What is the bill all about?
The General Insurance Amendment Bill aims to push greater private participation in the public sector insurers.
The bill seeks to remove the requirement that the Centre should hold not less than 51 per cent of the equity capital in such insurers.
Why the need for an amendment?
According to the government, the need arose to address such matters as (a) push for higher private participation in public sector insurance companies; (b)
raise the level of insurance penetration and thereby social protection; (c) secure the interests of policyholders in a better manner; (d) contribute to faster growth of Indian economy.
What does the bill seek to amend?
The General Insurance bill seeks to amend the General Insurance Business (Nationalisation) Act, 1972. This law dealt with nationalising all private general insurers in the country.
Under it, the General Insurance Corporation (GIC) of India — abbreviated as GIC Re — was set up. National Insurance, New India Assurance, United India and Oriental Insurance became its subsidiaries.
The Act was amended in 2002 and the Central govt took over control of the subsidiaries from GIC.
The new bill seeks to remove the old Act’s proviso on the 51% government holding requirement.
Which insurers will be impacted?
India has four general insurers in the public sector. These are: National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and the United India Insurance Company Limited.
Major changes from the old bill
(i) Section 10B of the old Act was omitted to scrap the 51% requirement;
(ii) Section 24B, a new one, has been brought in, which says the Centre can relinquish control of a public insurer from a given date;
(iii) Section 31A, saying that a director who is not a whole-time director will be held responsible for acts of omission and commission by the insurer.
What does the Opposition want?
The government has been accused of not following parliamentary norms and “bulldozing” the legislation. Opposition parties demand that the bill be referred to a select committee of the House.
According to the Opposition, the amended rules are going to prove detrimental to larger public interest.
When was the move first announced?
The late Arun Jaitley had first proposed to merge United India, Oriental Insurance and National Insurance, in his 2018 Budget speech. Such a merger would have made the united entity India’s largest general insurer.
In July 2020, however, Modi Cabinet called off this merger proposal.
In Budget 2021-22, Finance minister Nirmala Sitharaman unveiled a big-ticket privatisation agenda, announcing that “one general insurance company and two public sector banks” would be privatised.
What now?
The Bill will become an Act once it is gazetted. Thereafter, all the abovementioned public general insurers can be taken up for privatisation.
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