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Parliament approves demerger of GIC subsidiaries

Parliament on Tuesday approved the demerger of subsidiaries of the General Insurance Corporation into four independent companies and exclusively entrusting the reinsurance business to GIC thus enabling them to face competition from the MNC-backed private players in the liberalised insurance sector.

The Rajya Sabha passed the Insurance Amendment Bill, 2002 and the General Insurance Business (Nationalisation) Amendment Bill, 2002 after Finance Minister Jaswant Singh gave an assurance that no retrenchment of the employees would be allowed in the public sector insurance companies.

However, he indicated that there could be general trimming due to computerisation. ''Clerical offices could also be levelled out," the minister said.

He also assured the leader of the Opposition Manmohan Singh that the large number of existing agents need not fear any threat to their business, as these companies would continue to use their services.

The passage of these bills, which had already been approved by the Lower House, would enable the use of technology like smart cards and credit cards in the payment of premiums. They would also open up entry of the cooperative sectors in the insurance business.

Congress and Left members clashed in the House over further opening up of the insurance sector with Murli Deora seeking divestment of the Life Insurance Corporation of India. He dismissed Dipankar Mukherjee's contention that the demerged companies of the General Insurance Corporation would be wiped out of the business.

The CPI-M member argued that Parliament was writing an obituary of the four GIC subsidiaries - the National Insurance Company, New India Assurance, the Oriental Insurance Company and the United India Insurance Company. In the age of merger and acquisitions and at a time when the size matters, the government was demerging these firms, which would disappear from the competitive business.

Mukherjee's argument was contested by Deora who said each of the four companies had strength in one geographical area. While the Left member supported by his colleague Nilotpal Basu feared the government would resort to retrenchment of the state-owned insurance companies, the Congress member contended that the opening up of the sector had resulted in 51,000 new jobs and not a single existing job had been lost.

Deora also advised the finance minister to consider divesting some shares in LIC when it commands over 96 per cent of the market. His suggestion was vehemently opposed by the Left members.

Earlier, Congress member Kapil Sibal said that the new players were only interested in the lucrative business and not in the third party insurance. The public sector firms, which are required to do the third party business as also cater to the rural areas would thus be deprived of the level-playing field.

Bharatiya Janata Party member Manohar Kant Dyani said the insurance firms should cater to the peculiar requirements of the people in the hilly areas.

Telegu Desam Party member P Prabhakar Reddy highlighted the importance of the crop insurance and suggested creation of a separate company for the purpose.

Jaswant Singh said, even if there was any move to re-merge the four companies, about 1000 branch offices and some others would have to be closed down due to modernisation and added, there was no justification in stating that demerger would lead to closing down of some offices.

He said there could be some "levelling" of the staff in the insurance offices but not on a large-scale.

The minister said there was no proposal to bring in Voluntary Retirement Scheme in the state-owned insurance companies.

He also said it was mandatory on the part of all insurance companies to undertake business in rural areas.

He assured Manmohan Singh that interests of "all old and loyal" insurance agents would be protected.

UNI, PTI

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