India’s State-Owned Insurers Asked to Submit Plans to Cut Losses

Int’l Desk: India's state-owned general insurance companies have been asked to prepare plans to reduce or withdraw from loss-making businesses after reporting a combined net loss of Rs 10,050 crore in the 2025-26 financial year, despite higher premium income.

The four insurers had recorded a combined profit of Rs 798 crore in the previous financial year.

According to The Economic Times on Monday (November 2), citing sources familiar with the matter, the companies must prepare plans approved by their boards of directors. The plans should focus on improving financial strength, using technology and making operations more efficient.

The government will monitor progress in implementing the plans.

Higher Premiums, Bigger Losses

Government data shows that the four insurers collected Rs 102,568 crore in gross direct premiums during 2025-26, compared with Rs 95,252 crore a year earlier.

According to provisional figures, National Insurance reported a loss of Rs 2,534 crore, Oriental Insurance lost Rs 4,061 crore and United India Insurance recorded a loss of Rs 4,839 crore.

New India Assurance was the only profitable company, reporting a net profit of Rs 1,384 crore.

However, New India Assurance also reported a net loss of Rs 1,267 crore in the July-September quarter of 2026-27, compared with a profit of Rs 63 crore in the same period a year earlier.

Higher claim costs were a major reason for the quarterly loss. The company had to set aside around Rs 715 crore following a Supreme Court ruling on motor accident compensation. Claims involving major property damage, including flooding, also increased expenses.

Its combined ratio reached 156.2%, meaning it spent about Rs 156 on claims and operating costs for every Rs 100 of earned premiums.

Rising Claims and Capital Shortages

The three other state-owned insurers are also facing serious financial difficulties.

At the end of March 2026, National Insurance, Oriental Insurance and United India Insurance reported solvency ratios of -1.11, -1.63 and -1.36, respectively.

All three were below the minimum ratio of 1.5 required by the Insurance Regulatory and Development Authority of India (IRDAI).

The solvency ratio measures an insurer's ability to meet its financial obligations, including future claims. A negative ratio indicates a serious capital shortage.

High claim costs and premiums that do not adequately reflect insurance risks have added to the companies' financial problems.

The four insurers recorded combined underwriting losses of Rs 29,071 crore in 2025-26, up 58.3% from the previous year.

Underwriting losses occur when claims and operating costs exceed the premiums earned from insurance policies. Investment returns and other income helped reduce the insurers' overall net losses.

Government Plans to Restore Profitability

The proposed measures include better pricing of high-risk insurance policies, particularly government-backed health insurance schemes, stronger claim checks and greater use of reinsurance.

Reinsurance allows insurers to transfer part of their risks to other insurance companies, reducing the financial impact of large claims.

A parliamentary committee has also recommended using artificial intelligence to improve claim assessments and detect fraudulent claims.

In August, the committee called for time-bound plans to strengthen the financial position of state-owned insurers.

On September 2, India's Ministry of Finance reviewed the companies' performance and directed them to focus on profitable businesses and reduce claim costs. Their progress is also expected to be reviewed every three months.

The government has already provided financial support to the struggling insurers. Between 2019-20 and 2021-22, it injected Rs 17,450 crore into National Insurance, Oriental Insurance and United India Insurance.

However, continued underwriting losses have left the three companies facing major capital shortages.

According to credit rating agency ICRA, the insurers may need around Rs 39,000 crore in additional capital by March 2027 to meet the required solvency standards.

Reducing or withdrawing from loss-making businesses could also affect policyholders, particularly those covered by health insurance and government-supported insurance schemes.

Premium rates, coverage conditions or insurers' participation in certain schemes could change as companies seek to improve their financial performance.

However, the government has not yet identified which insurance businesses may be closed or announced a deadline for companies to submit their plans.