The Centre has finalised a comprehensive turnaround strategy for National Insurance Company (NICL), The Oriental Insurance Company (OICL) and United India Insurance Company (UICL), with the quantum and timing of any fresh equity support to be linked to improvements in their performance. According to reports from Business Standard, the government wants these insurers to demonstrate sustained operational improvement before committing further capital, emphasizing that equity infusion alone cannot help them unless the underlying issues are fixed. The strategy pushes for an overhaul of underwriting, product innovation and performance-linked talent management, with the government planning to monitor performance quarterly while insurers conduct internal quarterly reviews. As per two officials aware of the matter, the government wants to ensure sustainability in their performance before infusing funds this time, with the Reserve Bank of India describing the deterioration at the three insurers as a "direct financial stability concern" in its June 2026 Financial Stability Report.
The three state-owned general insurers are facing severe financial distress, with their solvency ratios deteriorating sharply despite previous government support. As reported by Business Standard, United India's solvency ratio fell to -136 per cent at the end of FY26 from -65 per cent a year earlier, while National Insurance's declined to -111 per cent from -67 per cent, and Oriental Insurance's fell to -163 per cent from -103 per cent. The insurers are required to maintain a solvency ratio of at least 150 per cent as per Insurance Regulatory and Development Authority of India (Irdai) regulations. Combined losses at public-sector multiline general insurers rose 58.3 per cent year-on-year to ₹29,070.57 crore in FY26, with United India's underwriting loss increasing 113 per cent to ₹8,335.7 crore and Oriental's rising 84 per cent to ₹7,307.77 crore. New India Assurance, the fourth state-owned general insurer and the country's largest, remains profitable with losses increasing 44 per cent to ₹8,801.9 crore, while National Insurance recorded the smallest increase of nearly 6 per cent to ₹4,625.16 crore.
The Union government had already injected a cumulative ₹17,450 crore into the three insurers between FY20 and FY22 to strengthen their financial position and solvency. According to Business Standard, National Insurance received ₹9,275 crore, Oriental Insurance ₹4,420 crore and United India Insurance ₹3,755 crore. However, their solvency positions have since deteriorated sharply, with Icra estimating that the three insurers could require about ₹39,000 crore by March 2027 to meet the regulatory solvency requirement. The government will review the insurers' performance over the next few quarters before deciding the quantum and timing of any equity infusion, as per two officials aware of the matter.
The insurers will need to better assess the risk profiles of customer segments and realign their portfolios, while using technology to improve underwriting, as reported by Business Standard. According to two officials aware of the matter, mathematical actuarial calculation of risk and probability would remain, but insurers can additionally deploy AI to understand what can be done to minimise losses with the same risk coverage. The government also wants insurers to combine traditional actuarial models with artificial intelligence to assess customer profiles and identify ways to reduce losses without changing the underlying risk coverage. Underwriting could be linked to internet-of-things weather data and satellite imagery to improve risk assessment, with the insurers' role in government-backed schemes such as Pradhan Mantri Fasal Bima Yojana offering scope for greater technology use. One insurance sector expert noted that underwriting could be linked to internet-of-things weather data and satellite imagery to improve risk assessment.
The government also wants the insurers to strengthen their human resources and retain skilled employees as new competitors enter the Indian market following the liberalisation of foreign direct investment in insurance. According to Business Standard, the companies are caught in a cycle in which losses constrain remuneration, contributing to employee attrition. Department of Financial Services Secretary Sanjay Lohiya held a review meeting earlier this month and asked the companies to develop a standardised key performance indicator framework. Performance-linked incentives could help retain talent, but only after the insurers bring losses under control, as per two officials aware of the matter. The insurers are expected to improve their solvency ratios through the sale of shares in the initial public offering of the National Stock Exchange, with the three companies together holding 90 million NSE shares and having put on the block 14.96 million shares at ₹1,785 each. They reduced the sale offer from an earlier plan to offload 18 million shares.
