To enable PSU insurers to avail composite licenses, the government needs to amend the two existing Acts- The Life Insurance Corporation Act of 1956 and the General Insurance Business (Nationalisation) Act, 1972 (GIBNA). But, no such provisions have been made in the Office Memorandum (OM) and the list of proposed amendments, as enshrined in Insurance (Amendment) Act, 2024, unveiled on Nov 26
New Delhi: A move, that will put the PSU insurers at disadvantages vis-a-vis their private sector counterparts, the government, now getting ready to unveil composite licenses as part of larger reforms in the Indian insurance industry, has excluded PSU insurers including Life Insurance e Corporation(LIC) from availing them.
The finance ministry, on Nov 26, has proposed- Insurance (Amendment) Act, 2024- to amend various provisions of the Insurance Act, 1938, including raising foreign direct investment (FDI) in insurance sector to 100 per cent, reduction in paid-up capital, and provision for composite license allowing insurers to do life/general/health in single registration/insurance.
Analysts say going by the ongoing plans, after suitable legislative changes, the composite licenses can only be availed by the private sector insurers and not by the PSU insurers.
To enable PSU insurers for availing composite licenses, the government needs to amend the two existing Acts- The Life Insurance Corporation Act of 1956 and the General Insurance Business (Nationalisation) Act, 1972 (GIBNA)- but going by the Office Memorandum (OM) and the list of proposed amendments, no such provisions have been made in these documents.
The General Insurance Business (Nationalisation) Act, 1972 (GIBNA) is a legislation that nationalised the general insurance business in India and govern the operations of four PSU general insurance companies transacting general insurance business.
The four PSU general insurance companies are –New India Assurance, United India Insurance, Oriental Insurance Company and National Insurance Company.
The Life Insurance Corporation Act of 1956 nationalised the life insurance business in India by transferring it to a corporation and establishing regulations for its control. The act was passed by Parliament in 1956 and established the Life Insurance Corporation of India on September 1, 1956.
In fact, among the latest list of amendments, the government has suggested a few changes in LIC Act, 1956 but there is no mention of any enabling clauses for allowing the corporation to go composite in its business.
It is worth mentioning, the corporation, after being setup in 1956 by merging a lot of life insurers, who were also doing non-life business, till 1973 was undertaking non-life business and had a full department to run the business.
Also, the government’s plan not to allow LIC to go composite is not going affect its ongoing efforts to tie-up with a stand alone health insurance company as it will not take a majority stake in such a company.
“Our health insurance foray has nothing to do with the government’s proposed plans to launch composite licenses in the industry and we don’t need a composite license to tie-up with a health insurance company,” a senior official had said earlier.
“Composite registration will be allowing insurers to do life/general/health in single registration/insurance company promoting operational efficiency for insurers having common brand across different lines of business,’’ said one of the proposed amendments, unveiled on Nov 26, for which the ministry of finance has asked public comments to be submitted by Dec 10.
In this regard, a comprehensive review of the legislative framework governing the sector has been done in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) and the industry, said the MoF note.
Such changes will help enhance efficiencies of the insurance industry, enabling ease of doing business and enhancing insurance penetration to achieve the goal of ‘Insurance for All by 2047’, it said.
However, analysts have now cautioned the government about an uneven level playing field for the PSU insurers which are already in a defensive mode against intense competition unleashed by their private sector counterparts in the domestic insurance markets.
Again a very anti PSU approach to weaken it more by allowing private players for composite licencing only. More over, reduction of capital to start business in India and allowing 100 FDI. All are anti PSU and anti social plans of this Govt. PSUs should be strengthened by merging it otherwise no level play field.
I totally agree.Already the private players are adopting unfair trade practices.
First the ruling dispensation should mrge the four PSU,general insures.
Then they can unveil composite licences,which will be a fair level playing field.
Anti-national move
Gov should allow PSU insurers to avail composite licenses and do composite business. PSU is like a Kamdhenu cow for the Indian economy . So gov should save their Kamdhenu, allowing PSU to composite business that is life, non-life and health also.
The Solvency ratio of PSU, is not strong.
Govt must amend LiC Act and GIBNA, and leave decision to respective Boards, whether and when the the LIC and Public sector GI companies should opt for composite business lines.. Otherwise, uneven level playing field will give private insurers unfair advantage
To protect PSU Insurance Companies Govt. should amalgamate LICI & GIPSA Companies with immediate effect. “One Nation, One PSU Composite Insurance Company.
If one knows the history- why insurance companies were nationalised- and the present environment with private sector, which is not at all conducive to garner long term savings, one will certainly agree that for insurance sector it should be only in the hands of the government. Compulsorily reducing the rates is the best option for , people, Govt and faster growth of nation. Remember how LIC achieved these objectives?
Govt has made this plan to welcome JIO to insurance sector. After all Adani and Ambani matter most.
First of all, we agents are ready to go grass root level and do business but government allowed banks and other financial institutes to dominate business.
Specially, banks sitting in the AC rooms have ready made data of all their account holders in hand and easily access deposits and persuade them to get businesses.
They also give them loans and 5 to 10% of businesses from their existing customers very easily. Whereas individual agent’s with insecurity of life go out every day facing all kind of vagaries of nature like hot sun, cold, dust, breez, bad smell,so on -to search new customers but without reference they don’t buy products from agents.
So, I demand that the government abolish licenses given to banks and other institutions and allowed them to do their CORE business only and allow everyone in the society master the product knowledge.
For the last 5 years, the Government of India, the management of the Life Insurance Corporation(LIC) and insurance regulator IRDAI are trying to sink the LIC , which is India’s largest financial institution, by sitting in an air-conditioned room.
The government and the entire system are working for the private insurance companies along with continuously bringing down the business of the corporation by imposing all kinds of restrictions.
In Hindi
एयर कंडीशन रुम में बैठकर भारतीय जीवन बीमा निगम जो कि भारत की सबसे बड़ी वित्तीय संस्थान है को पिछले 5 वर्षों से भारत सरकार निगम प्रबंधन और आईआरडीए डुबाने के लिए परेशान हैं। तमाम तरह की पाबंदी लगाकर लगातार निगम का व्यवसाय नीचे गिराने के साथ प्राइवेट इंश्योरेंस कंपनियों के लिए सरकार और सम्पुर्ण तंत्र कार्यरत हैं।
What is the logic to be told by the Govt behind the move in the bill prohibiting PSUs in getting composite licenses?
Govt has to tell the public the facts. Govt is elected by people. Then people have definitely the right to know the reasons.
LIC exists with an asset base of more than Rs 57 lakh crores today for which Central Govt in 1956 invested only Rs 5 Crores.
No money has come from the Govt afterwards for the development of this PSU whereas thousands of crores are being given back as Dividends and Corporate taxes every year in addition to lakhs of crores of investment and support to Govt sectors.
Still these kind of regulations are being framed to benefit whom? Govt itself destroys it’s strong financial support by introducing all kinds of wrong bills.