Indian Insurance Companies (Foreign...
The Indian insurance sector has come a long way in recent years and foreign investment has play...
Recently the parliament passed the General Insurance Business (Nationalisation) Amendment Bill, 2021. The bill aims to provide increased participation in the public sector insurance companies. The bill will allow the government to privatise state-owned general insurance companies. It will amend the General Insurance Business (Nationalisation) Act 1972. Lets’ discuss more on this bill.
At the moment, there are 4 general insurance companies in the public sector. They are as follows:
It is yet to be recognised as to which of these companies the government will park its stake.
The Act refers general insurance business as fire, marine or miscellaneous insurance business. It excludes capital redemption and annuity from the definition. Capital redemption insurance includes the payment of an amount of money on a particular date by the insurer once the beneficiary pays the premium periodically. Under the annuity certain insurance, the insurer pays the beneficiary over time. The General Insurance Business (Nationalization) Amendment Bill, 2021, removes this definition and refers to the definition provided under the Insurance Act 1938. Under this Act, capital redemption and annuity certain come under the ambit of general insurance business.
The bill has sought to present 3 main amendments. They are discussed below.
These amendments are as per the budget announcement when the Finance Minister announced that they sought to take up the privatization of two public sector banks and a General Insurance Company in 2021-22. She further said that it will need legislative amendments and proposed to introduce the amendments in the session itself.
As per the government, the need for an amendment was due to the following reasons:
As per the data released by insurance regulatory body, Insurance Regulatory and Development Authority of India, 25 general insurance companies observed a 10.8% rise in their collective premium in the month of January 2021 to 16.247 crore rupees as compared with 14,663 crore rupees in the month of January last year.
As per the data published by IBEF, India’s insurance penetration was seen at 3.76% in FY 20. In terms of insurance density, its overall density was seen at US$ 78 in FY 20. It stated that the market share of the private sector companies in the general and health insurance enhanced from 47.97% in FY 19 to 48.03% in FY 20.
In order to understand the amendments, we need to weigh the pros and cons of the bill. Here in this section, we take a look at the potential pros and cons of this bill.
The General Insurance Business (Nationalisation) Amendment Bill, 2021, has been passed in the parliament, and it amends the General Insurance Business (Nationalization) Act 1972, which was enacted to nationalize private companies undertaking general insurance business in India. As referred at the beginning of this blog, these amendments are in line with the budget announcement when the Finance Minister announced that they sought to take up the privatization of two public sector banks & a General Insurance Company in 2021-22.
Read our article:A Detailed Review of the IRDA Act 1999