Govt To Infuse More Capital Next Year In Public Sector General Insurance Companies
Updated On Mar 14, 2023
The government of India plans to increase the amount of capital for public-sector general insurers. The investment will improve the company's financial health and increase its solvency margin. General insurance providers offer protection for health and other valuable assets against fire, theft, burglary, and other unforeseen events that may arise during the policy tenure.
Depending on the FY23 performance, the finance ministry will decide the capital amount that would be necessary to meet regulatory requirements. The solvency margin is the extra capital that general insurance companies must maintain aside from the claim amounts. During extreme circumstances, it acts as a financial cushion for an insurance company to settle claims.
According to the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI), an insurance company must maintain a solvency ratio of 1.5 to reduce risks. During 2020–21, the government infused Rs. 9,950 crores in capital into three insurance companies. Out of which, Rs. 3,605 crores were infused in the United India Insurance Company, Rs. 3,715 crores in National Insurance, and Rs. 3,710 crores in Oriental Insurance.
The officials stated, “Although the capital infusion for insurance companies was not provided in the Budget 2023–24, the funds can be managed through an additional demand." Moreover, aside from the financial infusion, the companies might also implement various other reforms. Some recommendations have already been implemented, while others are in the process of being implemented.
New India Assurance Company is the only one among all four state-run general insurers that is listed on the stock exchange. The government fully owns and runs the remaining insurance companies.
Nirmala Sitharaman, the Finance Minister of India, announced high privatization, including two public sector banks and one general insurance company, in Budget 2021–22. Moreover, the government's intent to privatize one general insurance company has already been announced. The Parliament of India has also approved amendments to the General Insurance Business (Nationalization) Act (GIBNA) to promote privatization.
General insurance companies provide numerous general insurance products, including health insurance, motor insurance, travel insurance, and home insurance. Each product caters to the unique needs of individuals.
