Wednesday, August 11, 2010

NATIONAL CONVENTION OF WORKERS CALLS FOR ONE DAY NATION WIDE INDUSTRIAL STRIKE ON 7TH SEPT. 2010

ALL INDIA INSURANCE EMPLOYEES’ ASSOCIATION
LIC BUILDING SECRETARIAT ROAD HYDERABAD
(Cir.No.16/2010 29th July 2010)

To all the Zonal/Divisional/State/Regional Units:

Dear Comrades,

NATIONAL CONVENTION OF WORKERS CALLS FOR
ONE DAY NATION WIDE INDUSTRIAL STRIKE ON 7TH SEPTEMBER 2010

UPA government at the centre is going ahead with its anti people policies in spite of several protest actions by the people and the working class.

Price rise has reached unimaginable proportions. When the food inflation is hovering around 17%, government went ahead with the decontrol of the prices of petroleum products and increased the prices of petrol, diesel and kerosene. This had a cascading effect sending the food prices further up. All the opposition political parties gave a call for general hartal on 5th July 2010 and there was massive response to this call. But the government did not respond and on the other hand stuck to its stand of increase in the prices of petroleum products.

The profit making Public Sector undertakings are being put on sale with a current year target of Rs.40,000 crores from the proceeds of disinvestment. Public Sector is built with the money of the people and this is being handed over to the private capital in the name of disinvestment. Insurance Laws (Amendment) Bill 2008 aims at disinvesting the PSU General Insurance Companies and the LIC (Amendment) Bill 2009 had a road map for disinvestment of LIC. While the Standing Committee of Parliament on Finance came out with recommendations against the government’s moves to privatize LIC, the policy of the government makes us determined to continue our campaign and struggle for protection of the public sector insurance.

Labour laws are being violated across the country. In the unorganized sector labour laws are more observed in violation than in implementation. But the government is willingly standing as a mute spectator. In the SEZs and the IT sector no labour laws are applicable.

Job losses, underpayments, increasing working hours and outsourcing have become the order of the day.

The social security net promised by the government for the unorganized sector is falling much below the needs of such a process.

All these issues and others are repeatedly brought into focus and to the attention of the government by the working class of the country through campaign and united struggle.
INTUC, BMS, HMS, AITUC, CITU, AIUTUC, TUCC, AICCTU, UTUC and the industrial federations from Government, Banks, Insurance, Telecom, Defence, Railways and other sectors came together on 14th September 2009 and decided to observe joint actions including ALL INDIA PROTEST DAY on 28th October, 2009, Massive Dharna on 16th December, 2009 and Satyagraha/Jail Bharo on 5th March 2010 in which ten lakh workers participated. This was a massive success in projecting the united voice of the workers.

It is in this background that a National Convention of Workers was held at Mavlankar Hall, New Delhi on 15th July 2010. Apart from the Central Trade Unions - INTUC, HMS, AITUC, CITU, AIUTUC, TUCC, AICCTU, UTUC and Tamil Nadu based LPF- the industrial federations from Central Government employees, State Government employees, Insurance, Banks, BSNL, Medical Representatives, Railways, and other independent industrial federations participated in this massive convention. BMS supported the demands of the Convention but did not attend the Convention.

Shri G. Sanjeeva Reddy, President, INTUC placed the Declaration calling for a ONE DAY INDUSTRIAL STRIKE on 7th September 2010 which was endorsed by all other unions and federations. The Convention unanimously adopted the Declaration and called upon the workers cutting across the affiliations to join together and make the ONE DAY STRIKE a thumping success in order to prevail on the government to stop its anti-worker and anti-people policies. The One Day Strike is called on the following issues among others.

# Price rise of essential commodities to be contained through appropriate corrective and distributive measures like universal PDS and containing speculation in commodity market.

# Concrete proactive measures to be taken for linkage of employment protection in the recession stricken sectors with the stimulus package being offered to the concerned entrepreneurs and for augmenting public investment in infrastructure.

# Strict enforcement of all basic labour laws without any exception or exemption and stringent punitive measures for violation of labour laws.

# Steps to be taken for removal of all restrictive provisions based on poverty line in respect of eligibility of coverage of the schemes under the Unorganised Workers Social Security Act 2008 and creation of National Fund for the Unorganised Sector.

# Disinvestment of shares of Central Public Sector Enterprises (CPSEs) not to be resorted to for meeting budgetary deficit and instead their growing reserve and surplus is used for expansion and modernization purposes and also for revival of sick Public Sector Undertakings.


Secretariat of AIIEA which met at Mumbai on the 19th and 20th July 2010 during the wage negotiations at Mumbai, unanimously decided that AIIEA should be an active partner in the strike call. AIIEA secretariat also called upon the employees in the life and general insurance sectors to join the campaign for the strike along with the other unions at respective centres and work for the success of the strike.

The Declaration adopted at the Convention is being circulated separately.

We call upon all our units to popularise the demands behind the strike action and also help in the campaign along with the other unions, so that the 7TH SEPTEMBER 2010 STRIKE would have an overwhelming impact on the government which is unwilling to hear the voices of the people.
Comradely yours,
General Secretary.

National Convention of Workers: Declaration

National Convention of Workers
15th July, 2010, Mavlankar Hall, New Delhi

Declaration

Representatives of Central Trade Unions and Workers and Employees’ Federations having assembled in the 2nd National Convention of the Workers on the 15th July, 2010, reviewed the joint action programme over five commonly agreed demands as decided in the first historic Convention of Workers on 14th September, 2009. This Convention considering the review of joint actions, ALL INDIA PROTEST DAY on 28th October, 2009, Massive Dharna on 16th December, 2009 and Satyagraha/Jail Bharo on 5th March 2010 - Ten lakh workers participated and also considering the situation arising thereafter adopts the following DECLARATION.

Despite the trade unions demanding effective steps to curb price rise, particularly food price inflation, food prices escalating as high as 17 per cent, inflation rising to double-digit, government continued to remain totally unresponsive to mitigate the deep sufferings of the working people;

Despite the trade unions expressing deep concern at the uninterrupted violation of labour laws and trade union rights, situation becoming grim and repressive every day;

Despite trade unions protesting against job loss, underpayment, unbearable living condition, increasing working hours, rampant contractorisation, casualisation and outsourcing, nothing is being done to prevent the declining living condition and inhuman exploitation of working masses;

Despite the trade unions opposing the disinvestment in the profit making public sector, the latest disinvestment being pushed through in Coal India Ltd., BSNL, SAIL, NLC, Hindustan Copper, NMDC etc., the pernicious policy of reckless disinvestment is continuing with impunity;

Despite the trade unions earnestly asking for the setting up of a massive welfare fund for universal comprehensive social security coverage for the unorganized sector workers without any restriction, the fund allocation remained nominal and restrictive provisions continued.

The Convention notes with concern, not only protest of the trade unions is being ignored, the policy that accentuates increase in the prices of food grains is being constantly bulldozed, the latest is the deregulation of petroleum pricing linking with the international market leading to hefty increase in the prices of kerosene, cooking gas, diesel and petrol.

The convention reiterates the unanimously formulated demands once again as under:
# Price rise of essential commodities to be contained through appropriate corrective and distributive measures like universal PDS and containing speculation in commodity market.
# Concrete proactive measures to be taken for linkage of employment protection in the recession stricken sectors with the stimulus package being offered to the concerned entrepreneurs and for augmenting public investment in infrastructure
# Strict enforcement of all basic labour laws without any exception or exemption and stringent punitive measures for violation of labour laws
# Steps to be taken for removal of all restrictive provisions based on poverty line in respect of eligibility of coverage of the schemes under the Unorganised Workers Social Security Act 2008 and creation of National Fund for the Unorganised Sector to provide for a National Floor Level Social Security to all unorganized workers including the contract/casual workers in line with the recommendation of National Commission on Enterprises in Unorganised Sector and Parliamentary Standing Committee on Labour
# Disinvestment of shares of Central Public Sector Enterprises (CPSEs) is not resorted to for meeting budgetary deficit and instead their growing reserve and surplus is used for expansion and modernization purposes and also for revival of sick Public Sector Undertakings.


This National Convention of Workers, while exercising its constitutional and democratic right seeks to further its legitimate protest and call for immediate correction of the patently wrong policies that dangerously hurt the interests of the working people and the society as a whole, and to give vent to the feeling of the growing indignation of the working people.

The Convention, therefore, resolves to call for an All India General Strike on 7th September, 2010.

The Convention calls upon the entire working people of the country, irrespective of affiliations to make the all in united call for countrywide general strike a total success. If the government does not concede the demands the trade unions will intensify the struggle further and prepare for a March to Parliament.
INTUC AITUC HMS CITU
AIUTUC TUCC AICCTU UTUC LPF

Tuesday, August 10, 2010

Side Effects of Systematic Working

Dear friends I received this email just today from one of my friends and I am reproducing it as it is before you to read and enjoy. Any discomfort is regretted please.
A good one to spend some time...
A story told by an IIM professor regarding the side effects of systematic working: -
After completion of Lanka War Hanumanji was enjoying LTC with his friends. He got an email on his laptop from Accounts requesting him to clear his dues before 31st March - dues related to his tour for bring Sanjivani Booti for Laxmanji. He ignored the first mail. But after 3 - 4 reminders in two days time & receiving a call on CUG Mobile from Accounts Dept., he had to fly to Ajodhya canceling his leave.
He submitted:- TA, DA Bill, Bills of Sushen Vaidya, Hospital Charges incurred for Bharatji when he met with an accident during his travel, Cost of Sanjeevani Booti for Laxmanji, Transport charges (1) Where is your tour sanction report ? Asked the HR & ADMIN Dept. Hanumanji got it done by requesting to concerned officials 2 or 3 times. (2) Hanumanji claimed T.A. bill for air travel - but he was given only second class sleeper charges. And all other expenses on medical,Sanjeevani Booti, Fee of Sushen Vaidya were not reimbursed. When he asked for the reasons, he was told that (a) As per his designation, he is entitled for IInd class sleeper only. (b) He cannot get claim for other things as he does not have bills.
Then Hanuman approached Shri Rama and explained to him about the deduction on his tour expense report. Ramji ordered the related official to pay for Air travel & other charges as claimed by Hanumanji. The officer came with the rule book & told Shri Ramji, "These rules are created by the grandfather of Dasharathji, If you want to overrule your forefathers I don't have any problem." Ramji became speechless. So he thought for another way to compensate Hanuman. He called Hanumanji & gave him the claimed amount in cash, But how can Hanumanji take cash money from Ramji ? Hanumanji told, “How can I take money from you for treating Laxmanji? Laxmanji is equally reverend to me as you are. "
In his heart of hearts Hanumanji thought why he listened to accounts fellow, cut short his LTC, completed all the formalities & put Shriram in such an awkward position where he has to offer money to me. Hanumanji continued his work with the same attachment as he used to after this incidence also.
Hanuman was a god, but for us mortals, learnt a different lesson & that was MORAL OF THE STORY : "NOT to do anything without proper sanctions : Whatever may be the urgency or importance of the job" At the most Laxmanji will die - nothing more will happen.

Ten Years Of Liberalisation Of Insurance Sector

TEN YEARS OF LIBERALISATION OF INSURANCE SECTOR
Com. Amanulla Khan

The reforms in the insurance sector have completed one decade. The Insurance Regulatory and Development Authority Act 1999 ended the government monopoly over the insurance sector. It permitted private sector and allowed foreign capital to do business in insurance through joint ventures. Since then, 21 private players along with State owned LIC are doing life insurance business. Of these, 19 companies are operating in collaboration with foreign partners. In the general insurance industry, 15 private players, of whom 14 are in collaboration with foreign partners are competing with the four State owned insurance companies. Apart from them, some specialized State owned firms are also functioning in the industry. As per the annual report of IRDA for the year 2008-09, the Indian partners have employed a capital of Rs.13893.54 crore and their foreign partners Rs.4354.50 crore in the life insurance business. Similarly, the figures for general insurance is Rs.1911.51 crore and Rs.621.72 crore respectively. The FDI therefore amounts to 23.94% in the insurance sector.

BACKGROUND
The decision to open up the insurance sector witnessed great public debate. The opening up of this crucial sector lacked general consensus. More than 1.54 crore people petitioned the Parliament against opening up of the sector on the basis of the unhappy experiences of the pre-nationalisation days. Brushing aside objections both within and outside the parliament, the government went ahead to liberalise the insurance sector. The government came out with the following arguments in justification of liberalization:

01. Insurance penetration and density in the country is low;
02. The country needs massive investments in infrastructure and liberalizing insurance and pensions will help mobilization of long term funds;
03. Allowing foreign companies would help them bring a substantial portion of their worldwide premium funds into Indian infrastructure; and
04. India is a large economy and a big market with ample space for both private and public sector;

Those opposed to opening up argued that public sector insurance industry has make significant progress in achieving the tasks and objectives of nationalization. The public sector has given total security to the policyholders and made substantial investments in infrastructure and social sector. Insurance penetration and density depends on the levels of income and the ability to save after meeting the basic requirements of life. Comparison with different countries on the levels of penetration and density ignoring the levels of income is unjustified. Despite the low levels of incomes, surprisingly both the coverage and penetration of life insurance in India has been very good. India ranked 83rd among the 86 countries surveyed in terms of the per capita income in 1997 (Sigma Report 4/ 1998), while it ranked 33rd in terms of life insurance penetration. The life insurance penetration in India at 1.39% of the GDP in 1997 was much higher than that obtaining in countries with incomes five times or even ten times greater. They further argued that it makes no sense to say that by allowing foreign capital to do business these companies would invest their global premium funds in India. The investment decisions are always based on profitability and security and surely they would not be made out of gratitude.

THE REAL REASONS
These arguments both in favour and against apart, two important developments influenced the opening up of the sector. First, in the struggle between the two contending economic systems, capitalism registered a significant gain with the disintegration of Soviet Union in 1980. The absence of a countervailing force helped the developed nations led by the United States demand opening up of third world economies. The United States threatened imposition of sanctions against India under Super 301 if the insurance markets are not opened. The second was the financialisation of capital. Beginning from 1970, the world witnessed huge concentration of wealth and internationalization of financial capital. The financial wealth gained autonomy from production. Financialisation enabled creation of huge artificial wealth totally unconnected from production of goods and services. This process was helped by governments that adopted policies of deregulations on the understanding that markets are self-regulating and all knowing. The huge concentration of finance capital and its internationalization demanded newer and greater spaces for its investments. Demands, therefore, were made on the developing countries to liberalise their economies and open them to the international finance capital. Neo-liberalism became the dominant ideology dictating economic and political policies across the world. The role of the State was curtailed and excessive faith was placed in the markets. Therefore, it is not right to look at neo-liberalism just as a radical economic liberalism. The events since then have clearly proved that it is an ideology that is hostile to the poor, workers and the welfare State and promoted massive inequalities both within the nations and among the nations.

Beginning from 1991, the dominant classes in India fully embraced neo-liberalism. The Industrial Policy of 1956 which had envisioned building up of a self reliant economy through a dominant role of the public sector was given up. The dismantling of public sector began in order to vacate economic space in favour of the private sector. Therefore, it may not be right to say that there was any resistance to the demand for opening up the Indian economy and liberalizing the financial sector. The Indian government was too willing to do it. However, in order to gain legitimacy in public domain, Malhotra Committee was appointed to suggest reforms in insurance sector. Similarly, K.P.Narasimham Committee was asked to suggest reforms in the banking sector. The reports of both these committees were tailor made. These committees recommended placing Indian financial sector into the global financial architecture. Despite public opposition to these recommendations, the government went ahead to liberalise the financial sector. Therefore, the real reasons for opening up the Indian financial sector were the embracing of neo-liberal ideology and accommodation of the interests of the international finance capital.

TEN YEARS OF LIBERALISATION
The Indian insurance industry has registered impressive growth in the past one decade. The life insurance grew at a very fast pace with new business premium increasing from Rs 19857.28 crore in 2001-02 to Rs.87006 crore in 2008-09. The growth continues for the current financial year with new premiums touching Rs.75347.29 crore as at 31st January 2010. Similarly the total premium income increased from Rs.50094.46 crore in 2001-02 to Rs.221791 crore in 2008-09. The total assets under management rose to Rs.931000 crore as at the end of 31st March 2009. The public sector LIC has surprised the critics with a very strong showing. It has retained domination over the market. It is holding on to a market share of 70 percent in number of policies and 65 percent in new business premium. The LIC has also an impressive share of 88 percent in the total assets under management. The SBI Life with 6.43% market share in new premiums ranks second displacing ICICI Prudential which ranks third with 5.84% market share. Similarly the gross domestic premium income in the non-life sector increased from Rs.2439.41 crore in 2001-02 to Rs.30601 crore in 2008-09. In the current financial year premium underwritten upto January end is Rs.28169.23 crore. In this sector too, the major market share is retained by the public sector.

The premiums mobilized through life insurance as a percent of the GDP has touched 4.1 percent in 2008-09. This is significantly higher than many developed countries including Germany and on par with that of United States. The life insurance penetration is almost equal to the world average. The non-life penetration has marginally increased to 0.65 percent. It is worth noting that Indian insurance industry has been growing much faster than the world average. The global financial meltdown has shaken the insurance industry in the developed world. Even the giant AIG had to be bailed out by the government. The growth of insurance industry in the developed countries has become negative. The crisis left the Indian insurance industry unaffected and the growth story continues.

The advocates of liberalization have been campaigning that the growth experienced by the industry is due to competition. Therefore, there is a strident demand for further liberalizing the sector and hiking the foreign equity limits. Is this the truth? The answer is a vehement no. It cannot be the whole truth. The growth of insurance industry depends upon the growth of the general economy, levels of income and increasing levels of disposable income. Ignoring these crucial facts and giving credit only to competition is absolutely unfair. It may help understand that the LIC sold 794585 crore policies in the first year of its operation (1957). This was nearly 40 percent more than the number of policies sold by 245 private life insurers in the year prior to nationalization. The LIC, a monopoly performed much better in the very first year compared to what could be achieved through competition by 245 players. It must also be noted that Indian savings in the form of life insurance showed steady increase over the years as a share of GDP. In 1985-86 the life insurance penetration in India was 0.7 percent and this doubled to 1.4 percent in 1997-78.

This clearly indicates the existence of a very strong link between the growth of economy, levels of disposal income and the growth of the life insurance business. The Indian economy averaged a growth of over 8 percent during this period. The GDP grew from Rs.19,52,036 crore in 1999-2000 to Rs.53,21,753 crore in 2008-09 (Source: RBI). Similarly, the gross domestic savings grew from Rs.4,84,256 crore in 1999-2000 to Rs.17,79,614 in 2007-08. The household savings constitute around 65 percent of the gross domestic savings. Currently, the life insurance premium account for around 19.5 percent of the financial savings. The growth, therefore, was mainly driven by the growing economy and increasing levels of incomes.

However, some disturbing trends are seen in this growth. Life insurance premiums are a major source of funds for infrastructure. The popularization of unit linked products have raised a serious question over the ability of the life insurance industry to provide long term funds for infrastructure since investment decisions are taken by the policyholders in these policies. Thus one of the major arguments advanced for opening up of the sector has fallen flat. Today ULIPs account for over 70 percent of the insurance policies sold after liberalisation. The ULIPs account for nearly 90 percent of the portfolio of the private sector. The government has estimated that over $500 billion are required for the development of infrastructure in the next few days. The IRDA has shown some concern over this distortion and has advised the companies to have a proper mix of the policies so that long term funds are generated for infrastructure investments.

There is also a worry over the high level of lapsation. One of the major reasons for such high level of lapsation could be mis-selling. According to IRDA, LIC has the lowest lapsation ratio of 4 percent. The lapsation ratio in the private sector ranges from 19 percent for Max-Newyork to 53% for ICICI Prudential. There is concern over the high operating expenses in the private sector too. The contract of insurance is a promise and the ultimate delivery of service of an insurance product is the honouring of that promise. The public sector scores over the private sector in this aspect. The claim settlement ratio of LIC is 99.86 percent as against the average of 70 percent for the private sector. The IRDA has expressed concern over the delay in settlement of claims as also the high level of repudiation. But just expressing concern is not enough. The regulator must take concrete measures to rectify this situation.

PROSPECTS FOR GROWTH
The insurance industry is expected to continue its growth story. A 2007 Report by Mckinsey & Company notes that “among all financial products in India, life insurance enjoys the highest popularity and demand. Contrary to the conventional directly correlated risk-return relationship, Indian consumers perceive life insurance as a low-risk and high-return investment – a perception driven by high awareness of the Life Insurance Corporation of India (LIC) and its record of delivering stable returns over the years”. The life insurance thus is a preferred product for savings as also to avail the tax benefits. Today the life insurance industry has been servicing 30 crore individual policies. Different estimates are made of the size of the market. Projections are being made that in the next three to four years, the total premium income would double with a few differing voices that claim these estimates as very optimistic considering the poverty levels in India. But there is unanimity that India is one of the fastest growing markets for insurance. The major source for insurance business has been the Indian middle class. The middle class is growing and estimated to be nearly 200 million now. The economic growth has benefitted them and these sections have increasing levels of disposable incomes. The demography is also in favour of the insurance industry. The estimates suggest that 60 percent of the Indian population is below the age of 25 years and are potential future customers. Though the wealth is very unevenly distributed, the fact is that the asset owning classes are increasing in India. This is an opportunity for the non-life insurance industry to aggressively design and sell personal and retail insurances. The non-life insurance industry, even after liberalization has mainly been targeting the corporate business.

The size of Indian population makes it a hugely attractive market. There is no doubt that the benefits of growth of Indian economy have not benefitted all sections of the population and a large number still live a very miserable life. The Tendulkar Commission has put the figure of those below poverty level at nearly 40 percent of the population. A large number of these people live in rural India. There is a serious talk of inclusive growth now. If the government seriously takes measures to improve the life and purchasing capacity of these people, then rural India would provide a huge opportunity for growth of the insurance business. The experience of micro-insurance has proved successful and this opens up vast opportunities for the expansion of insurance activities.

India is a country where there is no social security. Nearly 90 percent of the work force in the country is employed in the un-organised sector. This section needs insurance as a security against various risks. With intense competition, it is natural that the companies would target the most profitable business ignoring this vast section which is not capable of purchasing big ticket insurance policies. Driven by the intense competition, even the public sector seems to be faltering in reaching the most deprived and needy sections of the population. Therefore, there is need for the government and regulator to force the insurance companies to come out with plans that meet the requirements of these companies.

Health insurance provides another big opportunity. It is justified to expect that the basic responsibility of providing health services to citizens lies with the government. It is much more justified considering the fact that poverty is widely prevalent and the country has 40 percent of its people below the poverty level. However, what is surprising that India has one of the most privatized health services in the world and the government spending on health is very low. Surely, the companies are going to cash on the opportunities in health insurance. But a vast majority of people cannot afford the health insurance cost making the government intervention absolutely necessary in this area.

THE NEW CHALLENGES
The liberalization has helped create a number of new channels of distribution of insurance products. The bancassurance has been very successful with private sector securing 21 percent of the new premiums through this channel. The private sector has also utilized well other alternate channels. The Corporate Agents, Brokers and Direct Sale has contributed 24 percent of the new premium for the private sector during 2008-09. However, LIC continues its dependence on tied agents who have contributed 97.34% of its new business premium during 2008-09.

The successful experience with the bancassurance is coming under strain with major banks deciding to enter the insurance business promoting their own companies. The SEBI has also noticed cases of mis-selling of insurance products by the banks. The IRDA is contemplating to permit the banks to have multiple agencies. What impact this can have has to be seriously analyzed.

The recommendation of Swaroop Committee for abolition of agency commission and replacing it with a fee based structure had created disquiet in the industry. This recommendation ignores the fact that insurance in India is still sold and not purchased. If the government accepts this recommendation, it will seriously harm the prospects of the insurance industry in India. The insurance agents have been protesting against this recommendation and even the regulator has opposed this move.

In sum the key drivers of growth would be the distribution channels. Therefore, there is an urgent need to professionalize the agency force and strengthen the alternate distribution channels.

CONCLUSION
The growth of the insurance industry in the past one decade is being seen, rather mistakenly, as unqualified success of liberalization. Therefore, efforts have been taken to further liberalise this sector. The Insurance Laws (Amendment) Bill 2008 and LIC Act (Amendment) Bill 2009 have been tabled in the parliament. Currently these two bills are being scrutinized by the Standing Committee on Finance. These bills seek to hike the foreign equity participation and also take steps towards privatization of the public sector companies.

The joint ventures with foreign capital were allowed on the premise that substantial portion of the global premium funds of the foreign partners would be invested in Indian infrastructure. There is no evidence to suggest such investments having taken place. This proves right the understanding that nobody would take investment decisions on the basis of gratitude. Having settled this question, one must say that 26% FDI limit has not been an entry barrier. This reasonable restriction has not deterred the foreign companies to enter India, which they see as a hugely attractive market, as the experience has shown. The argument that FDI has to be increased as the Indian partners are unable to bring the required capital also cannot be true. “Capital has so far not been a major constraint for the insurance industry given the way they have been expanding their business (IRDA Chairman – Business Standard 5/1/2010). It is also a fact that many private companies have decided to approach the capital markets with initial public offerings. This would help them raise additional resource.

Then, why is this excessive obsession with the foreign capital. Today the world is seriously debating the so-called beneficial effects of FDI on the recipient economy. The World Bank appointed Growth Commission has concluded that “foreign saving is an imperfect substitute for domestic saving, including public saving to finance the investment a booming economy requires”. The experience of the successful economies across the world suggest that public investment is the foundation on which infrastructure is developed. The experience with the private investments has not been encouraging. Insurance, especially life insurance mobilizes long term funds and therefore, it is important that the government must exercise greater control over these funds. The hike in foreign equity would only succeed in giving greater access and control to foreign capital over the domestic savings. This is simply against the national interests.

The global financial meltdown has left India largely unaffected. There is universal acknowledgement that this is due to the strong presence of public sector in the Indian banking and insurance industries. The world realized at great peril that finance capital is fundamentally in search of quick profits and hence speculative in character rather than having any enduring links with the industry. Therefore, efforts are being made to tame the finance capital and as a result many of the financial institutions including insurance companies have been taken over by the governments in the developed countries.

Therefore, India must remain cautious. The plans to further liberalise the insurance industry must be given up. Today, there is a conflict between the IRDA and SEBI over ULIPs and between RBI and SEBI over interest futures. The government must take steps to settle these conflicts and strengthen the regulatory mechanism for the orderly growth of the financial sector, insurance included. However, some measures being taken by the government are raising apprehensions. There is a talk of allowing insurance companies to trade in derivatives. The Union Budget for 2010-11 has proposed to allow new private banks. This raises a genuine question – are we going to find ourselves in a situation that was existing immediately after independence? This was the period when every business house had owned a bank and an insurance company. The result was disastrous. India and its people cannot afford to allow such a disaster to happen again.
(Com. Amanulla Khan is President, All India Insurance Employees' Association)

Monday, August 9, 2010

Wage Revision Heads Towards Finality: LIC Offers Satisfactory Wage Proposals


ALL INDIA INSURANCE EMPLOYEES’ ASSOCIATION
LIC BUILDING SECRETARIAT ROAD HYDERABAD 500063
Cir.No.15/2010 Camp: Mumbai 21st July 2010

Dear Comrades,
WAGE REVISION HEADS TOWARDS FINALITY: L.I.C. OFFERS SATISFACTORY WAGE PROPOSALS
The three year long struggle to secure a good wage revision is heading towards finality. The LIC management came out with offers in the discussions held on July 19, 2010 which meet the expectations and aspirations of the employees to a great extent. The employees must have analysed the pay scales and offers on other benefits in a detailed manner and would have understood the massive progress registered through their struggle.

The joint session of all the unions held on 19th July, 2010 was addressed by Shri T.S.Vijayan, Chairman, LIC. The AIIEA was represented by Coms. Amanulla Khan, President, K. Venu Gopal, General Secretary and V.Ramesh, Joint Secretary in this session. The Chairman appreciated the contribution made by the employees towards yet another spectacular performance in the financial year 2009-10. He specifically mentioned the cooperation extended by the Unions and the employees in the month of March 2010 which saw a huge procurement and registration of new business. He further added that LIC also made quite a lot of efforts to ensure that the employees are given a wage revision that would meet their expectations. Thereafter the offers on pay scales and other allowances were made.

Reacting to the speech of the Chairman, the General Secretary of AIIEA expressed happiness over the stupendous performance of LIC in the last financial year. AIIEA appreciated the efforts of the LIC on the issue of wage revision. The AIIEA expressed happiness that the efforts have been made to move away from the parameters on pay scales laid in other financial institutions. The AIIEA made it very clear that it is not in favour of a PLLI scheme which is not industry based. The AIIEA also opposed the proposal to withdraw some minor existing benefits and the proposal to introduce the New Pension Scheme for the new entrants.

Secretariat of AIIEA analyses the proposals:
The Secretariat of AIIEA met in the afternoon of July 19th to make a detailed study of the proposals made by LIC. Even while the Secretariat was in session congratulatory messages started pouring in from across the country. These messages clearly indicated the happiness and satisfaction of the employees over the achievement secured by the AIIEA. The Secretariat after a detailed analysis came to an unanimous conclusion that the offers are satisfactory. These offers have been secured by the relentless efforts of the organization. The AIIEA succeeded in uniting all the unions in struggle which was responsible to bring about this massive achievement. The Secretariat identified certain areas where improvements need to be demanded.

The Secretariat noted that AIIEA could overcome the conditionalities like mobility, withdrawal of ½ day CL, withdrawal of ACL, and withdrawal of compassionate appointments. Secretariat at the same time felt that the LIC should not venture into creating minor irritants through withdrawal of existing benefits even if they are minor in nature. The Secretariat was of the firm opinion that the PLLI scheme offered would create problems and unhappiness. While the PLLI to those in the Central Office would depend upon the average of all India performance, for the Zonal Offices it would be on the basis of the average performance of the Zones. For those working in Divisional Offices and Branches the PLLI would depend upon the performance of the divisions on certain parameters. The Secretariat felt that the branches which are the main production centers would miss out the PLLI in the event the Division as a whole failing to meet the said parameters. The Secretariat therefore, decided to demand PLLI based on the all India performance of the Corporation.

It was also decided to firmly oppose the introduction of the New Pension Scheme for the employees who join the Corporation on or after 1.4.2010.

Negotiating Team meets the Officials:
The full Negotiating Committee of the AIIEA (comprising of the Secretariat members from life sector) met the Executive Director (Personnel) and other officials in the evening of 20th July 2010. The Negotiating Committee appreciated the role of the officials in taking up with the government our demand for a wage revision reflecting the growth of the institution and aspirations of the employees.

The following improvements were demanded by the AIIEA:
Improvements in the pay scales of Sweepers and Peons.
One more stagnation increment and the duration to be reduced to two years for the HGA cadre.
Improvement in the allowances for passing the Technical examinations and inclusion of MCA and Company Secretary Courses in this category.
Minimum HRA to be specified.
Washing Allowance to be enhanced.
Cashier’s allowance should rank for fixation on promotion.
Improvement in Hill Allowance and inclusion of remaining parts of Himachal Pradesh.
HRA at 10% to be made applicable to all the cities with a population of 45 lakhs and above and inclusion of Ajmer and Meerut into CCA centres; improvement in Paradip Port allowance and project allowance for Durgapur.
Stagnation stage to be allowed for fixation on promotion.

Apart from the above the AIIEA delegation demanded improvement in LTC scheme and encashment. The AIIEA also demanded introduction of certain amenities like reimbursement of petrol expenses and coupons. Responding to these demands the Executive Director (Personnel) said that it might be difficult to consider further improvements in view of certain constraints. However she added that they would seriously take the views of the AIIEA and make improvements wherever it is possible. The ED (P) also informed that the demand of AIIEA for improvements in LTC and its encashment and introduction of certain amenities would be seriously considered by LIC.

The delegation firmly informed that AIIEA would not accept the introduction of the New Pension Scheme. On the other hand AIIEA demanded more improvements in the existing pension scheme and another option for employees to join the existing pension scheme. The AIIEA also made it clear that it wants a PLLI scheme where every employee should be rewarded for the progress of the Corporation.

AIIEA delegation meets the Chairman and Managing Director:
Com. Amanulla Khan, Com. K. Venu Gopal and Com. V. Ramesh met the Chairman and Shri AK Dasgupta, Managing Director today and impressed upon them the need for accommodating the genuine demands for improvements placed by AIIEA.
Comrades, the present wage proposals are a great progress achieved by the AIIEA. The AIIEA had promised the employees that it would make all efforts to secure a good wage revision and the AIIEA was confident of delivering on this promise. It must be understood that this progress did not come easily. It came through sustained efforts and organisational actions. The progress achieved should be consolidated. The AIIEA will make efforts to ensure that the wage revision reaches its finality soon and the employees taste the fruits of the struggle. We congratulate all LIC employees for the unity displayed and the faith reposed in the struggles of the AIIEA which has enabled them to make unprecedented progress in wage revision.
With greetings,
Comradely yours,
General Secretary.

LIC Act (Amendment) Bill 2009


ALL INDIA INSURANCE EMPLOYEES’ ASSOCIATION
Cir.No.10/2010 14th March 2010
LIC Act (Amendment) Bill 2009
The Life Insurance Corporation Act (Amendment) Bill 2009 was introduced in the Lok Sabha on 31st July 2009 despite popular opposition. The LIC employees registered their protest through a very successful walk out strike called by the AIIEA on August 2, 2009. The Bill was referred to the Standing Committee on September 9, 2009. AIIEA wrote to the Standing Committee on 26th September 2009 seeking an opportunity to appear before the Committee. Simultaneously AIIEA intensified the campaign against the proposed amendments to LIC Act and requested the Committee to carefully scrutinize these amendments as they would impact the most successful financial institution. The cadres of the AIIEA met more than 400 Members of Parliament to explain our views on the issue. AIIEA cadres also met the Members of the Standing Committee including the Chairman in their constituencies requesting them to appreciate the reasons of our opposition. The Standing Committee vide its letter dated 13th January 2010 asked AIIEA to appear before it and also submit a memorandum. AIIEA immediately submitted the memorandum.
Thereafter, AIIEA was invited to depose before the Committee for oral submission on January 22, 2010. The President and General Secretary of AIIEA deposed before the Committee and effectively placed our views on the subject.The LIC Act (Amendment) Bill 2009 proposed the following amendments:
1. Hike the capital from Rs.5 Crore to Rs.100 Crore and further increase whenever required through a notification;
2. Change the pattern of distribution of surplus. The present distribution pattern of 95% to the policyholders and 5% to the government to be altered to 90% for the policyholders and 10% to the government
3. Provide sovereign guarantee selectively from the present 100% government guarantee on the policy amount and the bonuses;
4. Take away the powers to open branches and divisions from the Zonal Manager and give more powers to the IRDA on these issues; and
5. Change the existing legal provisions relating to the terms and conditions of service of LIC Agents.
The views of the AIIEA on all these issues are well known. They were forcefully articulated both in the written submissions and the oral submissions made on 22nd January, 2010.The Standing Committee after exhaustive consultations finalized the Report in its meeting held on March 10, 2010. Thereafter, the Chairman of the Standing Committee has presented the Report to the Lok Sabha on 12 March 2010. The Report was also laid in Rajya Sabha on the same day.
The Standing Committee in its Report observed that “examination of the Bill brought to light certain key issues which mainly relate to the possible adverse or negative implications of the amendment proposals on the business prospects of LIC as well as on the policyholders’ interest. The Committee feel constrained to note that the negative implications that the amendment proposals would have on the functioning of LIC do not seem to have been examined and assessed adequately by the Government before moving them in the Bill under consideration. (Emphasis ours).
The Committee recommended consideration of the Bill taking into accounts the observations and modifications suggested by them.The Committee recommended the raising of the capital of LIC from Rs.5 crore to Rs.100 crore. But it also noted the concerns expressed about the possibility of future disinvestment and therefore, the Committee suggested that “any further raise in the capital in excess of Rs.100 crore, if and when required, may be provided by the Central Government through appropriations made by Parliament by moving an amendment to this effect in the Principal Act governing LIC’. This clearly means that any change in the equity pattern of LIC cannot be through an executive order but has to have the parliamentary approval. This suggestion is a big setback for the Government’s plans for privatization and is a very big achievement of our struggle.
The Committee disagreed with the amendment changing the pattern of distribution of surplus. The Committee has recommended that “the existing percentage of distributable surplus to the policyholders i.e. 95% be retained, and of the balance, a fixed percentage as may be decided by the Government apportioned to the reserve fund the purpose of which should be spelt out by the Government, and the balance remaining thereafter paid as dividend to the Government’. (Emphasis ours).
On the issue of sovereign guarantee, the Committee has suggested “as sovereign guarantee is key to LIC’s pre-eminent position in life insurance business, the Committee are of the considered view that this stature bestowed on LIC by Parliament should not be diluted in any manner under the pretext of providing a level playing field in the insurance sector”. The Committee further added that “at this juncture of the development of our country, rather than dis-incentivising the future growth and prospects of LIC, the Government must re-order its priorities by incentivizing LIC to mobilize more resources for developmental activities, particularly in the crucial infrastructure sector”.The Committee considered the clause intended to do away with the power of LIC in expanding its branch network and vest this power with the IRDA. “The Committee do not find merit in the proposed amendment as this might have the negative effect of limiting the future branch network expansion of LIC and thereby the growth of the Corporation’s business’. The Committee recommended that while broad guidelines issued by IRDA for opening of branches are made applicable to LIC, the Corporation should continue to retain the power of opening new branches.The Committee also did not agree with the amendment intended to do away with the existing system of the Central Government framing the rules with regards to the terms and conditions of service of agents of the LIC. The Committee was “of the view that it would be preferable to continue with the existing legal provisions relating to the terms and conditions of service of LIC agents”.
The Report of the Standing Committee has vindicated the stand of the AIIEA. We expect that the Government would accept the suggestions and recommendations of the Committee in the best traditions of democracy. But our experience suggests that the Government may not stick to democratic norms when it is inconvenient for them. Therefore, we need to keep our vigilance and continue our campaign against the further liberalization of insurance sector without any let up.We congratulate the insurance employees on this very significant advancement registered by their movement.
Comradely yours,
General Secretary

LIC & GIC Beat Economic Downturn

It is yet another year of stupendous performance by the Public Sector Insurance Companies. The journey of success continues despite pronounced global recession. A cursory glance at the figures of Premium Income, Number of Policies secured indicate that whatever may be the efforts of the Government of the day to tarnish the image of the Public Sector, the Public Sector Insurance Companies are shining in glory with yet another year of great achievement. The total First Premium Income of LIC stands at a whopping Rs.42,960.44 Crores by selling 3.88 Crores of Policies during the year registering a growth of 21.63% in Individual New Business. The market share of LIC has also improved with New Business accounting for 64.86% and the Number of Policies 73.02%.33.87% when the Private Insurers have painstakingly achieved a cumulative growth of just 12.43%. In the realm of Group Insurance, LIC commands Rs.20,775.56 Crores as Premium income and a market share of 75.39%. This really is the jewel in the crown of the Financial Sector Institutions. The story of Private Insurance Companies in India has been so dismal that most of the companies have registered a negative growth.
The Public Sector General Insurance Companies too have done an excellent job in increasing the growth rate during the year. The United Insurance Company has mobilized Rs.5,239.05 Crores, with a growth rate of 22.47%; Oriental Insurance Company mobilized Rs.4,718.75 Crores with a growth rate of 19.02%; New India mobilized Rs.6013.43 Crores with a growth rate of 9.16%; and National Insurance Company has mobilized Rs.4620.92 Crores with a growth rate of 7.97%. The leading Private Insurers have registered either a negative growth or a negligible growth rate during the period. ICICI Lombard has registered a negative growth of 3.56%; Bajaj Alliance -4.73%; and Reliance has managed to register a growth of 3.38% and Tata AIG 0.49%. This indeed is the contrasting story of Insurance Industry in India following opening up of insurance sector for competition by the Indian Government.
The progress of LIC and GIC at a time of economic downturn indicates the commitment of the employees towards Public Sector Insurance Companies. This is a fact born out by the statistics furnished in the foregoing which should enable the right thinking people to demand of the Government of India not to disturb the present stature of the LIC and GIC and on the contrary the Government should be persuaded to adopt such measures that are required to strengthen these two financial institutions. Unfortunately, notwithstanding marvelous performance, year after year by the Public Sector Insurance Companies, the Government appears hell bent on increasing the equity base of the LIC and GIC with an ulterior motive of privatizing them. The increase in the FDI limit from 26% to 49% is also to favour Private Insurers. The insurance employees while rejoicing over the continued triumphant onward march of the public sector insurance companies, may have to once again undertake the arduous job of mobilizing the public opinion in favour of the LIC and GIC through a programmatic action so that the government is prevented from going ahead with the ill-advised reform measures. At the same time, the employees naturally look forward to managements’ initiative to satisfactorily resolve the long pending issue of wage revision as they have enormously contributed to this success story. The resolve to fight the ill-conceived move of the government has to remain uppermost in the minds of the employees as the Government’s main agenda is to disturb the Public sector institutions at the behest of the International Finance Capital.