Listing of LIC is akin to killing golden goose
US Trade Representative Karlas Hills virtually threatened Indian Govt in 1989 with Super 301 Sanctions, if the Indian Insurance sector was not thrown open to MNC Insurance Companies. Her arrogance was in full flow when she stated that "We will prise open Indian insurance industry"
VP Singh, the then PM of India, who was leading the coalition government with Left and other parties, simply brushed aside the threats of USA." Hell with your sanctions, but we will not privatise Indian Insurance Industry", VP Singh emphatically announced. This is the audacity of patriotism!
This is patriotism in real parlance, not the jingoistic fervour which is being witnessed by us in the guise of patriotism! Exactly 10 years down the lane, IRDA bill was enacted in 1999 by a so-called patriotic government, by facilitating penetration of foreign and private insurance companies in Indian Insurance Industry.
In 2015, once again FDI limits in Indian Insurance Industry were spiked to 49 per cent so as to roll out red carpet welcome to Barak Obama, the then US President . It is praiseworthy that despite the repeated attempts to scuttle the public sector LIC , it is happening in the reverse.
Even after facing bitter competition with 23 private players for more than 19 years, LIC is cruising with 70 per cent market share. Though the Govt had opened doors for MNC /private companies, people of this country are fully rallying behind LIC.
There is a big saga behind this unflinching trust on LIC. Life insurance is a long-term investment. It is nothing but selling of only promise to the policy holder. That is the reason architect of our Constitution, Dr. Ambedkar wanted Insurance should be State monopoly as it cannot be equated with other financial products.(Insurance is Contract of Utmost Uberrima Fides)
The big movement led by All India Insurance Employees Association supported by progressive forces compelled the then Nehru Govt to nationalise Insurance Industry in 1956, after amalgamating discredited 256 private Insurance Companies.
The swindle and wholesale fraud perpetrated on the gullible policyholders by the then private insurance companies opened the eyes of Govt and it prompted them to nationalise Insurance Industry.
LIC came into being in 1956 with just Rs 5 Crores Capital from Govt of India and started it's journey with the Motto- People's money for People's welfare. The journey of LIC is so exhilarating that it earned the massive goodwill and trust of Crores of Policy Holders .
Today LIC is being equated with Trust and many call it rightly-'Trust,thy name is LIC'. The asset base of more than 31 Lakh crores ,highest for any Public Sector Insurance Company in the Asia, the customer base of 40 crores speaks volumes about the extent of trust reposed on it by the people of this Country.
True to its motto, LIC had invested Rs 29,84,331 crores up to 31st March 2019, for the benefit of community at large. LIC had invested 21,40,106 crores as at 31st March 2019 on Central, State Government Securities, housing, Irrigation roads etc.
On its investment of Rs 5 crore in 1956, LIC till now had paid more than 20,000 crores towards dividend to government of India. LIC had invested 2.23 lakh crores in Central/State government securities with an average annualized yield of 8.25 per cent. Can we visualise the same from any private company ?
LIC settles 98.27 per cent of claims and always has been world number 1 in claim settlement. LIC has been paying thousands of crores by way of income tax ,GST, sales tax etc. Still it is contributing more for the development of our country.
FDI hike is a ruse to weaken LIC
The tall claims that FDI will bring in millions of dollars to propel the growth in insurance sector and help in infrastructure development were proved hollow.
After opening up of the insurance sector the total FDI which came into our country is a paltry Rs.13, 068 crore (Rs. 9565 crore in Life and Rs. 3503 crore in General). During the last 4 years , only Rs 1,000 Additional FDI came in Indian Insurance Sector, which is trifle, despite raising FDI limits from 26 per cent to 49 per cent.
On the other hand, the LIC in the last two years (13th Five Year Plan) has already given an amount of Rs. 7.02 lakh crore to the cash strapped govt. Moreover, most FDI and FIIs have come into our country only to indulge in speculative investments and to take over Indian companies through acquisitions and mergers.
Finance Minister announced in the recent Budget that the Govt of India had decided to allow 100 per cent FDI in insurance intermediaries and is proposing to increase FDI to 74 per cent or more in insurance companies.
Whose interests it will serve?
Total Equity inflows in Indian services sector for 2018-19 is 9 billion dollars (roughly 63,000 crore), whereas LIC alone is providing around Rs 2.8 lakh crore to Indian Govt towards Investments.
Why further FDI hike in Insurance should be allowed, when it is only trifle and not useful for the productive development of our country? After 18 years of opening up of insurance sector, the insurance penetration (insurance premium as a percentage of GDP) levels in life sector has come down from 3.47 per cent to 2.76 per cent.
The insurance penetration has declined because the private insurance companies are engaged in selling only ULIP and big- ticket policies and are concentrating mostly on urban clientele.
The argument that FDI will create employment is a rude joke. The country is now facing the worst employment crisis in its history. No new products have come except ULIPs which are not considered as conventional insurance products. Moreover, no new technology has come for the benefit of customer servicing.
In fact, LIC in a systematic manner upgraded its technology from time to time keeping in mind the customer expectations and requirements. Today it is recognized as the "Numero Uno" technology user in the country.
As such, all the arguments put forth by the votaries of privatisation have fallen flat.
LIC is acting as stabilising force, whenever stock markets are in disarray. Time and again it has been coming to the rescue of Indian financial markets by making huge investments. It has independent directors in 54 companies.
Listing is nothing but first step towards privatisation
The pen pushers of international finance capital are propagating blatant lies that listing of LIC will unlock shareholder/intrinsic capital value, bring transparency and accountability, improve good governance and help LIC to raise capital from markets for its growth and spread.
This is sheer nonsense and aimed at hoodwinking the people. There is no need for LIC to raise resources from the markets. LIC itself is making around Rs 3 lakh crore investments every year for the development of the country.
The extent of LIC is so sweeping , not just in India but among various nations. It had thousands of offices across the Country. Former Finance Minister aptly remarked that It is the most reputed 3 word letter (LIC) ,known across length and breadth of our Country.
Many insurance giants in the world including AIG faced turbulent situation ,after 2008-09 economic crisis.AIG was virtually bailed out by US Govt by pumping nearly 5 lakh crores. Whereas in India, LIC and other PSUs provided stability to Indian Economy.
Whenever natural calamities like earthquakes, cyclones, tsunamis occur in various parts of the country, LIC fully settles all the claims, by waiving the statutory requirements also. This gesture of LIC is unparalleled in the entire world.
When terrorists targeted World Trade Centre on 11th Sep,2001 in USA, Insurance companies of USA stoutly refused to settle the claims, till they were supported by Federal Government. LIC is going to invest Rs 1,50,000 crores in Railway ,recently committed to invest Rs 1,25,000 crore for the development of national highways.
Will any private /corporate insurance company shell out such huge public investment ?? Once LIC is listed in Stock exchange, Will it be allowed to continue to invest for the development of our country?
It is an open secret that any listed company has to work in the interests of the shareholders only. The experiences of VSNL ,BALCO, Centaur Hotel are pointers in this regard.
It is also our experience that during the process of listing, the real value of the institution will be downgraded so as to pamper to the insatiable greed of few companies. Hence, it is preposterous to imagine that real value of LIC will unfold after its listing.
There is also a sinister agenda to tinker with LIC Act 1956 so as to convert LIC into a company before listing it in the stock market. There are apprehensions that this move may be followed by withdrawing State sovereign guarantee on LIC policies.
(Entire policy monies and accrued bonuses of LIC are guaranteed by Government of India).Govt gave Sovereign guarantee to the LIC in order to protect the policy monies of customers as thousands of policyholders were duped by then 245 private Insurance Companies.
There is no occasion since 1956 till now, for LIC to invoke this guarantee. In fact, LIC had settled claims worth Rs 70 lakh , out of the Capital of Rs 5 crore given by Govt of India. Being the 100 per cent Owner of LIC, Government had to give guarantee, or else who will give guarantee ?
It is crystal clear that the arguments to list LIC doesn't hold water. The Govt is in tearing hurry to carry out its agenda to disinvest many PSUs including LIC, to fill the coffers of treasury.
LIC is a golden goose. It is lifeline for Indian economy and providing economic sovereignty to our country.
Any attempt to tinker with the LIC Nationalisation Act,1956 will seriously jeopardise the interests of 40 crore of policyholders and to the long term interests of our Country.
It is high time the Govt repeal the unjust imposition of GST on insurance policies and provide separate tax slab for insurance premiums for the development of Insurance Industry in our Country. These would surely be called patriotic acts and will usher in Achhe Din for our country!
(The author is Vice -President, South Central Zone Insurance Employees Federation)