Insurance employees' union oppose FDI

IEU plans to request important personalities and opinion makers to write to Finance Minister opposing this move

The Insurance Employees’ Union (IEU) has decided to organise a day’s strike to protest the decision of the Centre to increase the Foreign Direct Investment (FDI) in insurance sector and to pass the Insurance Laws (Amendment) Bill 2008 pending in the Rajya Sabha.

General secretary of the IEU Dharwad unit Uday Gadagkar said, the protest is part of the campaign launched by the All India Insurance Employees’ Association (AIIEA). The date of strike is yet to be finalised. Terming the NDA government’s move disastrous, the IEU is organising a campaign in the form of a request to important personalities and opinion makers to write to Union Finance Minister opposing this move.

“Already over 5,000 important personalities, organisations, writers, lawyers, doctors, Jnanapeetha Awardees, peoples’ representatives and other opinion makers have written to the Finance Minister asking him to drop the proposal in the interest of the nation,” Gadagkar said.

Finance Minister Arun Jaitley, in his Budget speech announced that foreign equity limit in the insurance sector would be hiked from the present 26 per cent to 49 per cent and the Insurance Laws (Amendment) Bill will be taken up and passed soon.

The IEU feels that this position taken by the BJP led NDA government is a complete U-turn of the position it had taken earlier while in opposition. Earlier the decision of the UPA government to hike the FDI in insurance sector to 49 per cent was stoutly opposed by the BJP arguing that it is not in the interest of the Indian economy.

The Parliamentary Standing Committee on Finance headed by Yashwant Sinha (former Finance Minister) submitted its recommendations in December 2011, unanimously rejecting the recommendation for a 49 per cent equity holding by foreign partners.

The IEU has disputed the NDA government’s argument that is being advanced to increase the FDI limit is — under performance in the insurance penetration and density. “But Insurance penetration and density depend upon the availability of disposable incomes. The opening up of the sector failed to increase the insurance penetration and it did not succeed in mobilizing resources for investments in infrastructure and social sector. As per the IRDA report, the lapsing ratio and claim repudiation ratio in private companies are very high,” the IEU said.

“The Finance Minister’s assurance that despite the hike in the foreign capital, the management control will remain with the Indian partners is unconvincing. Even with 26 per cent equity the foreigners are heading a number of insurance companies. Today, there is a need to mobilise the small savings of people for investment in social and infrastructure sector. This can be effectively done only by the public sector insurance companies,” it added.

The IEU said, “Instead of increasing foreign equity, it is necessary to give more functional autonomy to the public sector insurance industry to garner savings of the people for the growth of the economy. The hike in foreign equity limit will only help foreign capital to gain greater access and control over the household savings to the detriment of the national economy.”

“This apart, the Insurance  Laws (Amendment) Bill also paves way for disinvestment of public sector general insurance companies. These companies are not only facing competition from private players but also competing among themselves. It is unfortunate that instead of merging these public sector general insurance companies to meet the challenges from the private players the government proposes to weaken them,” the IEU added.