-run general insurers into one consolidated heavyweight, a move aimed at giving the public sector an equal ground against a rapidly growing number of private insurers.

According to a report by the Financial Express, discussions around the merger of the public-sector general insurance companies (PSGICs) have picked up steam in recent weeks.

The companies in question are New India Assurance Company (NIAC), Oriental Insurance Company (OIC), National Insurance Company (NIC), and United India Insurance Company (UIIC). Among them, only NIAC is currently listed on the stock exchange.

The push for consolidation is not new. A similar plan had been floated several years ago but was shelved. What’s changed now is the context, and the timing.

In the Union Budget 2025, the government had also announced a significant policy shift: increasing the foreign direct investment (FDI) cap in the insurance sector from 74 per cent to a full 100 per cent. If this legislative move comes through during the upcoming monsoon session of Parliament, it could create a more competitive environment with a fresh influx of overseas players. That might be precisely why a stronger, unified public sector general insurer is back on the Centre’s radar.

A senior official told Financial Express, “The discussions on the merger of the PSGICs are gaining pace.” The objective appears clear: to build a general insurance entity on the lines of Life Insurance Corporation (LIC), which still dominates the life insurance market with a 57 per cent share in premium receipts.

In the non-life segment, public-sector firms have been steadily losing ground. Their combined market share shrank from 39 per cent in FY23 to 34.6 per cent in FY25. Meanwhile, private insurers have not only expanded but also invested aggressively in technology, product innovation, and customer service, areas where state-run companies have traditionally lagged.

That said, the public general insurers have recently shown signs of revival. NIAC has been profitable for some time, and the other three, historically loss-making, have begun to turn the tide. OIC and NIC posted profits in Q4 of FY24 and Q2 of FY25, respectively, while UIIC returned to the black in Q3 FY25, ending a seven-year profit drought.

The turnaround didn’t happen overnight. Between FY20 and FY22, the government infused Rs 17,450 crore into these firms to shore up their finances, introduce reforms, and set performance benchmarks. With better risk management, product diversification, and tech adoption, the four companies reported a combined profit of Rs 1,066 crore in Q3 of FY25, after suffering losses of over Rs 10,000 crore just a couple of years ago.

A larger, consolidated public insurer could also play a key role in furthering the government’s “Insurance for All by 2047” vision, aligning with India’s broader push to deepen insurance penetration. As of 2024, India’s insurance penetration stood at just 3.7 per cent, significantly lower than the global average of 7 per cent.

Whether the merger goes through this time remains to be seen. But with profitability restored, competition intensifying, and policy shifts around FDI in the pipeline, the stage may finally be set for India’s general insurance sector to witness one of its biggest transformations yet.