The health insurance segment is set to witness a major reshuffle in the way business is handled following the merger of several public sector banks and the impending merger of three public sector insurance companies.
The insurance regulator, Insurance Regulatory and Development Authority of India (Irdai), on Tuesday laid down the guidelines on group health insurance policies following the merger of public sector banks (PSBs). The boards of the three insurance companies — National Insurance Company, Oriental Insurance Company and United India Insurance Company — approved the merger process last week, setting the stage for the formation of a big insurance entity.
The government is planning to expedite the merger of three public sector general insurance companies and an indication to this effect is likely to be announced in the Budget. Though former Finance Minister Arun Jaitley had announced their merger in Budget 2018-19, there was hardly any momentum in its implementation. “When the merger takes shape, various insurance products handled by the three companies will come under one company,” said an insurance sector official. The health insurance sector reported a premium collection of over Rs 37,000 crore for 2017-18.
Meanwhile, the regulator said a bank in its capacity as a group organiser may have group insurance arrangements with any number of insurance companies for the insurance needs of its customers. At the end of the current policy period of the group insurance policy of the merged bank, the acquiring bank at its option may continue with the same group insurance policy with the same insurance company, for the customers of the merged bank. “The acquiring bank may simultaneously continue to have insurance coverage for its existing customers with its existing insurance company. The acquiring bank can also offer this insurance coverage to the customers of the merged bank with the consent of its insurer,” Irdai said.
The arrangements of the merged banks can be continued with the respective insurance companies for a period of twelve months from the date of merger, subject to willingness of the acquiring bank to function as the corporate agent for the respective insurance companies.
In August 2019, the government announced the government’s decision to merge 10 state-owned banks to create four large entities or lenders. Under the plan, Oriental Bank of Commerce and United Bank of India will be merged with Punjab National Bank; Canara Bank with Syndicate Bank; Andhra Bank and Corporation Bank with Mumbai-based Union Bank of India; and Allahabad Bank with Indian Bank. That will mean a consolidation of banks in India from 27 before 2017, to 12 after the merger goes through. In 2018, the government had announced merger of Vijaya Bank and Dena Bank with Bank of Baroda, aiming to create the third-largest lender after SBI and ICICI Bank.
During FY17-18, insurance companies collected Rs 37,029 crore as health insurance premium, registering growth of 21.8 per cent over the previous financial year. The share of group health insurance was the highest at 48 per cent, followed by individual business (41 per cent) and the government business (11 per cent).
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