July 30, 2021 4:00:25 am
The Union Cabinet has approved amendments to the insurance laws to help facilitate the privatisation of a state-owned general insurance company, a senior Finance Ministry official said on Thursday. The government plans to introduce amendments to the General Insurance Business (Nationalisation) Act in the ongoing Monsoon session of Parliament, the official said. Apart from the privatisation road map, this is one of the key reform proposals unveiled in the Budget.
There are four PSU general insurance companies: New India Assurance, United India Insurance (UII), National Insurance Company (NIC) and Oriental Insurance Company (OIC). The government had earlier dropped its plan to merge UII, NIC and OIC and decided to recapitalise them. Besides, the government owns reinsurer General Insurance Corporation (GIC Re).
The Finance Ministry, in consultation with the NITI Aayog and a core group of secretaries on disinvestment, will finalise the insurance company that is to be privatised. The entire general insurance business in India was nationalised by General Insurance Business (Nationalisation) Act, 1972.
The Government of India took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business.
This Act provided for the acquisition and transfer of shares of Indian general insurance companies, in order to serve better the need of the economy, by securing the development of general insurance business in the best interest of the community. The government has steadily opened up the insurance sector for private sector participation and even permitted up to 74 per cent foreign direct investment.
The decision was taken at the Cabinet meeting on Wednesday.
Private insurance companies have been consistently gaining market share over the years in general (or non-life) insurance segment.
In 2009-10, the market share of public sector general insurance companies was 57.14 per cent, while that of private companies including health and specialised insurers was 42.86 per cent. By 2019-20, this proportion nearly reversed, with market share of private general insurers (including specialised and health insurers) rising to 61.22 per cent, while that of public general insurers falling to 38.78 per cent.
The general insurance industry underwrote total direct premium of Rs 1.89 lakh crore for 2019-20, as against Rs 1.69 lakh crore in 2018-19, recording an annual growth rate of 11.49 per cent. This data is based on the latest annual reports of the Insurance Regulatory and Development Authority of India (Irdai).
In 2019-20, the market share of New India Assurance marginally increased to 14.19 per cent in 2019-20 from 14.11 per cent in 2018-19. The market share of United India Insurance, National Insurance and Oriental Insurance declined to 9.27 per cent, 8.08 per cent, and 7.24 per cent in 2019- 20 from 9.69 per cent, 8.93 per cent and 7.79 per cent in 2018-19, respectively.
New India Assurance, which collected direct premium Rs 26,813 crore, continued to remain the largest general insurance company in India.
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