The megamerger of the country’s state-run general insurance companies - National Insurance Company, Oriental Insurance Company and United India Insurance Company – could affect 15,000 jobs in the insurance sector, according to reports.
The move to scale up insurance companies to create India’s biggest non-life insurance company, on a par with mergers of state-run banking companies, was proposed by finance minister Nirmala Sitharaman in the 2019-20 budget.
For executing this, the government proposes tp modify the Insurance Business Nationalisation Act.
However, as per some estimations, 10-15,000 jobs can be lost, once this merger is completed.
Government is reported to be planning to expedite the merger of three public sector general insurance companies amidst a fast-paced divestment process that is sweeping several sectors.
Awhile none of the three insurance companies have any strength in their respective businesses, the finance ministry expects the merger to help eliminate suicidal business competition among the three.
This would also call for cost reduction, involving job cuts.
The department of disinvestment had its own ideas as to how this merger of three companies has to happen to maximize the valuation potential. After examining everything over time, we have decided to go ahead with the merger plan that was announced in Budget 2018-19,
However, there are other problems that could hinder merger plans - the three companies have different technology and IT platforms, which will pose an immediate challenge.
Besides, employee issues will also pose a major threat given the proliferation of trade unions in the three PSU insurance companies.
The creation of India’s largest general insurance company with a merger of the three PSU insurance companies is expected to render 10,000-15,000 employees redundant.
The staff reduction will result in savings of over Rs3,000 crore annually, say sources.
Also, the merger wou;d see a reduction in the number of branches of these insurance companies. Each of these insurers have around 800-900 branches and around 15,000 employees and Rs30,000 crore of assets.