Government is expected to encourage competition as it creates efficiency in the economy. Following the 1990s reforms, the insurance sector was deregulated and private sector firms were allowed to operate in India. Until the 1972 law on nationalisation of the insurance business, many private players did operate in India. Then the government nationalised the insurance sector, retained the Life Insurance Corporation of India, and created four other general insurance companies—National, New India, Oriental and United India—under a holding company called General Insurance Corporation of India Ltd. In the year 2000, six months after the setting up of the Insurance Development & Regulatory Authority, the supervisory powers of GIC were whittled down so that each of the four government companies could operate independently rather than function as the four legs of one table.
Now that there is a healthy competition in the sector, thanks to the arrival of many private players, the finance ministry wishes to turn the clock back. In a recent directive, the ministry asked the heads of four government insurance companies not to compete against each other, but to coordinate their activities. This is a retrogressive measure and needs to be reversed.
The ministry has also asked the four government insurance companies to share data on premiums, claims and other expenses with respect to major accounts, before quoting rates. These general insurers have already stopped competing for the group health insurance business. The finance ministry has also asked these companies to avoid discounting premiums especially at the time of