Presentation of the General Insurance Employees All India Association

Below we are reproducing highlights of the presentation by Com. K Govindan, General Secretary of General Insurance Employees All India Association at the meeting organised by the Kamgar Ekta Committee on December 13, 2020 on Privatisation of the Insurance Sector

The General Insurance industry was nationalised in 1973. Nearly 107 companies were amalgamated into 4 public sector general insurance companies.

The aims and objectives of nationalising private general insurance companies stated at that time included the timely settlement of claims and to spread insurance to every nook and corner of the country.

These objectives for nationalising general insurance companies were fulfilled by public sector insurance companies by 2000 itself. Nearly Rs. 10,000 crores of premiums are generated by all 4 public sector companies together. In 1971, there were hardly 780 branches but by 2000 there were more than 4000 branches. Almost every district had one branch.

Public sector general insurance companies have spread their operation throughout India to help people. They have introduced various policies in agriculture, horticulture, sericulture, floriculture insurance – in all areas except life insurance. All insurance is covered at the lowest rate of premium. However, from 1991 onward the government is bent on handing it back to private players.

There was stiff opposition to the privatisation program from workers. Initially the Malhotra committee tried to promote disinvestment but all unions launched a big struggle to jointly oppose it. So, instead of disinvesting they have allowed private companies to enter and do business.

Another reason given is that privatisation would lead to more products and lower premiums. Public sector general insurance companies have introduced more than 150 products at the lowest possible premium. Now they are saying privatisation policy will lead to lower premium which is an absolute joke. What happened is exactly the opposite. The premium for a two-wheeler which was Rs. 40 earlier has increased to Rs 568; for a lorry, it has gone up from Rs. 1,235 to Rs. 17,300 rupees.

As the private industry started growing, the government said it wants to increase FDI from 26% to 49% under the pretext of helping penetration to rural areas. But in reality, private players have never reached out to the rural masses. Private companies are focused on metros, big towns. On the contrary, public sector general insurance companies have one third of their branches in rural areas out their total around 8,000 branches.

The UPA government as well as the NDA government in its first term tried to increase the FDI to 49% but failed to do so due to strong opposition. All of a sudden, they brought in an ordinance through the backdoor and amended the Insurance Act to allow 49% FDI to private players. Trade unions strongly opposed it and observed a one day strike. Ignoring the opposition, with the help of Congress Party, the NDA Government ensured the passage of the Bill in the Parliament. They also allowed foreign Re-insurers to open branches here. Earlier, there was only one Re-insurance company in the country viz., GIC.

The Finance Minister Nirmala Sitharaman on the floor of parliament has said that the government is planning to raise the minimum public shareholding in the listed companies from the current level of 25% to 35%. In this way they will slowly increase it beyond 50% as well and turn these public sector institutions into private companies.

The government established the Insurance Regulation and Development Authority (IRDA) to promote insurance industry. The IRDA has actually regulated the public sector companies and developed the private ones!

People definitely cannot expect the lowest rate of premium coverage for poor people from private companies. Private sector does not want to do crop insurance unlike public sector companies. They are not ready to do any loss- making insurance. Recently the government promoted the opening of Jan Dhan Bank accounts and nearly 10 crore accounts were opened by public sector banks. Government offered personal accident insurance of up to Rs. 2 lakh rupees as an incentive. The premium offered by the public sector is as little as Rs. 12 per year. Private sector was not interested in this loss-making business.

Indian Railways offers a personal accident insurance that is given as an option to passengers. As this is profitable business, it has been handed over to private companies. This is the attitude of the Central Government. Loss-making activities are assigned to public sector companies and profitable ones go to private companies.

All 4 general insurance companies were subsidiaries of the General Insurance Corporation but after allowing private players to enter in 2000, GIC was converted into a reinsurance company and all the 4 public sector insurance companies were made independent companies.

GIC started in 1971 with capital of Rs. 19.5 crore. After opening the market to private players, it increased its capital to Rs 650 crores without any contribution from the government. In 2019 – 20, for the first time in the history of general insurance, the government has infused additional capital of Rs. 2,500 crore in these 3 companies together. Public sector general insurance companies have given Dividend of Rs. 5,000 crores to the central exchequer in the last 15 years. Nearly Rs. 1,90,000 crore has been invested by these companies mainly in infrastructure, thereby helping the government in its development plans.

In the banking sector, where workers are resisting merger, the government is carrying it out to help private players, whereas in general insurance when workers are demanding it, the government is refusing to do it as it won’t help the private players. Private players will take away all profit earning business like fire, marine and engineering.

Insurance workers appeal to all to jointly and unitedly fight against this government’s plan of disinvestment and privatisation of public sector general insurance.

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