By : Satyaki Paul
Recently, the General Insurance Business (Nationalisation) Amendment Bill, 2021 was passed by Rajya Sabha without any form of discussion amid protests by the Opposition MPs. The bill aims to provide greater private participation in the public sector insurance companies.
Why were the provisions of old bill?
The new bill seeks to amend the General Insurance Business (Nationalisation) Act, 1972. The Act was enacted to nationalise all private companies undertaking general insurance business in India. The 1972 Act set up the General Insurance Corporation of India (GIC). The businesses of the companies nationalised under the Act were restructured in four subsidiary companies of GIC: (i) National Insurance, (ii) New India Assurance, (iii) Oriental Insurance, and (iv) United India Insurance. The Act was again amended in 2002 to transfer the control of these four subsidiary companies from GIC to the Union government, thereby making them independent companies. In the meantime, GIC exclusively undertakes reinsurance business, as per PRS.
What are the Changes that did take place due to the amendment?
There were three major amendments done to the Act. The first amendment was to omit the proviso to Section 10B of the Act so as to remove the provision that the government had to have a 51% shareholding. The second amendment to the Act was the introduction of a new Section 24B which mandated that the Centre can relinquish control over a public sector insurer from a certain date. Then lastly, there is the addition of Section 31A that imposes a greater deal of liability on the non-whole-time director. These new directors will be held responsible for acts of omission and commission by the insurer. These amendments to the bill are in consonance with the Union Finance minister’s Budget speech wherein she had announced a big-ticket privatisation agenda that included two public sector banks and one general insurance company.
Why the Opposition?
The General Insurance Amendment Bill, 2021 aims to promote a greater deal of private sector participation in the insurance companies present in the public sector. The new bill aims to do this by seeking amendments to the General Insurance Business (Nationalisation) Act, 1972. This Act was put into play to nationalise all the private companies that were undertaking General Insurance Companies (GIC) in India. In current context, as to why there is so much push-back, there was no initial discussion when it was passed on August 11, 2021. The Opposition viewed it as a break of Parliamentary norms and wanted the bill to be referred to a select committee of the House. The Opposition views this move as something that will be detrimental to public sector interest.
In a nutshell, there are 4General Insurance Companies (GIC) in the public sector: National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and the United India Insurance Company Limited. So, one of these will be privatised for which the government is yet to finalise and publicise the name to the citizens of India.