Explain why the case study $is$ important and what contributions $it$ makes $to$ the field $of$ study. This can include discussing the potential implications $of$ the study $or$ its relevance $to$ practitioners $or$ policymakers.

Size matters. $Or$ does $it?$ That was the dilemma facing Suhas Nair and his team.

The issue under discussion was the restructuring $of$ Indian General Insurance

$Ltd.(IGIL),$ the largest, state$-$owned, non$-$life firm $in$ the country. Nair had $a$

personal stake too. His tenure $as$ chairman and Managing Director $of$ IGIL was

$to$ end $in$ two years. And $he$ was keen $on$ hanging $up$ his boots $on$ a high note.

Nair opened the meeting: "Should $we$ merge the four subsidiaries $of$ IGIL into $a$

single outfit that would give $us$ the advantage $of$ size?$"Or$ should $we$ delink

them into learner, autonomous, and agile unit?$$

"Just $to$ provide a perspective,$$ said Rajiv Parasnis, Director $(Management$

Services$),$ "consolidation $is$ the global trend. Look $at$ Japan. The top six insurers

are $in$ merger$-$talks.$$ "Out context $is$ different,$$ said Anup Sinha, Director

$(Personnel).$ "First, the insurance markets where consolidation $is$ taking place

are mature, making $it$ easier $to$ diversify into other financial services, invest $in$

technology, and expand our operations. A merger will also help integrate our

business.$$

"Let $us$ look $at$ the numbers,$$ said Abhinav Saran, Director $(Finance),$ punching

some keys $on$ his laptop. "A merger will bring $in85,000$ employees one roof.

$We$ will have a total $of80$ regional offices, $1,200$ divisional offices, and $2,920$

branch offices. Out combined free services would $beRs.6,450$ crore, net worth

$Rs.7,360$ crore, investment income $Rs.2,350$ crore, and total investment $Rs.$

$19,000$ crore. And all this $on$ a modest equity $ofRs\mathrm{.}375$ crore! $We$ can leverage

this enormous clout $to$ attract new business. $We$ will also $be$ able $to$ reduce

overhead costs. Like the rent outflow, for example. A merger prevents

duplications $of$ branches resulting $in$ huge savings. And that $is$ just one

example.$$

"But, Abhinav,$$ chipped $in$ Suresh Talwar, the newly$-$appointed Director $(IT),"a$

merger will pose problems $of$ integration. This becomes a time$-$consuming

activity for senior managers, overriding their business concerns. True, each $of$

our subsidiaries $is$ financially strong. However, each segment $of$ non$-$life

insurance has different parameters $of$ performance. There $is$ simply $no$ parity.

That $is$ why $itis$ best $to$ set $upan$ autonomous unit for each activity $of$ non$-$life

business.$$

"Talwar has a point$,$ remarked Vijay Santoor, Director $(Operations).$ "A merger

downplays all the inherent weaknesses $in$ the system. Take, for example, our

motor portfolio. $It$ represents over $30\%of$ the total premium. But $isa$

loss$-$making line $in$ all our subsidiaries mainly because $of$ laxity $in$ underwriting

and claims control? Once you spin $it$ off, you ensure discipline. $Of$ course, you

need $to$ move $of$ the current pattern $of$ cross$-$holding among subsidiaries and

make each $of$ them truly independent.$$

"Both approaches have their merits,$$ said Nair. "There $is$ also the growing

business $of$ reinsurance. $Ifwe$ decide $on$ a break$-up,it$ makes sense $to$ convert

IGIL from a holding company $to$ a national reinsurer. $Ifwe$ merge, $we$ may $be$

able $to$ live $upto$ our corporate vision $of$ being among the world's majors $in$

non$-$life $by2015.$ Still, given the right focus, there $isno$ reason why some $of$ our

$sectoral$ businesses cannot reach a global scale.