THE All India Insurance Employees’ Association (AIIEA) and other unions in the four public sector general insurance companies will go on a nationwide strike on March 17.  Similarly, all unions in LIC will strike work on March 18, 2021.  These strike actions are to protest against the decision of the government to list LIC in the stock markets through an IPO, increase FDI limits in the sector from 49 per cent to 74 per cent and privatise one public sector general insurance company. There is no justification for these decisions and therefore the strike is to bring to peoples’ attention the disastrous consequences of these moves to the national economy.

NO JUSTIFICATION
FOR LIC IPO
The LIC today is the biggest financial institution in the country and a world class organisation. It is the biggest life insurance company in the world in terms of number of policies serviced and number of claims settled.  This institution was created through an Act of Parliament.  It was given the task of raising resources for speedy industrialisation of the country by collecting small savings in the form of premiums and converting it into capital for long term investments while giving utmost security to the policyholders.  The LIC has been very successful in meeting these objectives.  The disinvestment in LIC is the first step towards privatisation.  Therefore, LIC IPO violates the very objectives of its creation.

The capital invested by the government in LIC in 1956 was a meager Rs 5 crore.  This was increased to Rs 100 crore in the year 2011 to meet the regulatory requirements.  On this small capital, LIC has assets under management amounting to Rs 32 lakh crore as on March 31, 2020.  It has 30 crore individual policyholders and another 12 crore have been insured under group schemes. LIC has given utmost importance to the needs of the weaker sections of the society.  It has insured 3.68 crore people under various social security schemes for the year 2019-20.  LIC holds the distinction for the best claim settlement performance. For the year 2019-20, it settled 2.16 crore claims for Rs 1,59,769 crore.  Under the social security schemes, it settled 68,352 claims amounting to Rs 901.95 crore during the same period.

LIC operates its business on the lofty ideal of “Peoples’ Money for Peoples’ Welfare”.  Its total investments in the Indian economy amount to an astronomical figure of Rs 30.70 lakh crore. It promotes social welfare through investments in infrastructure and social sectors like generation and transmission of power, housing, water supply and sewerage, building of roads, bridges, road transport and railways. Its total investments in infrastructure and social sector and government securities both central and state amount to Rs 24 lakh crore. The LIC has been consistently paying high dividends to the government on its paltry investment.  The cumulative dividend paid by LIC since 1956 is over Rs 28,700 crore and for the year 2019-20, it paid dividend amounting to Rs 2,698 crore.

The arguments advanced by the government for LIC IPO are frivolous. This decision is in tune with the ideological position of the government which wants to withdraw from economic space with the intention of allowing it to be filled by the private sector. This will make the objectives of nationalisation recede into background and the entire focus will be on delivering increasing profits to the shareholders. The LIC, like the private companies, will have to target the big policies which bring greater profits. In the process the small size policies which the poor, vulnerable and lower middle classes purchase will no more be attractive.  The social objective of providing insurance cover to the weaker sections will receive a set-back.  The efforts to expand insurance in the unprofitable rural areas too will suffer.  Therefore, disturbing the character of LIC will harm the interests of the national economy and the poorer sections of the Indian population.

PRIVATISATION OF GENERAL
INSURANCE COMPANY
The four public sector general insurance companies were created by nationalising 107 private companies in the year 1971 with GIC as the holding company. The stated objectives of General Insurance Business (Nationalisation) Act 1972 were to serve better the needs of the economy by securing the development of general insurance business in the best interests of the community. The four public sector general insurance companies have been successful in meeting these objectives to a great extent. These four companies paid a dividend of Rs 6,045 crore to the government from the year 2000 to 2020; the gross direct premium income stands at Rs 73,263 crore in the year 2020 with a market share of 44.61 per cent. As on March 31, 2020 the total assets stand at Rs 1,77,715 crore and investments at Rs 1,22,035 crore.  The PSGI companies are serving the weaker sections through affordable insurance schemes in the rural areas.  These companies have made enormous contribution to the national economy.

The AIIEA is of the firm opinion that privatisation of a public sector general insurance company is not in the interest of the nation. Despite intense competition, the public sector general insurance companies have held their ground to retain market dominance. Despite the slowdown in the economy, the public sector general insurance companies have recorded impressive growth in the recent period. If these companies are facing some difficulties now, it is not due to slack in business performance but due to higher provisioning they were forced to make to make these companies attractive for disinvestment in future. Rather than privatising any PSGI company, the government should have actually consolidated the public sector general insurance companies and enabled them to face competition successfully.

NO NEED TO
INCREASE FDI LIMIT
The insurance sector was opened for private companies through the IRDA Act 1999. Initially the IRDA Act allowed 26 per cent foreign equity in private insurance companies. Subsequently, the FDI limit was increased from 26 to 49 per cent in the year 2015. The government has now proposed to increase it from 49 to 74 per cent and has decided to allow even foreign ownership in insurance company.

The argument for FDI hike is that insurance is a capital intensive business.  The development and expansion of insurance requires significant amount of capital, which the Indian partners are not capable of doing.  This is not true.  All the big corporate houses of India have entered the insurance business and capital has never been an issue with them.  Most of these business houses are flush with funds investing heavily outside the country for expansion of their interests.  Therefore, it is not possible to accept that they lack resources for expansion.  Some of them are also listed and have access to raise capital through the markets in India.

The second argument is that insurance in India still remains under penetrated.  Penetration is seen as premiums collected in relation to the GDP.  In a country which has a low per capita income and people lack adequate resources to save, looking at the insurance market from this angle is not entirely right.  It is estimated that nearly 40 crore Indians are insured both through individual assurances and group insurance. It is estimated that the insurable population (persons who can be insured) in India is around 60 crore. Therefore, the number of persons covered is significant.  This number can increase depending upon the rising levels of income and savings.

The growth rate of general insurance business in India is one of the highest in the world.  This growth can further increase if the asset owning households increase. The potential for the growth of life and health insurance gets restricted due to the levying of 18 per cent GST. 

Insurance, especially life insurance, mobilises small savings of the people and converts them into capital for long term investments in social and infrastructure projects. It is therefore imprudent to allow foreign capital greater access to and control over domestic savings. It is important that in a developing economy like ours, the State exercises greater control over domestic savings. Allowing foreign capital greater control over domestic savings would surely harm the nation. In a country which has scarcity of capital, it is imprudent to allow the foreign capital to control the household savings.  The experience worldwide has proved that foreign capital can never be a substitute for capital formation through domestic savings.

The AIIEA is determined to oppose the government moves and has been mobilising public opinion against the decisions of the government.  It has urged the government to reconsider these decisions in national interests.  The AIIEA has met over 450 MPs to inform them of the inherent dangers to the national economy. The proposed strike actions have received overwhelming support from a large number of trade unions.  The ten central trade unions and the Samyukta Kisan Morcha have also extended their solidarity and support.  The AIIEA requests the people of India to extend solidarity with the strike of general insurance employees on March 17, 2021 and LIC employees strike on March 18, 2021 and support the campaign against LIC IPO, FDI hike and privatisation of general insurance company.