General Insurance Business Amendment Bil

Q  Why is it in News ? 

A 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.

Q What are key provisions of the Bill ? 

A 

• 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.

Q What is significance of this amendment Bill ? 

A 

• 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

Q What are some of the concerns associated ? 

A 

• 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.

Q What are key provision of General Insurance Business (Nationalisation) Act, 1972 ?A
A 

• 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