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HVK Archives: Union views opposing opening insu. sector (Part II of IV)

Union views opposing opening insu. sector (Part II of IV) - (no publication)

National Organisation of Insurance workers ()
2 August 1997

Title: Union views opposing opening insurance sector (Part II of IV)
Author: National Organisation of Insurance workers
Date: August 2, 1997

Enclosed pleased find herewith a brief Note prepared by us on our views on
MULTI NATIONAL CORPORATIONS". The notes is prepared for the benefit of
M.Ps. and opinion makers in the field to effectively argue or case.


After 40 years, it is noteworthy to know how far We have realised the
objectives of nationalisation. L.I.C. has given good account of its working
on the following broad objectives of the nationalisation

I) Developing business from class insurance to mass insurance,

ii) Mopping up of peoples' savings for national development,

iii) Providing efficient services to the insuring public, and

iv) Conducting business on sound footings and ensuring safety and liquidity
of the funds invested by the common man in various insurance instruments.

LIC has performed well over the years as evident in the fall of renewal
expense ratio, tremendous growth of rural business, increasing returns to
the Government, growth of group insurance, increase in. the Life Fund,
increase in the Premium Income, increase in Productivity, fall in the
percentage of salary and other allowances administered to staff to total
income of LIC. LIC has demonstrated excellent financial discipline as
borne out by the Institution not being involved in any scam.

1 ) Almost 45 % of the LIC business originates from villages with
population less than 5000. The penetration level of life insurance industry
was far higher than in China, Indonesia, Thailand, etc.

2) LIC has provided insurance cover under its social insurance schemes to
those sections of people who cannot afford to buy insurance on their own.
LIC has made tremendous progress in this field of activity.

3) LIC has always remained alive to the growing expectations of the
customers' needs. It has taken corrective steps, reshaped its policies and
adopted strategies to ensure steady growth with greater customer
satisfaction. (i. e., Decentralization of functions and powers to Branches
for rendering prompt service, opening of branches to make available
personalised service. launching of new products to cater the needs of the
customers. etc.)

4) Since Nationalisation, Indian Insurance Industry is highly rated and
considered the leader in South-East Asia with professional competence of
highest order.

The performance of LIC was as under:

1. New Business Rs. 336.67 Rs. 52071.53
(Sum Assured) crores crores
2. Rural New Business 5.34 lakhs 52.57 lakhs
(No. of Policies) (As on 31.12.61)
3. Percentage of rural
business to
a) total Sum Assured 30.49 % 41.0 %
b) number of Policies 36.53 % 47.7 %
4. Total Income Rs. 107.15 Rs. 22046.76
crores crores
5. Life Fund Rs. 410.40 Rs. 22046.76
crores crores
6. No. of complaints per 1.1 0.17
1000 policies serviced.
7. Percentage of o/s 38.5 % 5.99 %
claims to total claims (as on 31.03.63)
8. Renewal expense ration 15.89 % 7.00 %
9. 5 % of valuation surplus Rs. 1.45 crores Rs. 160.94
paid to government (for 16 months) crores
10. Socially Purposive Rs. 8 Rs. 50446
Investment crores crores

The above Table shows the ever increasing growth and progress. It may be
noted that the growth rate of LIC for the year 1996-97 is 20.58 % with
renewal premium income being increased by 19.68 % and total income being
mobilised to the amount of Rs.25,920 crores registering 21,11 % increase.
The Life Fund at the end of year amounted to Rs.87,760 crores showing the
growth rate of around 20.50 % and renewal premium expense showing decline
to the extent of 6.95 % for the year 1996-97. The number of complaints per
thousand policies serviced has come down to 0.17% and Rural New Business
registering new high of 21,264 crore figure. The LIC has already thrown
more than 47 products catering to varying expectations of insuring public.
The number of new lives covered under 23 occupations pertaining to social
security group insurance scheme was 3,96,626 and the number of lives
covered under rural group life insurance scheme, where 50% of the premium
is subsidised by Central and State Governments, is very large and substantial.

It may be noted that the LIC settles large number of Death Claims every
year. Yet LIC is compelled to repudiate death claims in cases where full
disclosure of material information at the time of taking the policy is not
made. While this number is very small, the Corporation has evolved a
machinery to provide opportunity to represent these cases. Claims Review
Committees, at Zonal/Central Office level, review the repudiated claims on
the representation of the claimants. Ex-gratia payments are approved
depending upon the merits of the case. LIC has inducted an outside member,
Justice S.C.Pratap, former Chief Justice of Andhra Pradesh High Court in
Central Claims Review Committee.

The Corporation has established Grievance Redressal Machinery at Branch/
Divisional/ Zonal/ Central Office to redress the grievance of the
policyholders promptly. The names of designated Grievance Redressal
Officers in all these offices are published from time to time in the local
newspapers for the information of the policyholders who can contact them
for redressal of grievances. Most of our offices have held customers' Meets
during the year 1995-96 which provides opportunity for interaction between
customers and our servicing units. This has been welcomed by our customers.

Thus the objectives viz. (a) To spread the message of insurance as far and
wide as possible reaching out far beyond the economically prosperous and
more advanced urban areas into the remote rural areas and economically
depressed classes; (b) To mobilise more efficiently peoples savings for
national development and to provide efficient service with full security to
the policyholders, set forth in the preamble in LIC Bill 1956 have been
achieved in adequate measure.

It may be noted that LIC occupies a high second position in comparison with
7 other highly developed countries. The following chart shows the position


Rank Country Percentage Growth
1. France 781
2. India 580
3. U.K. 331
4. Japan 331
5. U.S.A. 325
6. Canada 286
7. Germany 203
8. Switzerland 80


In the background of this grand performance there was obviously no demand
from the Indian People or insuring public for privatisation of insurance
sector. However, the Government had appointed Malhotra Committee. The
Committee has, among other recommendations, proposed the privatisation of
insurance sector and entry of foreign insurance companies, preferably in
joint ventures with Indian companies. The committee had also suggested the
Regulatory Authority to control and monitor the business of the insurance
sector. The Committee has also spoken about the competition in the
insurance field.

It may be noted that LIC has not been involved in any scam for financial
irregularities despite there being no Regulatory Authority. It may be
noted that in financial sector the non-banking and banking institutions
have indulged into big scams with C.R.B. fraud, Harshad Mehta Scam and a
number of Banking Financial irregularities despite there being regulatory
mechanism in the form of SEBI and strict regulatory controls from the
Reserve Bank of India.

It is our considered opinion that the IRA is being constituted not with the
intention to control and monitor the insurance business (because insurance
business is working on sound footing under the present LIC Act provisions)
but essentially with the sole objective to allow joint venture with foreign
insurers and then gradual opening of the insurance sector to MNCs in the
final analysis. It may be noted that the Chairman, LIC of India, during the
course of discussions with the employees' unions on 29-7-1997 has announced
that LIC proposes to go in for joint venture with one Indian company and
two foreign companies in the Pension business. This shows that there is a
definite attempt on the part of the Government to throw open the insurance
sector to foreign companies.

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