Modi govt’s bid to privatise public insurance firms a favour to crony capitalists, mindless of human suffering
Public sector general insurance companies cover 67 per cent population of country with health insurance, and can reach out to such remote areas that a private company cannot even dream of
Only a few days ago PM Narendra Modi had told business and industry that his government was going ahead with reforms for conviction and not compulsion. On August 11, his government got the General Insurance Bill passed in the Rajya Sabha amidst shocking scenes, paving the way for privatisation of public sector insurance companies even as the entire Opposition wanted a scrutiny of the wisdom of privatising the insurance sector by sending the legislation to a select committee.
Ever since the tabling of the Union Budget 2021-22 in Parliament on February 1, 2021, in which the intention of the Modi government was revealed to privatise the public insurance sector in India, the employees of all the four general insurance companies in the public sector - National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited, and the United India Insurance Company Limited have become restive.
Apart from countless protest demonstrations against the Modi government’s decision to privatise the public sector banks, they even went on a two-day all India strike on March 17-18, following a strike of public sector banks employees union, who had also given the call of strike against the privatisation of public sector banks.
Both have the support of the central trade union organisations including BJP-backed Bharatiya Mazdoor Sangh (BMS) who had also participated in the all India strike only a few days before the bank and insurance employees unions, i.e. on March 10, against the four labour codes under Modi’s labour reform. Even farmers’ unions agitating against Modi’s three farm laws seeking to bring corporates to the farm sector which had given a call for Bharat Bandh on March 26 gave their support to the insurance employees.
Despite such stiff opposition, the Modi government is going ahead with its ‘reform agenda’ which they claim is ‘pro-development’, while the opposing parties label them as anti-people and pro-corporate. This does present a case of detailed discussion and scrutiny in Parliament, on which Modi government clearly does not agree.
As for the public insurance sector privatisation, Lok Sabha passed the General Insurance Business (Nationalisation) Amendment Bill, 2021, on August 2, 2021. Just after two days, employees of public sector general insurance (PSGI) companies observed a nationwide one-day strike on August 4 to protest against the development. Only six days after the protest, Modi government got it passed in the Rajya Sabha on August 11.
The amendments to the bill are in line with Finance Minister Nirmala Sitharaman’s Budget speech wherein she had announced a big-ticket privatisation agenda that included two public sector banks and one general insurance company.
It may not be out of place to mention that the bill was passed by the Lok Sabha without discussion amid continuing protests by Opposition parties on the Pegasus snooping and other issues. As per the statement of objects and reasons of the General Insurance Business (Nationalisation) Amendment Bill, 2021, it seeks to remove the requirement that the Central government should hold not less than 51 per cent of the equity capital in a specified insurer.
Finance Minister Nirmala Sitharaman has argued that it was not privatisation but an effort towards ‘greater private participation’, which has been refuted by the Opposition and also the All India Insurance Employees’ Association (AIIEA), terming her argument ‘ludicrous’. They say that the amendment will enable the government to privatise all the four public sector general insurance companies and the reinsurer GIC Re.
PSGI companies in India occupy the first five slots in terms of premium and also settlement of claims. In the year 2020 and 2021, penalties were imposed against private insurance companies only, and the number of grievances registered against private insurance companies was as high as 82 per cent as against 18 per cent against the public sector insurance companies, the AIIEA has argued.
Given this fact, the people opposing the government’s move ask a pertinent question as to why Modi government wants to punish better performing public sector by privatising them and to reward the worse performing private sector by providing advantages to them.
The four PSGICs have a market share of over 55 per cent. They have been instrumental in implementing general insurance schemes of various governments. They cover 67 per cent population of the country with health insurance, and have reach to even remote areas that a private company cannot dream of, what to talk about matching the public sector insurance.
Hence, one of the fears among people is that their privatisation may adversely affect the common people, which could have been dispelled only by a thorough discussion on and the scrutiny of the Bill.
The four public sector insurance companies have over 7,500 branches and 60,000 employees, and they are concerned about the privatisation move. They are also agitating against several other issues and are demanding scraping of the new pension system and early conclusion of wage revision. The unions in LIC are also protesting hiking FDI cap from 49 per cent to 74 per cent and divesting of stakes in LIC by an IPO.
What happened in the Rajya Sabha during passage of the Bill was simply shocking. The entire Opposition was united in their call to send the Bill to a select committee to understand the greater ramifications of this law. The government, however, forced through a discussion amid the din, which followed the Opposition’s protest. The House was immediately adjourned.
Within minutes, more than 10 women marshals and nearly 50 men formed a human chain, blocking the way for the Opposition to get into the well of the House. When the House reconvened and speeches were going on, the marshals engaged in an intense tussle with Opposition MPs trying to register their protest. It was an “insult to democracy”, said Leader of the Opposition while walking out. The Bill was intended to favour “crony capitalists”, the Opposition said.
General insurance business was nationalized in India in 1973 by General Insurance Business (Nationalisation) Act, 1972 by merging 107 private insurers and restructuring the General Insurance Corporation of India in four subsidiaries – National Insurance, New India Assurance, Oriental Insurance, and United India Insurance.
A committee was set up in 1993 under the chairmanship of former RBI Governor R N Malhotra for reforming the insurance sector. Following the recommendations of the committee, Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body, which became a statutory body in 2000.
The same year, IRDA opened up the insurance market to promote competition. Foreign companies were allowed 26 per cent share. By the end of that year, the four subsidiaries of GIC were made independent and GIC was converted into a national re-insurer.
In 2002, the four subsidiaries were delinked from GIC by an act of Parliament and the control of these four subsidiary companies was transferred from GIC to the Central government. Since 2000, GIC exclusively undertakes reinsurance business.
Now in 2021, the original Act of nationalization, 1972, has been amended by the passage of the Bill in question in the Parliament, which will become an Act after the presidential nod. In the context of this history, there is a serious apprehension among the people that the BJP government will sell these public insurers to private companies, beginning with the present amendment.
Views are personal