Page 7 - Insurance Times March 2019

Shriram General Insur- Government's merger plan for general insurance com-
ance to open new panies may take time

branches The government's plans for the merger of three general insurance companies
to create one large entity seem to have
Shriram General Insurance is plan-
hit a roadblock. The Department of Fi-
ning to expand its
operations in 'C' nancial Services (DFS), which oversees
and 'D' tier cities, the operations of insurance
comnpanies, has written to the DIPAM
with plans to
open 50 new not to proceed with the merger plan in
branches over the haste and let it examine the proposal
next 12 months, a afresh and untangle complex opera-
top official said. tional issues first.
After this expansion, the private The fresh impediment has already removed the merger plan from this year's
general insurer expects 25 per cent disinvestment calendar prepared by the Department of Investment and Public
of its overall revenues to come from Asset Management (DIPAM). Sources now say that with the Finance Ministry
'C' and 'D' class cities in 2019-20. At raising fresh concerns, it would be difficult for the merger plan to go through
present, in terms of revenues, 'C' cit- even next year when a new government comes in at the Centre.
ies bring only 10 per cent of overall The government had announced the merger of three public sector general in-
revenues.
surance firms: National Insurance Company, United India Insurance Company
This proposed expansion, which is and Oriental India Insurance Company, in Budget 2018. The move was billed as
expected in the next 12 months, will the biggest ever merger in the insurance sector with the new entity having a
take the company's overall branch valuation exceeding Rs 1 lakh crore. It intended to complete the exercise in FY19
network to about 210 branches from itself. "The DFS is concerned that a merger without looking at the exercise from
the current level of 162, taking the different angles could lead to problems for the new entity emerging from the
share of 'C' and 'D' cities in overall coming together of three general insurance firms.
branch network to about 50 per
cent, Neeraj Prakash, Managing Di- Besides, there are also issues of further cutting losses and making operations
rector, SGI, told. of companies efficient and low cost. These have been highlighted by the DFS
in its letter that virtually stalls the process and seeks more time to complete
As on date, SGI has only about 47
branches in 'C' cities, accounting for the merger," said an official source privy to the development. "The proposed
27 per cent share of the overall merger of the three state-owned general insurance firms will happen only in
branch network. Most of the expan- the next fiscal now.
sion into 'C' and 'D' cities will hap-
pen in eastern India and in Gujarat 300 Cars gutted in Aero India fire
and Maharashtra, said Prakash. At least 300 vehicles parked in parking area number 5 at the Yelahanka air base,

While 'D' class cities are those with the venue of the airshow, were gutted in the fire.
a population up to 15,000 people, 'C' A court of enquiry has been ordered to investi-
class cities have a population rang- gate the cause of fire.
ing between 15,000 and 50,000. The Ministry of Defence has put in a request with
SGI will, next year, look to recruit 5,000 the Department of Financial Services (DFS) to set
new employees, and increase the up the special cell that can expediently clear in-
IRDAI-registered agents by 7,000 in surance claims. Some insurance companies have
2019-20 so that the total number of also opened up centres at the venue for the purpose.
agents goes up to 25,000. Currently, "If the claims are handled systematically, owners can get the eligible insurance
SGI has 17,000 IRDAI-registered amount within seven to ten days, and the amount will be the same as what
agents, which will go up to 18,000 by
the end of this financial year. they had opted for in the insurance policy," Lakshman, Senior Divisional Man-
ager, United Insurance India told.

The Insurance Times, March 2019 7