Industry Keeps Fingers Crossed On Amendments To Insurance Act

The insurance industry is keeping its fingers crossed on whether the government will be able to carry out the necessary amendments in theInsurance Act to facilitate the entry of the Indian private sector into the health insurance segment.

The government will have to amend the General Insurance Business (Nationalisation) Act, 1972 (GIBNA) before it can allow private players to offer insurance policies.

The problem arises because this amendment will have to be ratified by Parliament. The government will have to prioritise its options as it will also have to take decisions on other pressing matters, including the re-drafted companies bill. While the left parties have expressed their dissent, the government is likely to justify its move on social grounds.

The finance minister, in his budget speech, had said that only 20 lakh people had been covered by health policies. Hence, to increase the number of people with health insurance cover, the government decided to allow Indian companies into this segment. For this, Section 24 (1) of the GIBNA needs to amended. Under this section, the General Insurance Corporation and its four subsidiaries have the exclusive privilege of carrying out general insurance business in India.

The four subsidiaries of GIC are National Insurance Company Ltd, the New India Assurance Company Ltd, the Oriental Insurance Company Ltd and United India Insurance Company Ltd. However, under Section 36(1) of the Act, the Calcutta Hospital and Nursing Home Benefits Association Ltd was allowed to carry out its insurance business. The report of the committee on reforms in the insurance sector had mentioned that the Insurance Act 1938, the LIC Act 1956 and the GIBNA 1972, needed detailed scrutiny, amendment and consolidation, probably in a new insurance law.

Not only is an amendment of the GIBNA a pre-condition for allowing the entry of Indian corporates, it is necessary to enable the GIC to float a joint venture dedicated to the health segment.On its part, GIC is not waiting till the necessary amendments are made. The company may begin work on identifying the joint venture soon.