The Rajya Sabha passed the General Insurance Business (Nationalisation) Amendment Bill on Wednesday, August 11, 2021, after passing by the Lok Sabha on Tuesday, August 3, 2021.
The General Insurance Business (Nationalisation) Amendment Bill will amend the General Insurance Business (Nationalisation) Act, 1972. The Act was enacted to nationalise general insurance business by grouping 107 insurers into four subsidiaries of the General Insurance Corporation of India. The subsidiaries are the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Insurance Company Limited, and the United India Insurance Company Limited. In 2002, the Central Government took control of the four companies from the General Insurance Corporation of India.
The Bill is in line with the budget speech made by Finance Minister Nirmala Sitharaman. She informed the privatisation of two public sector banks and one general insurance company to achieve its divestment targets. The Bill hopes to promote greater participation by the private sector in the state-run general insurance companies by removing the mandatory holding of not less than 51% of the equity capital by the Centre. This move allows the government to reduce its stake in general insurance companies, increase insurance penetration, secure policyholders’ interests, and contribute to faster economic growth. Along with the increase in foreign direct investment to 74%, the investments pouring into the country will rise.
Three significant amendments to the Act are omitting the proviso to Section 10B, inserting Section 24B and Section 31A. The Central Government will no longer hold at least 51% of the stake through the first amendment. Through the second amendment, the government can relinquish control of a public insurer from a particular date. Lastly, through the third amendment, the liability on non-whole-time directors will be increased as they will be responsible for acts of omission and commission by the insurer.
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