Dr Daleep Pandita
Entry of private players in to the sanctum sanctorum of Indian general insurance industry neither created much needed insurance awareness among the public at large nor percolated down the real benefits of insurance among the masses truly among the rural poor. Newly born private insurance companies enjoying patronage of their experienced foreign partners concentrated only upon commercially viable segments of our country and grabbed insurance business mostly from urban areas at the cost of rural India. Private players failed in maintaining the Insurance Regulatory and Development Authority (IRDA) stipulated social obligations and rural targets. The situation thus created even could not protect the basic interests of policy holders as indicated by the increase in number of litigations arising out of insurance transactions in the country. Also the idea of generating healthy competition among the Government and private insurers for rendering better insurance services to the interested public ultimately got aborted on way. Notwithstanding justifications, all such facts are quite evident at the ground level. Thus opening of Indian general insurance industry did not achieve the basic mission for which it was introduced instead it created another phase of capitalism.
Finally it provoked the policy makers to introduce certain changes by improving the marketing channels through the introduction of insurance brokers, creation of Bancassurance partners and development of motor business tie-ups as a remedial measures that is also prevalent in other parts of the world. Alternative mechanism of insurance brokers for improved marketing and quality service delivery was introduced in haste. Government under pressure, had to tactfully weed out the century old fundamental marketing backbone of Development Officers in Indian general insurance industry by replacing it through the re-strengthening of existing agent system. Drives for recruitment of agency force under the pretext of addressing unemployment problem of the country were launched not realizing its survival issues.
Unlike agency system of Indian life insurance industry, which enjoy three way support, firstly from the Government in terms of granting Income Tax exemption benefits, secondly from the insurance company in terms of giving fixed remunerations and other benefits and thirdly from the insuring public seeing them as a mean of generating savings not giving much importance to the risk coverage portion of the life insurance policy. Comparatively, the agency system in general insurance industry do not enjoy all such advantages, so is neither long lasting nor dependable. Broker system, by and large, did not really pick up in Indian conditions neither in terms of their penetration deep down in the market nor in giving efficient pre and post-sale guidance and support service. Insurance brokers mostly concentrated on mega business segments for making their profits only and remained beyond the reach of a common man defeating their very purpose of introduction. Weaponry and control over the expedious disposal of insurance claims were forcibly handed over to third party administrators (TPA) particularly in the field of health insurance having huge market potential in Indian scenario.
Such conditions for general insurers ultimately resulted in mis-selling without marketing logics, for which at the end of the day a common man suffered both financially and morally. The real price for the product and the services offered differed markedly, simply created confusion and finally encouraged unethical marketing practices by offering discounts and advantages.
The huge size of Indian general insurance industry, both in terms of vastness of its market and large manpower strength virtually makes it difficult for the Regulator to control it effectively, particularly under the the influence of Government interference. Though it becomes easier to control Government Public Sector Undertakings (PSU’s) than private players, who enjoy reasonable patronage for political and other reasons.
After getting the lapses exposed for not foreseeing the hic- cups and not owning the consequences thereupon, the Government is forced to contemplate making general insurance PSU’s sick paving way for their merger, acquisition or enhancing Foreign Direct Investment (FDI) in Indian insurance sector. Destabilizing level playing field between Government PSU’s and private players by acts like unilateral prevention of offering discounts in premium, forcing only PSU’s to represent in commercially non viable rural areas without taking private insurers to such levels, conversion of fully operating office to representative or micro offices, qualitative and quantitative reduction in recruitment even under the massive retirement era, settlement of losses of unlimited liabilities in motor third party claims etc. not only make general insurance PSU’s deliberately sick but also a national wastage for not utilizing their enormous experienced man power talent.
Planning to raise FDI from present 26 percent to 49 percent in insurance sector in India again prove the intentions of the Government of succumbing to the foreign pressure by providing more opportunities to private players to take over the reins of Indian insurance industry against the concept of nationalism, taking Government PSU’s back to erstwhile 1974 position of capitalistic and feudalistic economy.
Still the general insurance PSU’s are growing higher than the industrial growth in India, catering to the insurance needs of both urban and rural India, providing huge direct and indirect employment opportunities, generating substantial income in terms of taxes and profits, expanding insurance awareness and above all ensuring the financial stability by covering the risks and uncertainties which are very common in our present day to day life.
So merger by deliberately making general insurance PSU’s sick, acquisition to benefit few domestic capitalists and enhancing foreign direct investment to please some foreign investors, is no answer to the problem being faced by Indian general insurance industry in particular and the people at large.
Revival of the Indian Government general insurance companies by providing level playing field in tandem with private insurers, ensuring free and fair trade practices with open pricing of products and service charges, representation deep down to vast rural segments and unrepresented areas, introduction of insurance education at least at college level, coming up with proper recruitment and promotion policy and stoppage of closure of offices can be some of the corrective initiatives to be taken immediately in order to restore faith and confidence in their survival must remain priority for the Government.
(The author is a senior officer with Government of India owned general insurance PSU at Jammu)
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