Government notifies law to shed holding in public sector general insurance company

President Ram Nath Kovind has given his assent to a bill to amend the General Insurance Business (Nationalisation) Act. This will facilitate bringing down government’s equity below 51 per cent in a public sector general insurance company

Govt moves to shed stake in a general insurance co

Titled, the ‘General Insurance Business (Nationalisation) Amendment Act, 2021’, the new law has brought in three amendments. First one aims “to omit the proviso to section 10B of the Act so as to remove the requirement that the Central Government holds not less than 51 per cent. of the equity capital in a specified insurer”. The second one will 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 one will 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.”

According to the objectives of the bill, 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.

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The new law is seen as a move to implement the budget announcement on privatisation of one of the public sector general insurance companies. However, Finance Minister Nirmala Sitharaman has repeatedly said that the new law is not for privatisation. “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, the common people’s participation in the general insurance companies,” she had said while introducing the bill during just concluded Monsoon session of the Parliament.

Further she mentioned that general insurance companies in the private sector have greater penetration, as they raise more money from market and therefore give a better premium for insuring public and also have innovate packages. “Whereas public general insurance companies are not able to perform because they are always short of resources,” Sitharaman said.

As on 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, it is not yet known that in which one of them, the government will lower its shareholding.

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