IT was in 1994 that a committee headed by R N Malhotra, former governor of RBI came out with a report on the liberalisation of insurance sector in India. The report recommended that (i) private companies be allowed into insurance sector including foreign capital and (ii) the public sector insurance companies be disinvested. All India Insurance Employees’ Association (AIIEA) opposed these recommendations and started its struggle and campaign against the privatisation of insurance sector. Apart from the strike actions and campaign among the people for the past 20 years, the highlight of the campaign was mobilisation of one crore fifty lakh signatures from the citizens of the country during 1999 on a petition addressed to the Speaker, Lok Sabha against the moves to privatise insurance industry. In this struggle and campaign, the Left parties consistently supported the insurance employees’ movement. Unfortunately, the BJP led NDA government, setting aside the massive people’s petition, passed the IRDA Act in 1999 giving a shape to these recommendations. The first private insurance company was given the licence in October 2000. These private companies were allowed a share of FDI up to 26%. But the people of the country kept their faith in the public sector insurance industry and even after 13 years of the private companies operating in the country, LIC retained its market supremacy and today holds 74% of the market share with the other 23 companies contributing the balance among them. The private capital was not amused with these results and wanted their strength to go up by taking up higher FDI into their equity base. The demand for 49% FDI started in 2004 when the UPA-1 came to power. P Chidambaram the then finance minister wanted the FDI to be increased to 49% and also to disinvest the public sector general insurance companies. But this could not be taken up due to the persistent opposition from the CPI (M) and other Left parties and the continuous struggle conducted by the AIIEA. AIIEA continued its campaign for protection of the people’s savings and in the process strongly opposed the raise in the limit of FDI to 49%. Strike actions, seminars, conventions, torch light processions, human chains and various other actions of mobilising public opinion has continued since 2004 without any let up. It was in 2008 that the then UPA government brought in Insurance Laws (Amendment) Bill in the Rajya Sabha. Insurance employees once against went on a one-day flash strike and brought the government’s intention to the knowledge of the people. The Bill was referred to the Standing Committee on Finance which unanimously rejected the provision to raise the FDI limit to 49%. The Bill could not be passed during the UPA regime due to opposition from other political parties. It is unfortunate that now the BJP led NDA government has decided to get the Bill passed. Perhaps, BJP wants to prove that they are faster in implementing the neo-liberal agenda. The main provisions of the Bill are (i) to increase the FDI limit in insurance to 49% and (ii) to disinvest the public sector general insurance companies. INCREASE IN THE LIMIT OF FOREIGN EQUITY PARTICIPATION TO 49% The major amendment that is being proposed is to increase the foreign equity participation to 49% from the present 26%. The AIIEA is strongly opposed to the foreign equity hike. It is being argued that insurance business being capital intensive, the Indian partners lack resources to expand the business. The other arguments are that hike in FDI would bring technology, enable product innovation and generate resources for infrastructure development. These arguments are in total variance with the actual experiences since the opening up of the insurance sector and therefore do not stand the test of reasoning. The argument that Indian partners are short of resources is simply unacceptable. It is known that many of the private insurance companies are subsidiaries of flagship corporate houses such as Tatas, Birlas and Reliance which have extremely strong balance sheets, ready access to financial markets and healthy capital reserves. The Parliamentary committee on finance which examined the Bill said that both the claim of capital requirement and the foreign capital flow if the equity limit is hiked are exaggerated. Insurance industry has made impressive progress in the last few years thanks to the growth in the economy and increased disposal income in the hands of the middle classes. However this sector could not remain insulated from the economic crisis as a result of the global financial meltdown. Despite this, life insurance penetration in India is much higher than many developed countries thanks to the performance of the LIC. The private sector has spread across the country and today in the life insurance business, the private sector has a share of around 26% in the first year premium income and in the general insurance business they have a share of over 40%. Therefore, the argument that they have not been able to expand due to resource crunch is simply not true. The Indian insurance industry is highly developed and technology adopted sector. In fact, the LIC has the highest technology spend in the entire country and is in possession of the best possible technology. Therefore, hike in FDI is not required for technology import. The Indian insurance industry has a large number of products designed to suit the needs of every section of population and there are continuous innovation of products to benefit the customers. Even on this count, there is absolutely no need for FDI. The 26% limit on foreign equity participation has not been an entry barrier. Today nearly 42 private life and non-life insurance companies are operating businesses in India. The IRDA is continuously receiving applications for licences from the foreign players and their Indian partners to operate business in India. The household savings in India were estimated at 21.9% of GDP for the financial year 2012-13. This would roughly translate into Rs 23 lakh crores. Even if 50% of this were to come to financial assets, it would be a huge amount necessary for the Indian infrastructure needs. But the hike in FDI would allow foreign capital to gain greater access and control over our domestic savings. This will hasten the process of mergers and acquisitions. This surely cannot be in national interests. It is pertinent to mention that insurance companies in US and Europe failed to protect the policyholders’ savings during the recent world economic crisis. The US government had to bail out insurance majors such as AIG. That being the case, it is not prudent to fully open up our markets to the multi-national insurance companies. The benefits of FDI are being critically re-assessed across the globe. The World Bank which stridently pushed the idea that FDI is the most important element to promote the domestic economies has now adopted a more cautious approach. The World Bank supported Growth Commission under the chairmanship of Noble Laureate Michael Spence observed “our view is that foreign saving is an imperfect substitute for domestic saving, including public saving to finance the investment a developing economy requires.” This observation and the experiences of FDI across the globe makes it clear that it is the domestic savings that provide most stable funds for investments in economy and therefore the government must control these savings rather than place them at the disposal of foreign capital. The Parliamentary Standing Committee on Finance headed by Yashwant Sinha, senior BJP leader, scrutinised the Insurance Laws (Amendment) Bill 2008 and submitted its Report to both the Houses of the Parliament on December 13, 2011. In this report the Committee unanimously recommended that “There is no need to increase the limit of FDI to 49% as “the government seems to have decided upon this issue without any sound and objective analysis of the insurance sector following liberalisation”. Cautioning the government of the global financial crisis, the committee has recommended to the government that the private companies may explore avenues to tap the domestic capital instead of increasing the FDI limits. The world is still grappling with the aftermath of the worst financial crisis. The entire insurance industry in United States, Europe and Japan is in great turmoil. The bail out of AIG is too well known. Similarly in Europe Fortis, ING, Aegon had to be bailed out by their governments. The global insurance scenario is not very bright even today. Since the financial crisis in 2008, the advanced industrialised nations are experiencing stagnation in premium income. The annual growth rate in North America is (-) 2.9%, Oceania (-) 3.7% and Western Europe (-) 0.6%. (Sigma Report, March 2014). Therefore, it is natural for the multinational companies to demand further opening up of the insurance sector in India which is very promising with a young population. In the background of rising inflation resulting in lesser household savings, India has done well in insurance. Life insurance penetration in India at 3.1% is noteworthy when compared to 2.9% of Canada and 3.1% in Germany. India has a higher level of penetration than all the Latin American countries and many of the developed nations. We can improve upon this if the income levels and disposable incomes increase. Insurance industry plays the important role of providing security to the policyholders and converting the small savings into capital for investment in critical infrastructure sector. At a time when the government has to make heavy investments in infrastructure to create domestic demand, the savings mobilised through insurance play a very important role. Therefore, the government must gain total control over the domestic savings rather than allowing the foreign capital to use them for their speculative endeavours. Therefore, the All India Insurance Employees’ Association (AIIEA) firmly opposes the proposal for hike in Foreign Direct Investment limits from the present 26% to 49%. DISINVESTMENT OF THE PUBLIC SECTOR GENERAL INSURANCE COMPANIES There is another amendment proposed in the Bill to amend the General Insurance Business Nationalisation Act. It is clear that the purpose of this amendment is to raise capital either through IPO route or otherwise diluting the government holding and ultimately privatising the GIC and the four PSU General Insurance companies. The GIC (which is presently a reinsurance company) and the four companies have been performing admirably well. Instead of this provision, the government could as well allow the GIC and the four public sector general insurance companies to raise resources through other forms like bonds, debentures etc whenever there is a need, and not through the route of disinvestment of their equity. The four PSU General Insurance companies are also financially very sound. They have assets worth more than One lakh crore along with substantial reserves. All the four companies have provided for the required solvency margin of 1.5 as per the IRDA norms. They have been regularly generating profits and making huge dividend pay outs to the government. Therefore, we firmly believe that these national institutions do not require approaching the capital markets to raise funds for their expansion. Privatisation of these successful institutions does not serve any national interest. Rather than this measure to privatise, the government must seriously consider the amalgamation of the four companies into a single corporation on the lines of LIC as suggested by the Parliamentary Committee on Public Undertakings. This would help them to serve the social and rural sector and fulfill the objectives of a public sector with greater amount of success. Lastly, an increase in the ceiling for the insurance sector will automatically translate into a similar limit for the pension sector too. This paves way for the foreign capital to have a greater access over the long term savings both in life insurance and pension sectors. All these are reasons for which the Insurance Laws (amendment) Bill should be withdrawn in the interest of the sovereignty of the national economy. The AIIEA along with the other unions in the industry and the agents spread across the country are preparing for a flash strike in case the Bill is passed in the Rajya Sabha. The struggle and campaign will continue to protect the people’s savings and make it available for the social investments.