21 Main Pros and Cons of Merger of Public Insurance Companies

The public sector of any country is the security of the people of that country. It is the wealth of the taxpayers and is accountable to the tax payer. The existence of the public sector ensures that the citizens of the country can contribute through their taxes to the development and administration of society and help the functioning of society.

The main purpose of having insurance companies is to keep the lives of the people of the country and thief property and belongings safe from damage and accidents. The insurance provided serves as an advantage to the common man from threatening situations like health risks, accidents, damage to business, etc.

PROS OF MERGER OF PUBLIC SECTOR INSURANCE COMPANIES:

  • Competition:

Due to the merger of public sector insurance companies, the chance of competition reduces. The insurance companies can work as the same unit instead of trying to compete with each other to get hold of customers. This is a great advantage of mergers of public sector insurance companies and the public sector in general.

  • Services:

Due to the merger of the public sector insurance companies and the several entities and employees of the public sector insurance companies, it becomes easier for the companies to provide better services to the people due to an increase in workforce and efficiency of the workers. Mergers help in increasing morale as well.

  • Policies:

After the merger of public sector insurance companies, the companies tend to offer better policies to its customers because they have the leverage to perform better than what they used to when the companies were separate enterprises. The merger helps in formulating better solutions to complex problems.

  • Brokers:

As is well known in a country like India, the problem of brokers exists in all fields of government services. This enhances corruption and inequality as even government services, which is the right of every citizen of the country have to be paid for in huge unnecessary amounts.

  • Employment:

As mentioned before the merger of public sector insurance companies also leads to the chance of better employment and betterment of workforce. Since mergers involve national companies that extend through the length and breadth of the country coming together, it also enhances employment of the population of that region.

  • Reduce Cost of Operations:

The merger of public sector insurance companies ensures that the cost of operations also reduces since it is well known that mergers, instead of functioning in isolation, tends to reduce the cost price and cost of operations of the enterprises performing, planning and executing the merger. 

  • Geographical Reach:

During the merger of public sector insurance companies, there are several small and regional insurance companies, that cater to a specific population of the country also become part of a centralized unit, Hence their customers also tend to choose to invest in the new enterprise, helping a centralized public sector insurance company develop outreach in various remote areas as well.

  • Expertise:

The merger of public sector insurance companies ensures that there will be more expertise at your disposal when you are dealing with a particular problem. A complex problem, or a advice and policies required for the solution of a problem can be better dealt with more professionals at hand.

  • Reduces Disparity and Inequality:

The merger of public sector insurance companies ensures that there will be an increase in the employment in the regional companies that will be merging with the bigger ones. This will lead to reduction of disparity and inequality in various parts of the country.

CONS OF MERGER OF PUBLIC SECTOR INSURANCE COMPANIES:

  • Monopoly:

With the merger of public sector insurance companies there exists the chance of an increase in the monopoly of insurance companies. This will lead to the better functioning of the companies by all means, but at the same time it makes the problem of monopoly arise due to the lack of alternatives.

  • Expensive:

The merger of public sector insurance companies might also lead to the policies and services of these companies becoming more expensive due betterment in the policies and services of these companies. This is something than can be very well avoided by imposing strict sanctions and rules, but it might also be the case that the government will not do so.

  • Technology:

The technological merger is a massive challenge that lies ahead of any public sector insurance company that is willing to do a merger. This is because the companies have different databases and different customers, hence merging will mean getting all those details and information in one centralized database.

  • Lack of Alternatives:

Mergers will naturally lead to the unavailability of alternatives and keeps the consumer in a tight spot with regards to choices. The consumer will now have to choose between a singular public sector option, which is always safer, or multiple private sector options, which is quite unsafe.

  • Centralism:

The merger of public sector insurance companies leads to the possibility of shutting down of several local branches and several district offices. This will be inconvenient for the consumer who will have to travel considerable distances and wait in lines in order to seek the services of the insurance company.

  • Lay-offs:

Mergers generate employment, but at the same time they also lead to lay-offs of many low-tier employees and contractual employees since a centralized unit usually hires newer agencies for the supply of low-tier employees. This leads to a problem of economy in certain regions, but can be avoided if planned.

  • Stronger Insurance Companies Come Under Pressure:

One must remember that in a merger, not all companies are of equal status. Some are bigger than others and function better than other. In the time of merger, the bigger enterprises come under massive pressure in making up for the smaller enterprises which may not be able to function very efficiently when being merged.

The merger of public sector insurance companies is a step that the government decides upon and ensures that the functioning is properly set-out. This makes it easy, but at the same time with an inefficient government, these enterprises come under a lot of extra pressure and may lose their credibility.

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