It is not only the telecom sector players that are
intently watching the merger developments between Mahanagar
Telephone Nigam (MTNL) and Bharat Sanchar Nigam (BSNL).
of the four public sector general insurance companies
National Insurance Company, New India Assurance
Company, Oriental Insurance Company and United India Insurance
Company are also looking at the MTNL-BSNL merger
proposals. For, they have been demanding the merger of
the four insurance companies into one to catch up with
the mounting competition and to ensure faster growth.
purpose of having the four companies, all subsidiaries
of General Insurance Corporation of India (GIC), at the
time of nationalisation was to have competition among
themselves in service and products. But subsequently
all the four chose the easy way out selling identical
products at the same price. The service, too, was equally
good or bad, depending on the experience of the customers.
that real competition has come in with most of the global
insurance players setting footprints here, the GIC employees
feel time has come to merge the four companies into one
and enjoy the benefits of the size. Even a parliamentary
committee has recommended the merger of the four government-owned
is to be stated that size does matter in insurance business,
life or general. All over the world mergers and acquisitions
in the risk underwriting sector is common. In the case
of the four insurers under discussion, the benefits of
a merger are enormous. The merged entity will enjoy higher
underwriting and risk retention capacity; increase in
reinsurance premium; reduction in reinsurance outflow;
healthy solvency margins; setting right the asset-liability
mismatch; and reduction in costs.
couple of foreign consultants, too, have recommended the
merger. However, the top echelons of the four outfits
are not in favour of a merger. Perhaps due to the fear
that the merger will result in loss of three chairmen
and managing directors, not to mention several general
managers. Thus, as the saying goes, what is good for the
goose need not be good for the gander.
four companies, meanwhile, are yet to take a decision
on implementing the voluntary retirement scheme (VRS)
for development officers though the government notified
the scheme a few months ago. The insurers are also threatening
to implement a transfer policy for the clerical staff.
trouble is brewing at the companies as the unions are
opposing the hiring of third party administrators (TPAs)
to manage the health insurance claims. TPAs, apart from
increasing the premium cost for the policyholders, will
also make the already-trained staff redundant and increase
the companies cost of operations beyond the statutory
limits. All the four companies have exceeded the statutory
ceiling for expenses of the management.