INSURANCE EMPLOYEES submit memo to Manish Tewari

Ludhiana, January 31, 2013: As per the decision of All India Insurance Employees Association (AIIEA) and campaigning against the Insurance Laws (Amendment) Bill 2008, in which up till now the members have met more than 300 Members Of Parliament, the members of Ludhiana Division Insurance Employees Association under the leadership of Amarjit Singh, Divisional Secretary met Manish Tiwari, Congress MP from Ludhiana, and Union Minister of State for Information and Broadcasting (IC) and handed over the memorandum and submitted their view points on their opposition to the bill.

Harbans Singh, P.P Singh, Maan Singh, Jagtar Singh and K.K. Malhotra accompanied the delegation.

They apprised him that the Standing Committee of Parliament headed by Yashwant Sinha has opposed the increase in FDI cap in insurance sector from 26% to 49% keeping in view the international finance crisis in 2008 which was caused by the mismanagement of these private insurance companies in those countries, mentioning the report of Reserve Bank of India (RBI) (2011-12) they told that the total FDI of $22 billion came into India whereas its outgo was $26.1 billion belies the argument of the government that nation needs FDI for the investment and development of the infrastructure.

Moreover in the past 5 years, FDI in India is mainly flowed into the service sector (with an average share of 41%) followed by manufacturing sector (around 23%) and FDI inflow is very marginal in the infrastructure development.

Despite very less disposable income of the people, the insurance penetration in India is 4.4% whereas the world average is 4%; USA 3.5%, Australia 3.1%, China 2.5% and Brazil 1.5%. The argument of the government that by promoting the FDI in India, Insurance Penetration (ratio of the premium underwritten to the GDP) will increase is not tenable.

The Statistics in the memorandum reveals that, the total FDI in life sector (from 2001 – 2011) is only Rs. 5723 Crores whereas for the same period LIC has paid dividend of Rs. 7848.13 Crores to the government. As on date the investment in government and social sector by LIC is Rs. 819835 crores. The investment by LIC in the 11^th Five Year Plan (2007 – 12) is Rs. 704151 crores. Out of the total investment in the infrastructure by life insurance industry LIC alone has invested in infrastructure more than 90%.  LIC alone has paid Tax to the Govt. Rs. 4424.77 Crores In 2011-12 and Dividend to be paid to the Govt. on the equity of Rs. 5 crore for the same year is Rs. 1281.22 Crores. So the LIC alone in one year has paid the amount to the government which 22 private insurance companies in life sector could pay from the year 2001 till 2012. As per report of World Economic Forum which held its meeting recently India is ranked 1st in the world (life sector) and 3^rd in the world (general sector). These ranks have been given to India on the basis of premium collection, insurance penetration and insurance density.

They also submitted that the Insurance Laws (Amendment) Bill 2008 has a provision to raise the capital by public sector general insurance companies from the market. These companies have an asset base of Rs. 1,02,000 crore, a reserve of Rs. 15,000 crore and capital of Rs. 550 crores and as such they do not require any capital infusion from the market. This provision in the Insurance Laws (Amendment) Bill allows private capital to enter into the public sector general insurance companies with their nefarious designs. Even without merger these public sector general insurance companies are giving tough competition to the private companies and total gross direct premium income last year (2011-12) of the public sector general insurance companies is Rs. 30531.61 crore and the growth reflected in the premium collection is 21.39% which is far ahead of these private insurance companies in general sector.

The delegation demanded that this clause in Insurance Laws (Amendment) Bill 2008 be dropped in the interest of nation. As it will be suicidal for the economic sovereignty of this country and it leads to have a control on the household savings of this country by foreign players and not the development of infrastructure.

Tiwari repeated his and their party stand in favour of increase in FDI in insurance to the delegation.