General Insurance Business (Nationalization) Amendment Bill, 2021

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admin August 29, 2021
Updated 2021/11/04 at 1:16 PM

The General Insurance Business (Nationalization) Amendment Bill, 2021, was passed by the Union Lok Sabha on Monday, amending the General Insurance Business (Nationalization) Act, 1972. The Act was enacted to nationalize all private general insurance businesses operating in India. The bill aims to increase private sector participation in the public sector insurance businesses governed by the Act. The central government must own at least 51 percent of the listed insurers, according to the 1972 Act. This provision is repealed in the 2021 Amendment Bill. There are also some additional changes, such as a change in the definition of the general insurance business, the transfer of control from the government, and director liabilities.

What is the bill?

The amendment aims to eliminate the requirement that the government owns at least 51 percent of the shares in the General Insurance Company’s four subsidiary companies: the National Insurance Company, the New India Assurance Company, the Oriental Insurance Company Limited, and the United India Insurance Company. According to the Bill, revisions were required to encourage greater private engagement in public sector insurance businesses, increase insurance sector penetration, and offer social protection by safeguarding policyholder interests. The bill also modified the definition of general insurance business and gave the government the right to choose the majority of directors of a specific insurer as well as control over its management and policy decisions. The Bill’s goals and motivations are to promote private sector engagement in public sector insurance businesses, boost insurance access, improve social protection and policyholder interests, and contribute to the economy’s rapid expansion. It became necessary to change certain of the Act’s provisions as a result of this.

Importance of the bill

This measure was passed in accordance with the government’s aggressive privatization plan. The finance minister proposed a privatization initiative involving two public sector banks and one general insurance firm in his budget statement for 2021-2022. Accordingly, the government will lower its holding in one of four public sector general insurance businesses, namely National Insurance Company Limited, Oriental Insurance Company Limited, New India Assurance Company Limited, and United India Insurance Company Limited. The bill aims to increase insurance penetration and social protection, as well as better protect policyholders’ interests. It also hopes to contribute to the economy’s faster expansion.

Criticism of the bill

The law wants to remove the requirement that the government holds no less than 51 percent of equity capital, and it also calls for more private participation in public sector insurance companies, which has alarmed the opposition. Congress leader Adhir Ranjan Chowdhary, who spoke briefly against the bill during protests in the Lok Sabha, called it anti-people and anti-national legislation. It is also claimed that privatizing decades-old institutions will result in them being concentrated in the hands of capitalists.

Transfer of Control

The Bill will not apply to the listed insurers after the central government relinquishes control of the insurer, according to the Bill. Control refers to the ability to appoint a majority of the directors of a specific insurer, as well as the ability to direct its management and policy decisions. The Act gives the federal government the authority to notify workers of selected insurers about their terms and conditions of employment. The insurer shall be assumed to have embraced schemes devised by the central government in this regard, according to the Bill. The insurer’s board of directors has the authority to alter or create new policies. Furthermore, the central government’s powers under such programs (as defined by the Amendment) will be passed to the insurer’s board of directors. A director of a specified insurer who is not a full-time director will be held accountable solely for particular activities, according to the Bill. Acts such as the following have been committed With his cooperation or connivance, or when he had not performed diligently, and with his knowledge, responsible through board processes

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