The contentious General Insurance Business (Nationalisation) Amendment Bill, 2021 was passed in the Rajya Sabha on Wednesday despite the Opposition’s demand to send the legislation to a select committee.
The legislation allows the Central government to dilute its stake in state-owned general insurers below 51 percent.
Which are the state-owned insurers?
New India Assurance, National Insurance Corporation, General Insurance Corporation of India (GIC Re), Oriental Insurance and United Insurance are the state-owned insurers.
What would happen if the bill becomes an Act?
Once the Bill is gazetted and becomes an Act, all the state-owned general insurers can be privatised.
What’s The Background?
The General Insurance Business (Nationalisation) Act was passed in 1972. This law sought to nationalise all private general insurance companies in India. In 2002, the Act was amended to transfer control of these subsidiary companies from GIC to the Central government.
Late finance minister Arun Jaitley, in his Budget speech in February 2018, proposed to merge United India, Oriental Insurance and National Insurance. The proposal to merge the three insurers was called-off in July 2020, in a meeting of Union Cabinet, chaired by Prime Minister Narendra Modi.
The Modi government further amended the law to remove the requirement that the central government should hold not less than 51 per cent of the equity capital in a specified insurer. This means that these insurers can be privatised. According to the statement of objects and reasons of the general insurance amendment bill, it seeks to remove the requirement that the central government should hold not less than 51 per cent of the equity capital in a specified insurer.
In Budget 2021, Finance Minister Nirmala Sitharaman had announced that one general insurance company would be privatised in 2021-22. The change in legislation was following this proposal.
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