AIIEA opposes govt's move to open top PSU posts to private sector

AIIEA says allowing private executives to head PSU insurers undermines nationalisation and could demoralise staff, while experts see scope for merit-based reforms

The All India Insurance Employees’ Association (AIIEA) has opposed the government directive seeking to open up top posts in the state-owned insurance companies to the private sector, saying this will lead to greater private influence and “eventual privatisation”.

 

Stating that opening the top-most positions to outsiders from the private sector will demoralise the officers, the association said the move strikes at the very ethos of nationalisation, which ensured that banking and insurance serve the public interest rather than private profit. 

 

“The revised guidelines open the door for greater private influence and eventual privatisation of these eminently successful public sector financial institutions,” a statement by AIIEA said.

 

Life Insurance Corporation of India (LIC) has four managing directors (MDs) apart from the MD & CEO, and the government has said that one of the MD posts will be open for all the eligible candidates from both public and private sectors. Also, the role of chairman managing director (CMD) in state-owned non-life insurance companies has also been opened up to the private sector.

 

The statement by the employees’ association also raised concerns regarding the impact on internal career progression. “Opening the top-most positions of these vital institutions to outsiders from the private corporate sector by way of lateral entry will demoralise the officers already giving their best to these institutions and will be fraught with the possibility of disrupting internal career progression,” the statement said.

 

The association also noted that removal of annual performance appraisal report (APAR)- based merit evaluation and employing private HR agencies for behavioural assessment will fundamentally alter the appointment framework mandated by the Parliament. 

 

Meanwhile, experts say the government’s move aims to implement merit-based promotions instead of those based on seniority. Also, the knowledge and experience of the private sector player will be of key advantage. However, it will have to be seen whether the private sector player is able to adjust to the public sector environment along with reduced pay offered in these companies, they said.

 

R Doraiswamy is currently the MD & CEO of LIC. Sat Pal Bhanoo, Ratnakar Patnaik and Dinesh Pant are the other MDs. Recently, the Financial Services Institutions Bureau has recommended R Chander as the fourth MD of the insurer. Experts believe that Chander's appointment is not likely to be affected by these changes. However, Bhanoo’s tenure is expected to be completed by January 2026 and his successor’s appointment might be subject to these norms. Meanwhile, the tenure of N Ramaswamy, CMD of state-owned reinsurer – General Insurance Corporation of India- ended in September 2025.

 

“This move is very beneficial for the public sector as it will understand how the private sector functions. The insurance sector has matured enough in the last 25 years to get competent candidates from the private sector who have expertise and domain knowledge which the public sector can utilise. After listing, LIC has already filled certain positions like CFO, chief compliance officer etc. from the open market. There is no dearth of talent in the private sector. Even today, the positions of member life, non-life etc. in Irdai are held by persons from the private sector,” Nilesh Sathe, former member, Insurance Regulatory and Development Authority of India (Irdai), said.

 

“However, whether the person will be able to make considerable change or not will have to be seen. Also, it will have to be seen if candidates from the private sector would be willing to take substantial reduction in salary and perquisites to join as LIC MD. The move may affect the chances of the existing eligible candidates for the position of MD. What benefit it draws to the public sector will have to be seen.” Sathe added.