Insurance Vrs Cuts Marketing Cadre 32%

The second round of the voluntary retirement scheme (VRS) in the financial services sector has elicited good response, reducing 32 per cent of the marketing cadre in the four state general insurance companies.

This paves the way for the introduction of brokers, corporate agents and a new breed of agents as VRS-optees are re-recruited.

Fears of transfer and mobility and promises of being re-appointed as agents for the state insurer, saw 1,382 development officers taking the notified VRS, while another 2,370 opted for taking up a Class II administration job at present scales without the DO incentives. The maximum number of DOs opting for the scheme are from eastern India.

The central government notified a one-time special VRS with three different options for the 11,000-odd development officers in an effort to bring in reforms in the marketing of insurance products by the state players.

The scheme offered benefits almost identical to that offered to bank employees. Of the nine-lakh employees, over 1.2 lakh opted for VRS.

In the insurance sector, the government offered DOs three options: one, to continue functioning as a development officer without the bulk of cash incentives they enjoyed; second, to take up a Class II administration job at present salary without incentives; and third, to opt for VRS.

With the exit of 32 per cent of the marketing force so far, state insurance companies can now consider taking the services of brokers and tying up with corporate agents to hawk their products.

The VRS is the first step towards right-sizing state companies to bring down administrative expenses to meet section 40C of the Insurance Act, 1938, which stipulated that management expenses have to fall within 19.4 per cent of the premium income.

March 3 was the last day for DOs to apply for VRS. Despite many DO associations legally contesting the VRS at seven different high courts in the country, the first round of the scheme has met our expectations, said the secretary general of Gipsa (General Insurers