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State-run general insurers to hire consultant for revamp

State-run general insurers will hire an external consultant to advise them on organisational restructuring and performance management. This comes as the government is moving ahead with its plans to privatise one insurer in this fiscal.

“The government has recently infused capital in three insurers and this is the next step to improve on their operational efficiencies,” said an executive aware of the matter, adding this may also help to increase the valuation of the firms which may be privatised.

The four state-run companies through General Insurers’ (Public Sector) Association of India or GIPSA have floated a request for proposal or RFP to restructure the insurers, achieve profitability and employee development.

“There is a proposal for restructuring the organisation to bring in profitable growth and employee development through performance management and capability management, in alignment with the KPIs devised by the PSGICs,” the RFP noted, adding that the last date for submission of bids is June 2, 2022.

Of the four firms, only New India Assurance Company is profitable while Oriental Insurance, National Insurance and United India Insurance Company Limited are loss making. This year, the government had put in ₹3,700 crore in National Insurance, ₹1,200 crore in Oriental Insurance and ₹100 crore in United Insurance.

The government has already notified the General Insurance Business (Nationalisation) Amendment Act, which will allow the government to cut its stake in state-owned general insurers to below 51%.

The government is yet to firm up the name of the entity that would be taken up for privatisation. The NITI Aayog has said to have recommended the name of United India Insurance to the Core Group of Secretaries on Disinvestment headed by the cabinet secretary.

According to the RFP, as on March 31, PSGICs together have procured a total premium of ₹75,116 crore with a market share of around 34%. The total employee strength is around 44,743 spread over 6,759 offices.

“Broadly, 80% of the proposed assignment shall be allocated towards creating unified/common strategies/methodology and frameworks while 20% of the proposed assignment will be allocated towards customising and rolling them out at individual company level,” the RFP said, adding that the expected duration of the proposed assignment for the selected consultants is 10 months, with a provision for extension, if required on existing terms.

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