The Budget was presented in parliament on 1st February, 2018 by Finance Minister Arun Jaitely. Two major decisions were taken in the budget concerning the insurance sector. First to merge National Insurance Co. Ltd., United India Insurance Co. Ltd. and Oriental Insurance Co. Ltd. into one single entity. This is a major policy decision which will impact the general insurance industry in India. The merger will help the companies to consolidate, the risk bearing capacity will increase, internal competition will reduce, reduction in administrative expenses, marketing will improve and the company would be in a better position to compete with private companies.
In the financial year 2016-17 the gross domestic premium of New India was 21597.92 crores and the 3 companies combined was 41462.19 crores. The size of the new company would be bigger than Newindia. There will be healthy competition among the two PSU’s. However merger would not be very easy as there might be protests from the Employees union, consolidation of offices, business, restructuring of workforce deployment. Overall this is a good decision as the financial health of these companies were going down constantly and the merger would give them a new lease of life and a new vigor.
Second major decision is to launch health protection plans for 10 crore people for a coverage of Rs.5 lakhs which will cover around 50 crore population. The details of the scheme would be the details worked out in due course. The main concern would be what would be the premium, who will launch the schemes, government contribution, servicing of claims etc. If the schemes are handled by PSU general insurers it may affect their balance sheet as health insurance is a loss making portfolio and handling the scheme at such a huge scale may be quite challenging.
The income tax exemption for senior citizens has been increased to Rs.50,000 which is a welcome step.
