GENERAL INSURANCE BUSINESS NATIONALIZATION ACT, 1972 :
This Act came into force on 1st January, 1973. This Act gave effect to clause (c) of Article 39 of the constitution of India. Article 39 (c) read as follows:
“The State shall direct its policy towards securing that the operation of the economic system does not result in concentration of wealth and means of production so as to prove harmful to the common interest of the community”.
Under this Act, there were no longer private insurers in the country. As a result general insurance business became the domain of the State. The General Insurance Corporation of India (GIC) became the holding company with four subsidiaries, namely United India Insurance Company with Head Office in Madras, Oriental Insurance Company with Head Office in New Delhi, National Insurance Company with Head Office in Calcutta and New India Assurance Company with Head Office in Bombay.
The ownership of all shares of both the Indian insurance companies and the foreign insurers from then on vested in the Central Government with effect from 1.1.1973. The services of all the personnel in the private sector were also transferred to the holding company and subsidiaries based on factors such as qualification, seniority, position and location.
Objectives of the Act: The object of the Act was primarily,
• To provide for the acquisition of the shares of the existing general insurance companies
• To serve the needs of the economy by development of general insurance business
• To establish the GIC by the central government under the provisions of the Companies Act of 1956, with an initial authorized share capital of seventy – five crores
• To aid, assist, and advise the companies in the matter of setting up of standards in the conduct of general insurance business
• To encourage healthy competition amongst the companies as far as possible
• To ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment.
• To ensure that no person shall take insurance in respect of any property in India with an insurer whose principal registered office is outside India
• To carry on of any part of the general insurance business if it thinks it desirable to do so
• To advice the companies in the matter of controlling their experience and investment of funds.