Karol Bagh | IAS GS Foundation Course | 29 May, 6 PM Call Us
This just in:

State PCS

Daily Updates

Indian Economy

General Insurance Business (Nationalisation) Amendment Bill, 2021

  • 12 Aug 2021
  • 5 min read

Why in News

Recently, the General Insurance Business (Nationalisation) Amendment Bill, 2021, was passed by both the houses of the parliament.

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.
    • 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.
  • 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
  • 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.

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.

Source: TH

SMS Alerts
Share Page