Insurance Bill could bring good news for both policyholders and shareholders

The amendments will help public sector companies in catering to the demand of customers by offering innovative products.

Amid the protest from the opposition, the Lok Sabha passed the General Insurance Business (Nationalisation) Amendment Bill, 2021 on 2 August. The bill amends the General Insurance Bill of 1972, which had nationalised General Insurance. After the amendment, the government can reduce its minimum shareholding requirement of 51% in the four subsidiary companies of the General Insurance Company – the National Insurance Company, the New India Assurance Company, the Oriental Insurance Company Limited and the United India Insurance Company.

Finance minister Nirmala Sitharaman while presenting the budget in February, had proposed privatising one general insurance company and two public sector banks in 2021-22. However, the finance minister has said that it is not to privatise but to enable citizens’ participation. She said that the move could help faster growth for insurance companies. It can also lead to more innovative insurance products in the market in line with their private counterparts.

The reduction in stake will also help the government in meeting its divestment targets. The government, during the budget, announced the target of Rs 1.75 lakh crore from stake sale in public sector companies during 2021-22.

With the bill’s passing, it is expected that one more public sector insurance company apart from Life Insurance Corporation of India (LIC) will go public this fiscal year. The size of the LIC IPO can be expected to be the largest in the country so far. It is to be seen how the public receives both these IPOs. Given the IPO euphoria in recent times, one can expect the public issue of insurance companies to garner a good response. The amendments will help public sector companies in catering to the demand of customers by offering innovative products.

Published: August 5, 2021, 07:23 IST
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