Asia Times: Workers strike over end to insurance monopoly



	November 2, 1999	atimes.com

India/Pakistan

Workers strike over end to insurance monopoly
By Ranjit Dev Raj

NEW DELHI - Most of the 200,000 employees in India's nationalized insurance sector struck work on Friday to protest against a new bill seeking to end government monopoly of the business and open it to trans-national corporations (TNCs).

When the Insurance Regulatory and Development Authority Bill was introduced in the Lok Sabha (the lower house of parliament) on October 28, it brought together pro-liberalization parties in treasury and opposition benches.

Despite bitter rivalry with the ruling Bharatiya Janata Party, the opposition Congress party was clearly in a mood to support the bill which it originally proposed in 1996. Since the Congress commands sufficient strength in the upper house, this means that the bill is likely to be passed by both houses.

Resistance to the bill, the passage of which is seen as the acid test for the seriousness as well as the ability of the new government to pursue liberalization, now falls on the left-wing groups in parliament and to striking employees outside, who have charged the government with selling out to TNCs.

Despite the 26 percent cap on foreign equity stakes in private insurance companies stipulated in the bill, there has been a rush by TNCs trying to get an early foothold. Among those that have already forged tie-ups with Indian partners are Allianz AG of Germany, Prudential Life, Commercial Union and General Accident from the UK, the American International Group, GIO Australian Holdings and Sun Life of Canada. Others searching for Indian partners include Sumitomo, Tokio Fire and Marine, Yasuda Fire and Mitsui Marine of Japan and New York Life International and Mannlife of Canada.

Finance Minister Yashwant Sinha's assurance that no more than 26 percent of the government's Life Insurance Corporation (LIC) and the General Insurance Corporation would be disinvested did not convince left-leaning MPs who walked out of parliament in protest.

The new government's intentions were clear in the presidential address to the new parliament on October 25 which said it hoped to attract $10 billion in foreign direct investment annually, for which it pledged automatic clearance. Emphasis was laid on reform of the nationalized banks and financial institutions through ''reducing non-performing assets and strict application of prudential norms''.

The government-owned insurance firms can hardly be described as ''non-performing assets'', however, considering they distribute annually an average of $1 billion as bonus to policy holders. Further, according to D Raja, national secretary of the Communist Party of India, the public sector insurance companies serve as important instruments for social investment. The LIC alone, he pointed out, has invested nearly $2.5 billion in housing, another $2 billion in electricity, and has schemes for rural and crop insurance. During India's eighth five-year plan, which ended last year, the LIC invested $1.7 billion while a sum of $7.5 billion from insurance funds has been earmarked for infrastructure development in the ninth plan.

''Nobody seriously expects private insurance companies or the TNCs to invest in places which will not guarantee quick and excessive returns for themselves,'' Raja said.

According to Biplab Dasgupta, an economist and Marxist member of the Rajya Sabha (upper house of parliament), Western insurance companies are desperately looking for places like India for new investments because of saturation in their home markets. Fierce competition has made hundreds of Western insurance companies insolvent over the last 15 years. ''In the United States, one insurance company gets liquidated every month,'' Dasgupta said. A US Senate sub-committee report attributed this to ''scandalous mismanagement and rascality of pirates operating insurance companies and the ill-effects of frauds and incompetence''.

Yet, the US used sanctions for four years to pressurize India to open up its insurance sector to TNCs. However, a series of unstable coalition governments effectively prevented the passage of the bill - versions of which were introduced three times under different administrations.

India's life insurance companies were nationalized nearly half a century ago because of a spate of bankruptcies among the then existing private companies. Some 245 companies were merged to form the LIC, which now has investible funds of over $2.625 trillion. General insurance followed suit in 1973 to ''serve better the needs of the economy in the best interests of the community and to ensure that concentration of wealth does not result in common detriment''.

But such prudence has been thrown out of the window in the hope that private competition would help improve the industry and that it would stimulate the inflow of foreign investment. Dasgupta said there should have been attempts to improve the running of insurance and other public sector enterprises before handing over massive public assets to private companies and TNCs.

(Inter Press Service)