Structural changes in PSU General Insurance on the cards, companies to focus on profitability; how it will impact employees, shares? Find here
The central government is mulling for structural change in the state-run general insurance companies to a 3-layer structure from 4-layer earlier, said Special Correspondent Anurag Shah, quoting sources, in his exclusive report on Thursday.
The central government is mulling for structural change in the state-run general insurance companies to a 3-layer structure from 4-layer earlier, said Special Correspondent Anurag Shah, quoting sources, in his exclusive report on Thursday.
Shah said, “The public sector undertaking (PSU) general insurance companies are currently divided into Head Office, Regional Office, Divisional Office, and Branch Office, wherein the divisional and branch office will be merged into one and could be termed as Operational Office.”
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Last year, the government had infused 12,000 crores in these companies which are holding about 40% market share in general insurance space. The government's focus has now shifted more towards profitability than growth and hence is undertaking the restructuring exercise of the companies. Therefore, loss making and connected offices in one area will be merged, Shah said adding that the focus will now be on increasing business through digital modes.
The government-owned general insurance will be given more focus to digitisation and also on cost-saving measures, Shah mentions. Moreover, the thrust will be on encouraging employees to get more businesses for the company through marketing and they will also be given incentives for the same, he added.
He further said that the state-owned general insurance companies' operation and employees' expense is over 5-7 times higher as compared to private general insurance companies.
The loss-making PSU general insurance branches with less/zero profitability and higher expenses will be closed, and some of them would be merged, Shah said.
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According to the source, the restructuring blueprint of PSU general insurance branches has been made and it shall be implemented in a phased manner, the special correspondent added further.
The government-owned general insurance will be given more focus to digitisation and also on cost-saving measures, Shah mentions, adding further that the employees likely to be asked get more businesses for the company through marketing and will also be given incentives for the same.
The special correspondent also expressed concern that there would be a possible disruption from workers and unions. He adds, the employees may get impacted in short term, but they will get benefitted due to the profitability of the company going forward.
While speaking on the impact of this news on state-run general insurance companies, the managing editor Anil Singhvi says, when an investor puts his/her money in a stock, it’s mainly on the basis of the business model of the company. In the general insurance segment, we won’t find an immediate change in share price as its long-term business and so is the share price of the company will react.
Singhvi assures the insurance companies’ stock will definitely give you double returns than that of Fixed Deposit – FD.
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