Bill to amend general insurance law introduced in Lok Sabha

A bill to amend the general insurance law to allow the government to pare its stake in state-owned insurers was introduced in the Lok Sabha on Friday, but Finance Minister Nirmala Sitharaman insisted that it will not lead to privatisation.

Introducing the General Insurance Business (Nationalisation) Amendment Bill, 2021, Sitharaman said its passage will help generate required resources from the Indian markets so that public sector general insurers can design innovative products.

Several opposition members had opposed the introduction of the bill, saying it will bring in foreign investors and entail total privatisation of PSU general insurance companies.

Sitharaman said, “The apprehensions mentioned by the members are not well-founded at all. What we are trying to do in this is not to privatise. We are bringing some enabling provision so that the Government can bring in public, Indian citizens, and common people's participation in the general insurance companies”.

As per the statement of objects and reasons of The General Insurance Business (Nationalisation) Amendment Bill, 2021, it seeks to remove the requirement that the central government holds not less than 51 per cent of the equity capital in a specified insurer.

“With a view to provide for greater private participation in the public sector insurance companies and to enhance insurance penetration and social protection and better secure the interests of policyholders and contribute to faster growth of the economy, it has become necessary to amend certain provisions of the Act,” as per the bill, which was introduced amid the din. Sitharaman said public-private participation in the general insurance industry will help get more resources.

“Why do we need to raise the resources from the market? Our market can give the money from the retail participants who are Indian citizens. Through that, we can have greater money, bring in better technology infusion and also enable faster growth of such general insurance companies. We need money to run them,” she said in the Lok Sabha.

The minister said general insurance companies in the private sector have greater penetration, they raise more money from the market and therefore give a better premium for insuring the public and also have innovative packages.

“Whereas public general insurance companies are not able to perform because they are always short of resources,” Sitharaman said.

Sitharaman in the Budget 2021-22 had announced a big-ticket privatisation agenda, including privatisation of 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.

As of date, there are four general insurance companies in the public sector - National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and the United India Insurance Company Limited. Now, one of these will be privatised for which the government is yet to finalise the name.