What you need to know about the recently passed insurance amendment bill

Analyzing the draft law amending the 2021 General Insurance Activities (Nationalization) Amendment Bill, which was adopted during the monsoon session of Parliament which has just ended, KUDRAT MANN highlights the changes it is making to its parent law, the General Insurance Business (Nationalization) Law, and the substantive and procedural concerns raised against it.

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THE Parliament, without much discussion in both Chambers, adopted the Bill amending the Bill amending the Bill on General Insurance (Nationalization), 2021 (the bill) last week. Lok Sabha and Rajya Sabha passed the bill by voice vote on August 2^sd and 11^e respectively. The bill, which amends the General Insurance Activities (Nationalization) Act 1972 (the Act), was passed amid widespread protests in Parliament.

In addition to calling for discussions on the revelations of Project Pegasus and the three farm laws, heated exchanges between opposition parties and the government erupted over the opposition’s claims that the government had destroyed a law. bulldozed, even with respect to this bill.

The 1972 law nationalized all private companies carrying on general insurance business in India. This bill, on the other hand, allows for greater private sector participation in public sector insurance companies covered by the act.

The explanatory memorandum of the bill states that it aims to “ensure greater private participation in public sector insurance companies and to improve insurance penetration and social protection and to better protect the interests of policyholders and contribute to faster growth of the economy ”.

Read also: Government decision to privatize insurance companies threatens India’s financial sector

Definitional modifications

The law defines “general insurance activities” as fire, maritime or other insurance activities, but excludes capital repurchases and annuities for certain activities. The bill seeks to remove this definition and alludes to the definition in the Insurance Act of 1938 in which capital repurchase and annuity of certain business are included in the definition of general insurance business.

In addition, the “board of directors” will be interpreted in accordance with Section 2 (10) of the Companies Act of 2013 to designate “a collective body of the directors of the company”.

Cessation of government “control”

The bill seeks to restrict the role and control of government in insurance activities. Article 24B was inserted into the law to give it effect. It provides that the Act will not apply to designated insurers once the government stops monitoring them. “Control” here refers to the power to appoint the majority of directors of a specified insurer and the power over management and political decisions.

The law instructed the central government to establish general conditions of service for employees of specified insurers. The purpose of the bill is to transfer this power from the government to the board of directors.

Responsibility of the director

The bill, by inserting section 31A into the law, provides that an administrator (other than a full-time administrator) of a specified insurer will only be held liable for certain acts. These include acts that have been committed with the knowledge of the director (a), (b) attributable through board processes, (c) with his consent or connivance or (d) when did not act diligently.

Said provision is in accordance with Subsection 149 (12) of the Companies Act 2013.

Government shareholding

Section 10B of the law provided for a minimum requirement of 51% equity holding in public sector insurers by the central government. The bill seeks to remove this provision.

The public sector insurer General Insurance Corporation of India (GIC) was established by law in 1972. GIC was subdivided into four subsidiaries namely: National Insurance, New India Assurance, Oriental Insurance and United India Insurance. Since a 2002 amendment to the law, their control has been transferred from the GIC to the central government. Now, once the bill is enacted, one or more of these subsidiaries will be privatized.

What is the reason for the amendment?

Since 2018, the central government has expressed its willingness to privatize the public insurance sector. Former Union Finance Minister Arun Jaitley had offers a merger of three of the subsidiaries of public sector insurers in his February 2018 budget speech. The aim was to merge the entities for their eligible stock exchange listing. However, the idea never materialized due to insolvency and low profits.

Looking to 2021, the current Union Finance Minister, Nirmala Sitharaman, in his budget speech this year, once again pushed the privatization agenda into calling for the privatization of one of the public sector insurers. The bill is part of the same agenda.

Why the heckling over the bill?

The bill was passed in unprecedented chaos in Parliament. The opposition had called for the bill to be sent to a special committee of Parliament for review, but the government did not agree to the same. A committee restricted to Parliament is formed for the proper reading of a bill, after analysis, it returns a report of its observations to Parliament, which the Chambers may or may not accept.

Contrasting images can be drawn between the passage of the original law and the amending bill.

The procedure followed for the adoption of the main law in 1972 demonstrated due diligence, as it was discussed all day at Lok Sabha before being sent to a Joint Committee of Parliament on May 29. The committee, after a series of meetings over a three-month period, submitted its report on August 21. more than four hours before the 1972 bill was passed. A similar series of deliberations also followed at the Rajya Sabha, where two sessions were devoted to debate the 1972 bill before it was passed.

In contrast, the moment the bill was debated in both chambers for a 22 minutes combined and passed with negligible discussions via voice vote. Large-scale security personnel were here to Rajya Sabha during his visit, and the opposition organized a walkout in protest.

The opposition expressed concern about the capitalist agenda behind the bill and the ramifications it would have on public sector employees. An opposition MP even called the bill “anti-people” since it aims to feed the interests of the capitalists. Central-backed insurers are necessary to ensure regular liquidity, especially since the underwriting losses accumulated by public and private insurers have increased. strongly increased due to the pandemic.

Read also: Microinsurance: a lifeline for the poor

Employees of public sector insurers have also expressed their dissatisfaction with the recent changes made by go on strike August 4, 2021.

Are the concerns expressed about the bill justified? This remains to be seen and will only become visible once the bill is implemented as law. However, a thorough discussion between the ruling alliance and opposition MPs on the bill prior to its passage would certainly have helped to combat any potential adverse effects of the bill that may arise in the future.

The path to follow

It was not the only bill that has been passed without much discussion in little or no time over the past few years. According to the PRS India Legislative Research Institute, during the final session of Parliament, the Lok Sabha and the Rajya Sabha discussed bills for only 34 minutes and 46 minutes respectively on average before passing them, with a single bill worthy of more than an hour’s discussion in both Houses.

In fact, the 2021 Coconut Development Council Bill (Amendment) was passed after a combined “discussion” of only 10 minutes in both chambers, the National Commission Bill 2021. for Indian System of Medicine (amendment) was adopted after full discussion time. of 15 minutes, and the bill on the National Commission for Homeopathy (amendment), 2021, after only 16 minutes.

India’s Chief Justice, while addressing an independence day ceremony hosted by the Supreme Court Bar Association on Sunday, lamented the haste with which parliament passes bills calling it one “Sorry state of affairs”. He underlined the fact that if the process continued, it would only result in ambiguity in the statutory provisions which led to an influx of cases requiring judicial interpretation.

At this point, it is relevant to engage in a debate as to whether the current parliamentary procedure allows for circumvention of well-established standards, or whether there needs to be tighter oversight of procedures to ensure compliance with them. a fair process.

(Kudrat Mann is a third year BA LL.B (Hons.) Student at Dr. BR Ambedkar National Law University, Rai, and intern at The Leaflet. The opinions expressed are personal.)