The Rediff Special / Gurudas Dasgupta

'To meet the problems of customers, is it necessary to invite private firms into the insurance sector?'

The Communist Party of India has been in the forefront of the national campaign to prevent the opening up of the insurance sector to private and foreign companies. In this extract from a recent speech in Parliament, CPI MP Gurudas Dasgupta explains why his party is opposed to reforms in the insurance business:

I thank you for inviting me to initiate a discussion on insurance in general and particularly on the question of inviting private firms, Indian and foreign, into the insurance sector. It is an important issue. It concerns insurance; it concerns millions of policy holders; it concerns the social welfare of the country; it concerns a vital part of the economic policy of the present government. I never say that all is well in the insurance sector. Nowhere is all well.

I say that the insurance sector has to be restructured, it has to be strengthened. There are problems in the insurance sector and the government needs to take action.

It is true that there are complaints from the policy holders and customers, but, the point is, to meet the problems of the customers, is it necessary to invite private firms -- foreign and Indian -- into the insurance sector? That is the issue.

To begin with, let me inform the House that the employees belonging to insurance, irrespective of their political commitments or union affiliations, are ready to sign a memorandum of understanding with the government, with the insurance authorities, to bring about improvement in the quality of service, particularly in relation to customer service and in relation to transparency. At the same time, it is also true that there is mismanagement and corruption in the insurance business.

Employees are second to none in bringing about a change in the situation. I may inform the House that if anybody, after signing a memorandum of understanding is found to be wanting, it is for the management to take appropriate action. Trade unions are equally eager to bring about an improvement in the quality of work and to plug loopholes that are there in the insurance business. While saying so, I have every reason to oppose the move of the finance minister, Chidambaram, to invite private firms, Indian and foreign, into the insurance business.

My friend Chidambaram has been a relentless campaigner in inviting private firms -- particularly the foreign firms in the insurance business -- in the country and abroad. Chidambaram extended a welcome to foreign insurance companies on June 18, 1996. On August 7, the finance secretary declared that restructuring of insurance was a priority. On October 2, probably the most auspicious day for making a statement on the soil of America, the minister again opened up and declared that foreign insurance companies were likely to be allowed next year.

A month later, the finance minister sent out the same signal that the highly regulated insurance industry will be thrown open in the next year's Budget.

Chidambaram advocates a policy, in my opinion, of partial privatisation on a wrong analogy with banks. But, that is not the issue.

To me the point is after the signal was given from the highest quarters, the Reserve Bank of India had well taken the message. I would like to know under whose authority and instruction the RBI has recently permitted the opening up of insurance liaison offices of four foreign companies at Bombay, namely, Yashuda Insurance Company of Japan, Zurich Insurance Company of Switzerland, Cigna International Insurance Company of USA and Allianez.

Taking the signal of the ministry of finance emanating from the action of the RBI, the leading industrial houses of the country lost no time in building up collaboration officially and formally with a number of foreign companies. For example, Tata tied up with AIG of USA, Bombay Dyeing tied up with the General Insurance Company of UK and DCM tied up with Sunlife of UK. On top of everything, the State Bank of India, which is still in the public sector even after disinvestment, has also tied up with a foreign insurance company.