Explained | The General Insurance Business (Nationalisation) Amendment Bill, 2021

Finance Minister, Nirmala Sitharaman, on July 30 introduced The General Insurance Business (Nationalisation) Amendment Bill, 2021 in the Lok Sabha which will allow the government to privatise state-owned general insurance companies.

The Bill will amend the General Insurance Business (Nationalisation) Act, 1972.

The amendments are in line with the budget announcement when Finance Minister Nirmala Sitharaman had said, "We propose to take up the privatization 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."

Moneycontrol explains what are the proposed amendments in the Bill and which are the four general insurance companies in the public sector.

Which are the four general insurance companies?

Presently, there are four general insurance companies in the public sector: Oriental Insurance Company, National Insurance Company, United India Insurance Company and New India Assurance Company. It is not known yet in which of the companies will the government pare its stake.

What are the amendments? 

The Bill seeks to introduce 3 amendments.

The first amendment aims to omit the proviso to Section 10B of the Act so as to remove the clause that the Central government must hold at least 51 percent of the shareholding.

The second amendment proposes 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.

The third amendment proposes to insert a new section 31A providing for liability of a director of the specified insurer, who is not a whole-time director, liable for any acts of omission or commission committed with his knowledge and consent.

What is the General Insurance Business (Nationalisation) Act, 1972?

The General Insurance Business (Nationalisation) Act, 1972, was enacted to provide for the acquisition and transfer of shares of Indian insurance firms for deve­lo­ping the general insurance business.

In the year 2002, it was amended to transfer and vest the shares of the acquiring companies with the central government, thereby mandating it to maintain at least 51 percent shareholding in the general insurance companies