Lok Sabha clears Bill for privatising state-run general insurance firms

The General Insurance Business (Nationalisation) Amendment Bill, 2021, was tabled in Lok Sabha on 30 July. The Bill seeks to usher in more private capital into general insurance business and to help improve its reach and make more products available to customers. The move is part of the government’s strategy to open up more sectors to private participation and improve efficiency.

The most important feature of the Bill is to drop the requirement in the existing general insurance law of 1972 that the central government will hold not less than 51% of the equity capital in a specified insurer. It also provides for cessation of application of the general insurance law to those insurers in which the government ceases to have control over.

Control means right to appoint the majority of directors or have power to influence management or policy decisions.

Finance minister Nirmala Sitharaman, in a statement explaining the objectives of the Bill, said amendments to the general insurance law of 1972 have become necessary in order to enhance insurance penetration and social protection and to better secure the interests of policy holders and to contribute to faster growth of the economy.

The amendments also provide for liability of a director of a specified insurer, who is not a whole-time director, in the case of certain acts by the insurance firm that he was aware of or was party to.

Sitharaman had in her Budget 2021-22 announced a big-ticket privatisation agenda which included two public sector banks and one general insurance company.

“We propose to take up the privatisation of two Public Sector Banks and one general insurance company in the year 2021-22. This would require legislative amendments,” she had said at the time.

As of date, there are four general insurance companies in the public sector – National Insurance Company Ltd., New India Assurance Company Ltd., Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. Now, one of these will be privatised for which the government is yet to finalise the name. The government has set a ₹1.75 trillion disinvestment target for this fiscal and is preparing for the public float of state-owned Life Insurance Corp. of India.

(PTI contributed to this story.)