FM introduces bill in Lok Sabha to privatise general insurance firm
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Finance Minister Nirmala Sitharaman on Friday introduced a bill in the Lok Sabha to offload part of government’s stake in public sector general insurance companies. The bill will amend the General Insurance Business (Nationalisation) Act, 1972. Although the bill has a provision to enable the government to bring down its shareholding below 51 per cent, Sitharaman clarified that this bill is not for privatisation.
“The apprehensions mentioned by the members is not well-founded at all. What we are trying to in this is not to privatise. We are bringing some enabling provision so that the government can bring in public, participation, Indian citizens, the common people’s participation in the general insurance companies,” she said while introducing the bill amid dins.
The amendment was a follow-up to the budget announcement when Sitharaman had said: “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, and I propose to introduce the amendments in this Session itself.” However, the bill could not be tabled during the budget session as it was curtailed on account of pandemic.
On Friday, Sitharaman said public-private participation in the general insurance industry would 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 enable faster growth of such general insurance companies. We need money to run them,” she said.
The Minister said general insurance companies in the private sector have greater penetration. They raise more money from the market and give a better premium for insuring the public and have innovative packages. “Whereas public general insurance companies are not able to perform because they are always short of resources,” Sitharaman said.
Three amendments
The bill proposes three amendments. The first one aims to omit the proviso to section 10B of the Act to remove the Central Government’s requirement to hold not less than 51 per cent of the equity capital in a specified insurer. The second one is to insert a new section 24B providing for cessation of application of the Act to such specified insurer on and from the date on which the Central Government ceases to have control over it. And the third is to insert a new section 31A providing for liability of a director of specified insurer, who is not a whole-time director, in respect of such acts of omission or commission of the specified insurer which has been committed with his knowledge and with his consent..
“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 policy holders and contribute to faster growth of the economy, it has become necessary to amend certain provisions of the Act,” statement of objects and reasons of the bill 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, it is not yet known which one of them, the government will lower its shareholding.
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