State-Owned Insurers Go The Banks Way, To Unveil Vrs

The hugely successful voluntary retirement scheme (VRS) implemented by public sector banks is set to be adopted by state-owned insurers for their class II employees who are of the level of development officers.

Senior executives in state-owned insurance companies said nearly 25 per cent of the 13,000-odd class II employees would be eligible for the package that would entail an outgo of around Rs 6 lakh per employee. With nearly 3,250 employees eligible for the proposed VRS, it would cost the insurers around Rs 200 crore on class-II employees.

The class I officer cadre has, however, rejected any move to launch a VRS. General Insurance (public sector) Association (Gipsa) officials would meet representatives of the class III employees association in Chennai from January 19-21 to get their consent on a VRS. The class-II employees associations have agreed for the manpower rationalisation programme.

 

The four public sector general insurers -- Oriental Insurance, New India Assurance, United India and National Insurance -- have a staff strength of over 80,000 employees.

The VRS package -- originally prepared by the Indian Banks' Association and implemented by all PSU banks, except Corporation Bank -- entails a compensation of 60 days for each year of service or salary for the remaining years of service, whichever is less. Employees with 15 years of service and who are over 40 years in age would be eligible to opt for VRS.

Executives said the insurance companies would, however, make cash payments and would not issue any bonds as was done by some public sector banks.

The timing of the launch of the VRS has not been decided. Prior to the launch of the scheme, the four insurance companies have put in place a strict transfer policy and a plan to rationalise the office network. The transfer policy entails redeployment of employees in any region of the country.

The need to implement a VRS package stemmed from the fact that the staff cost of the four insurers is very high and is putting a strain on their balance sheets. Staff costs are estimated to be as high as 27 per cent of the gross premium income and the cost has been rising every year.

With the entry of corporate agents into the system, development officers would slowly end up duplicating the job.