General Insurance Business (Nationalisation) Amendment Bill, 2021 | 12 Aug 2021
Why in News
Recently, the General Insurance Business (Nationalisation) Amendment Bill, 2021, was passed by both the houses of the parliament.
- It seeks to amend the General Insurance Business (Nationalisation) Act, 1972.
Key Points
- Key Provisions of the Bill:
- Government Shareholding Threshold:
- It seeks to remove the mandatory requirement of the Central government holding not less than 51% of the equity capital in a specified insurer.
- Defines General Insurance Business:
- It defines general insurance business as fire, marine or miscellaneous insurance business.
- It excludes capital redemption and annuity from certain businesses from the definition.
- Capital redemption insurance involves payment of a sum of money on a specific date by the insurer after the beneficiary pays premiums periodically.
- Under annuity certain insurance, the insurer pays the beneficiary over a period of time.
- Transfer of Control from the Government:
- It will not apply to the specified insurers from the date on which the central government relinquishes control of the insurer. Here control means:
- Power to appoint a majority of directors of a specified insurer.
- To have power over its management or policy decisions.
- It will not apply to the specified insurers from the date on which the central government relinquishes control of the insurer. Here control means:
- Empowers the Central Government:
- It empowers the central government to notify the terms and conditions of service of employees of the specified insurers.
- It provides that schemes formulated by the central government in this regard will be deemed to have been adopted by the insurer.
- The board of directors of the insurer may change these schemes or frame new policies.
- Further, powers of the central government under such schemes will be transferred to the board of directors of the insurer.
- Liabilities of Directors:
- It specifies that a director of a specified insurer, who is not a whole-time director, will be held liable only for certain acts which includes the acts which have been committed:
- With his knowledge, attributable through board processes.
- With his consent or connivance or where he had not acted diligently.
- It specifies that a director of a specified insurer, who is not a whole-time director, will be held liable only for certain acts which includes the acts which have been committed:
- Government Shareholding Threshold:
- Significance:
- Private Capital:
- It will bring in more private capital in the general insurance business and improve its reach to make more products available to customers.
- Improved Efficiency:
- The move is part of the government’s strategy to open up more sectors to private participation and improve efficiency.
- Enhance Insurance Penetration:
- It will enhance insurance penetration and social protection to better secure the interests of policyholders and contribute to faster growth of the economy
- Private Capital:
- Concerns:
- Affect the Workers:
- It will affect the insurance sector in the country and the workers engaged with the General Insurance Company.
- Total Privatisation:
- It may lead to total privatisation of general insurance companies. Privatising would lead to opening a Pandora’s Box, throwing into insecurity 30 crore policyholders.
- Governments Loss:
- The government will also lose money by way of dividend in the proportion of shares being offered.
- Pensions Safety:
- The pensioners in the four public sector general insurance companies were worried about the safety of their future pensions when the central government privatised one of them.
- The pension fund is dependent on the contributions of the employees so that Pension Trust can pay the pensioners.
- Affect the Workers:
General Insurance Business (Nationalisation) Act, 1972:
- The Act was enacted to nationalise all private companies undertaking general insurance business in India. It set up the General Insurance Corporation of India (GIC).
- GIC is an Indian nationalised reinsurance company.
- The businesses of the companies nationalised under the Act were restructured in four subsidiary companies of GIC:
- National Insurance.
- New India Assurance.
- Oriental Insurance.
- United India Insurance.
- The Act was subsequently amended in 2002 to transfer the control of these four subsidiary companies from GIC to the central government, thereby making them independent companies.
- Since 2000, GIC exclusively undertakes reinsurance business.