Insurance Article, The Insurance Times 2021, The Insurance Times September 2021



With  premium income of  about Rupees one lakh thousand crores,  Indian government general insurance industry catering nearly 75,000  vast manpower and feeding its several million agents all across India, can not be ignored as a great contributor to the National economy. These companies have also contributed immensely in implementing various government sponsored socially benefited welfare insurance schemes from time to time.


But post nationalisation era of 40 years of this Indian insurance sector has neither served the very purpose of its penetration down to the masses nor it has generated cost effective market competition lagging behind  in terms of its services to its citizens besides generating  negligible  improvement in its customer services. Overtaking of general insurance business by the government of India was much hyped over expected venture not only to please its stakeholders but to find out an alternative to spread benefits of insurance down to rural India and to generate rural employment as a part of ambitious 20 point programme by then government of the day.


Of late,  these Government General Insurance Companies are  primarily struggling for their survival,  mainly in terms of procuring profitable business, generating underwriting profits, maintaining requisite solvency levels,  reducing claim loss ratios, controlling management expenses, downsizing their huge manpower, adopting rapid changing advanced technological techniques and due to various other cost  efficient working parameters.  On top of  these operational constraints,  at the helm of their affairs,  remain  their  short tenured week higher management, mostly succumbing to their staff  unions mostly concentrating on their HR issues and relying on inaccurate feedback resulting in to incorrect decisions,  only add  to  their failure storey of pre occupation with purposeless issues at the cost of their core business. Lot of over benefits are being transferred to marketing  officers and office Incharges through various lucrative schemes those ultimately widen gape between marketing and administrative staff. Mostly business procurement meetings have turned in to eating and cheating bonanzas, by and large official tours have turned in to  gift procurement ventures, vigilance and audit exercise have shaped in to a mere formality, office discipline and decorum has much reduced.  Most importantly loyalty of employees towards its organization and their commitment towards the assigned work has drastically gone down. All such continuous reasons  over a longer period of time finally resulted in to substantial decrease in the overall performance of these PSU’s.


Currently three of these companies are functioning on solvency debentures and fund infusions from the government of India ( GoI ) while their big brother thrive on the assets accumulated by its ancestors. In nutshell, all these four government undertakings are in financial intensive care situation. Merger of these companies in to a single unit, as proposed earlier by GoI, will not only lead to the adding of their all offices and their all employees but also hamper their working due to synchronization of their different operational systems that will take sufficient time during which most of their existing business will evaporate. The operational cost per employee of the merger entity  is whopping high and disproportionate to viability of such organisation. Desparity among management and their ambitions shall always remain a bone of contention ehile discharging their responsibilities. In the meantime, minor disinvestment of one of its companies also did not yield  expected results  instead  exposed indecisiveness and week financial policy  of the government in this direction.

Then what is it, that is ailing these Indian general insurance giants under prevailing circumstances, which  is really not a million dollar question but a simple an introspection of their practices applied at the ground zero level, which majority of their stakeholders have failed to do it on time and in time.


Now that the government of the day  pre attempted to reverse this failure venture by lowering its stake and control in these companies by bringing in General Insurance Privatisation Bill in the ongoing session of Parliament with the main intention to regulate insurance business in India instead of running it. Concept of government is clear but the guarantee of their experiment is ambiguous as insurance operations I itself are risky to predict.

Earlier experiment of bringing private sector in to the sanctum sanctorum of Indian Insurance industry has steadily shown their growth and overtaking market share to nearly 55 % within 15 years of their operation. Their efforts on penetration to rural India with fulfillment of the social obligations as stipulated by the Indian Insurance Regulator besides providing improved customer services has established more potentiality of private players in this sector. Their low operational costs, reduced customer complaints, innovative products and adoption to digital technology present phenomenal picture of private players to learn and ponder about.



Now under the current digitalization era, insurance companies need not to have their offices down to every location at village level instead can efficiently run on cost saving efficient service on line model through their competent  representatives or qualified agents thereby reducing their salaried staff which in turn may reduce their management costs and increase their profitability.

Reducing the control and interference of government in Indian general insurance sector will not only give it a status of an industry that will run on profit but its share holders will also make it accountable for its services, which will be  key to its success.  Only regular and complete monitoring by the Insurance Regulator and their operational safety and security by the government of the day to its shareholders, need to be ensured  to bring back the glory to the insurance sector of India remains to be seen in coming days. Pleasing country’s some of the economic giants and reeling to the foreign pressure, privatization of Indian insurance portfolio must not prove only a process of making their hay in the sunshine.

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