MERGER OF PUBLIC SECTOR INSURERS ?

Is merger  of Public Sector Insurers also on the cards ?  

Dated 24.11.2025 : The Government of India, through the Finance Ministry, is reportedly re-evaluating an earlier proposal to merge three public sector general insurance companies: Oriental Insurance Company Ltd., National Insurance Company Ltd., and United India Insurance Company Ltd  .

Is the merger of public sector insurers finally back on the policy agenda? That is the big question doing the rounds in financial circles after recent media reports suggested that the Government of India is once again examining a proposal to merge three public sector general insurance companies – Oriental Insurance Company Ltd., National Insurance Company Ltd. and United India Insurance Company Ltd.

According to these reports, the Finance Ministry is carrying out a fresh internal assessment of the old merger plan. This review comes at a time when the financial health of these insurers has improved compared to a few years ago, mainly due to repeated capital infusions by the government and corrective steps in underwriting and operations. With their balance sheets looking relatively stronger, policy-makers are reportedly reconsidering whether a consolidated mega-insurer could deliver better efficiency and scale.

Background: An Idea First Announced in 2018

The merger of public sector insurers is not a new idea. It first appeared in the Union Budget 2018-19, when the then Finance Minister Arun Jaitley announced that Oriental Insurance, National Insurance and United India Insurance would be merged into a single entity and then listed.

However, the merger did not move forward as expected. By July 2020, the government officially put the plan on hold. Instead of combining the three companies, the immediate priority shifted to strengthening their capital position and meeting regulatory solvency norms. A sizeable capital infusion was announced and implemented to stabilise their operations.

Since then, the conversation has slowly shifted from “survival and clean-up” to “consolidation and long-term strategy”. The latest round of rumours and “source-based” stories should be viewed in this context.

How the Privatisation Agenda Fits In

The government’s broader insurance sector roadmap also includes privatisation, not just merger. In the Union Budget 2021-22, Finance Minister Nirmala Sitharaman announced that the Centre would privatise one public sector general insurance company.

To make this legally possible, Parliament passed the General Insurance Business (Nationalisation) Amendment Act, 2021. This amendment allows the government to reduce its stake in a public sector general insurer below 51%, thereby opening the door for strategic disinvestment and privatisation.

As of now, there has been no formal announcement on which company will be privatised or what the timeline will be. The Finance Ministry is reportedly examining multiple scenarios – including:

• Merging three PSU general insurers into one large entity,
• Privatising one public sector general insurance company, and
• A combination or sequencing of both steps over a period of time.

In other words, all options are still on the table and there is no firm decision yet.

FDI Limit and the Search for Global Capital

Another important policy move that influences the debate on the merger of public sector insurers is the plan to increase the Foreign Direct Investment (FDI) limit in the insurance sector. Currently, FDI in Indian insurers is allowed up to 74%.

The government now plans to bring a bill in the Winter Session of Parliament starting 1 December 2025 to raise this limit to 100% FDI in insurance companies. If passed, this will significantly open up the sector to global players and long-term foreign capital.

For PSU insurers, a higher FDI cap creates more strategic options:

• A merged, stronger PSU entity might attract a foreign strategic partner.
• A privatised PSU general insurer could see substantial foreign interest.
• Joint ventures, technology partnerships and product innovation may accelerate.

Thus, the FDI proposal and the merger / privatisation debate are closely linked elements of a larger reform package.

What Could a Merger Mean for Stakeholders?

If the merger of public sector insurers actually happens, it could have far-reaching implications:

• For policyholders:
  In theory, a larger, more efficient insurer could offer better service, wider reach and improved claims-paying capacity. At the same time, customers will watch closely to ensure that pricing remains competitive and service quality does not suffer during the transition.
• For employees:
  Any merger raises questions about redeployment, duplication of roles and HR integration. Past experience from banking mergers suggests that the government usually prefers a gradual, non-disruptive approach, but employee unions are likely to scrutinise the details.
• For the insurance market:
  A combined PSU general insurer would become a very large player, potentially reshaping competitive dynamics, especially in motor, health and commercial lines of business. Private sector insurers will closely track how the merged entity positions itself.
• For the government:
  A successful merger could simplify capital support, improve governance, and make future disinvestment or strategic partnerships easier to execute.

So, Is the Merger Confirmed?

Despite the buzz, it is important to underline that no official announcement has yet been made by the Finance Minister or the Cabinet on the merger of public sector insurers. The current news flow is largely based on unnamed “sources” within the Finance Ministry, who have only confirmed that:

• The merger proposal is being examined again, and
• The privatisation of one PSU general insurer, as announced in the 2021-22 Budget, is also under simultaneous review.

Their message is clear: “Various options are on the table, but nothing has been firmed up yet.”

Until a formal, public decision is announced, the merger remains a strong possibility – not a confirmed policy.

The above discussion is based on responses generated by a responsible AI application and publicly available policy developments.

You may also like to read our related article on MERGER / PRIVATISATION OF PUBLIC SECTOR BANKS for a wider view of how government strategy is evolving across both banking and insurance.

The merger of the three PSU general insurers is reportedly under active review by the Finance Ministry, but an official, final decision or statement from the Finance Minister confirming the merger has not yet been made. The government is simultaneously considering other options like the privatisation of one general insurance company.
The current discussion in the media is based on “sources” within the Finance Ministry who state that the proposal is being examined.  The sources also confirm that the proposal to privatise one public sector general insurance company (as announced in the FM’s 2021-22 Budget) is simultaneously being examined. They state, “Various options are on the table, but nothing has been firmed up yet.”

So  far, the developments on the issue  include 

The article  is  based on the replies we got from  a  responsible AI app 
Read our article on MERGER / PRIVATISATION OF PUBLIC SECTOR BANKS