The General Insurance Business (Nationalisation) Act, 1972
The General Insurance Business (Nationalisation) Act, 1972
1. Purpose & Background
Enacted by the Indian Parliament in 1972, this Act nationalised all general insurance businesses operating in India.
Before this Act, general insurance was primarily in private hands; the Act transferred these businesses to the government to consolidate, regulate, and control the industry.
This was done to promote equitable distribution of insurance services and prevent unhealthy competition.
2. Key Provisions
Section 3: Transfer of Undertakings
All general insurance business (including life insurance, except as specified) conducted by Indian companies or firms was compulsorily transferred to the government.
The transfer included assets, liabilities, contracts, policies, and employees.
The Act established General Insurance Corporation of India (GIC) as the holding company for four subsidiary companies to manage different segments of general insurance.
Section 4: Vesting of Undertakings
The properties and rights of transferred companies vested in the government without further transfer.
Section 6: Establishment of General Insurance Corporation (GIC)
GIC was created to oversee and manage all general insurance business.
Four subsidiary companies were set up under GIC for different classes of insurance:
National Insurance Company Ltd.
New India Assurance Company Ltd.
Oriental Insurance Company Ltd.
United India Insurance Company Ltd.
Section 8: Continuance of Contracts and Policies
All existing contracts and insurance policies remained valid and enforceable despite the transfer.
Section 10: Claims and Liabilities
Claims under transferred businesses were to be honored by the government or its subsidiaries.
3. Objectives
To centralize the insurance business under government control.
To ensure uniformity, protect policyholders, and prevent exploitation.
To facilitate development of the insurance sector aligned with national economic goals.
To avoid fragmentation and unhealthy competition in insurance markets.
4. Impact
Effectively ended private general insurance companies’ operation in India from the date of nationalisation.
Led to the creation of a large government insurance sector controlled by GIC and its subsidiaries.
Helped the government regulate insurance premium rates, claim settlements, and policy terms more effectively.
The sector remained nationalised until the Insurance Regulatory and Development Authority Act, 1999 and subsequent liberalisation in the 2000s allowed private companies back in.
5. Legal and Economic Significance
It marked one of India’s largest nationalisation moves after banks and coal industries.
Reflected the socialist economic policies of India in the 1970s.
Created a monopoly in general insurance under government control for several decades.
Still governs many fundamental aspects of insurance regulation in India.
6. Subsequent Developments
The Act was amended over time but remained in force until insurance sector reforms began.
The establishment of the Insurance Regulatory and Development Authority (IRDA) in 1999 led to gradual deregulation.
The Insurance Act, 1938 and other insurance laws were also amended to allow private players post-2000.
The full text of the Act or its important sections
Details on the subsidiaries created under GIC
Historical context on insurance in India pre- and post-nationalisation
RELATED Blog
0 comments