Insurance personnel keenly watch MTNL-BSNL merger moves

Venkatachari Jagannathan
25 November 2002

Chennai: 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).

Employees 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.

The 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.

Now 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 general insurers.

It 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.

A 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.