Context:

• The Lok Sabha passed a law to amend the general insurance business Act without a debate.

Objective of the bill:

• It will allow the government to bring down its stake in State-owned general insurance companies.
• It will generate required resources.
• It will help public sector general insurers design innovative products.
• It seeks to remove the mandatory requirement of the Central government holding not less than 51 percent of the equity capital in a specified insurer.

Benefits arising out the bill:

• It will provide for greater private participation in public sector insurance companies.
• It will enhance the penetration of the insurance sector.
• It will provide social protection by securing the interests of the policyholders better.
• It will contribute to faster pace of the economic growth.

Provisions of the Bill:

• The bill will allow the government to bring down its stake in State-owned general insurance companies, generate required resources and help public sector general insurers design innovative products.
• It allows the government to privatize state-run general insurance
• It seeks to remove the mandatory requirement of the Central government holding not less than 51% of the equity capital in a specified insurer.
• It also provides for cessation of application of the existing general insurance law to those insurers in which the government ceases to have control.
• Control refers to the government’s right to appoint a majority of directors or to have the power to influence management or policy decisions.
• It increases the liability of a director, who may not be a whole-time director, in case the insurance firm commits certain acts of omission which he was aware of or party to.
• It seeks to include capital redemption and annuity certain within the general insurance business.

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