General Insurance Amendment Bill 2021 UPSC | Explained

General Insurance Amendment Bill 2021 UPSC | Explained | Why In The News ?

In news :  The General Insurance Business (Nationalisation) Amendment Bill 2021 was introduced in Lok Sabha

General Insurance Amendment Bill 2021 UPSC | Explained

What are the Key amendments of the Bill?

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

The Bill proposes three amendments.

• The first aims to omit the provision ( Section 10B ) which requires that the Central government should hold not less than 51% of the equity capital in a specified insurer.
• The second amendment is to insert a new Section 24B which will provide for ending the application of the Act to such a specified insurer on which the Centre ceases to have control.
• And, the third amendment is also to insert a new Section 31A, making a director (not a whole-time director), liable only for acts of omission or Commission.

Although the Bill allows the government to bring down its shareholding below 51%, it was clarified that this is not a Bill for privatisation.

Public Sector Insurance Companies : AERA Amendment Bill 2021 UPSC | Explained |

There are four public sector general insurance companies —

• National Insurance Company Limited
• New India Assurance Company Limited
• Oriental Insurance Company Limited
• United India Insurance Company Limited.

In Which Company Government Will Lower Shareholoding ?

• It is not yet decided in which one of the companies the government will lower its shareholding.

Impact On Govt Finances : 

• Now, if the government shed parts of its shareholding in LIC and a general insurance company, it will lose money by the way of dividend in the proportion of shares being offered.
• If it does not sell parts of its stake, it will be required to borrow money which means higher expenditure in future on account of debt servicing.
• Both options are going to impact the finances
• Till now, only one public sector insurance company, New India Assurance, has entered the stock market.

Challenges in the Insurance sector:

1. Low penetration and density rates.
2. Inadequate investment in insurance products.
3. The dominant position and deteriorating financial health of public-sector players.

Additional Information :

Important Reforms In Insurance Sector In Past Years :

• Nationalisation of life (LIC Act 1956) and non-life sectors (GIC Act 1972).
• Constitution of the Insurance Regulatory and Development Authority of India (IRDAI) in 1999.
• Opening up of the sector to both private and foreign players in 2000.