Recently, the General Insurance Business (Nationalisation) Amendment Bill, 2021 was passed by both the Houses of Parliament i.er., the Lok Sabha and the Rajya Sabha. This Bill, which was introduced by the Finance Minister Nirmala Sitharaman, amends the General Insurance Business (Nationalisation) Act, 1972. The 1972 Bill was aimed at nationalizing the insurance sector across the country and under this Act, the General Insurance Corporation was set up and 4 insurance companies came under it as subsidiaries. In 2002, an amendment was made to the 1972 Act that transferred the control of subsidiaries of General Insurance Corporation to the Central Government and made it mandatory for the Central Government to hold 51% or more equity capital. The General Insurance Business (Nationalisation) Amendment Bill, 2021 aims to dilute this effect of the 2002 amendment. The General Insurance Business (Nationalisation) Amendment Bill, 2021 seems to be in line with the government’s plan of privatizing a general insurance company along with two banks in the public sector. However, the Bill empowers the government to privatise one or more of the general insurance companies in the public sector.
The Bill aims at removing the mandatory requirement of the Central Government which bounds it to hold 51% or more equity capital at state-owned insurance companies. This will encourage private investors to invest in the public sector insurance companies and will bring more resources to the public sector. This will also provide a boost to the growth of the insurance sector and increase insurance coverage across the country. The new Bill also provides a provision for holding a non-full-time director responsible for any acts of omission or commission committed by the insurer. However, the Director will be liable only if the act was committed with the consent, connivance or knowledge of the Director or if the Director was not acting diligently. Furthermore, the new empowers the Government to relinquish the control of any public sector insurance company. The involvement of the private sector will also provide a boost to the performance and efficiency of the public sector insurers and hence it would be advantageous to the public at large.
However, there are also certain concerns about privatization. Firstly, the private sector, in its objective of achieving maximum profit, often overlooks the interests of the policyholders. This will result in insecurity among the policyholders. Secondly, workers of the privatized insurance companies might be concerned about their job security and pension benefits that they are entitled to the whole working in a state-owned enterprise.
Considering the cast resources of the private sector, the Bill will certainly have far-reaching impacts which could potentially transform the insurance sector of India. However, the Government must also come up with certain regulations for safeguarding the interests of the employees as well as clients of the insurance companies whose control the Government relinquishes. The private sector is profit-oriented and the Government must ensure that the general public is not exploited due to the profit-centric approach of the private sector.
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