Govt in­sur­ance firms post huge losses as merger de­lay hits biz NAMRATA ACHARYA

Business Standard - - COMPANIES - Kolkata, 9 Fe­bru­ary

With the merger ex­er­cise of three pub­lic sec­tor gen­eral in­sur­ance com­pa­nies — Na­tional In­sur­ance, United In­dia In­sur­ance and Ori­en­tal In­sur­ance — go­ing slow, va­can­cies are pil­ing up.

Ac­cord­ing to rough es­ti­mates, in the of­fi­cers’ grade alone, close to 600-900 posts are va­cant since the last one year. At the cler­i­cal and subor­di­nate level, the staff short­age is around 12,000, said sources in the com­pa­nies.

The im­pact is al­ready telling on the fi­nan­cial per­for­mance of the com­pa­nies. In ad­di­tion, at least two firms — Na­tional In­sur­ance and United In­dia In­sur­ance — sig­nif­i­cantly lost mar­ket share.

While Na­tional lost mar­ket share from 10.78 per cent in De­cem­ber 2017 to 8.63 per cent in De­cem­ber 2018, United In­dia In­sur­ance came down from 11.02 per cent to 9.27 per cent over the same time span.

The three in­sur­ance com­pa­nies have posted high losses in Q2FY19, given their pre­mium growth re­duced and pro­vi­sions rose. Mul­ti­ple rea­sons ac­counted for the losses, in­clud­ing man­power crunch and lack of clar­ity on merger.

“Lack of clar­ity on merger was a rea­son for the pre­mium to come down. Short­age of man­power was an­other rea­son. Fur­ther, the firms had to make huge pro­vi­sions over third party mo­tor losses,” said a se­nior of­fi­cial of the pub­lic sec­tor gen­eral in­sur­ance sec­tor.

Last year the gov­ern­ment made amend­ment in the Mo­tor Ve­hi­cle Act, 1998, which stip­u­lated al­most ten-fold in­crease in the min­i­mum com­pen­sa­tion for in­jury or death due to road ac­ci­dents. Ac­cord­ing to a se­nior of­fi­cial at a pri­vate sec­tor gen­eral in­sur­ance firm, while higher pro­vi­sion­ing norms ap­ply both pri­vate and pub­lic sec­tor firms, the pri­vate sec­tor com­pa­nies have been more pru­dent in se­lect­ing the cat­e­gory mix.

For ex­am­ple, they re­mained cau­tious in ex­po­sure to riskier in­sur­ances such as com­mer­cial ve­hi­cle in­sur­ance.

For United In­dia In­sur­ance, loss (be­fore tax, as af­ter-tax fig­ures were not avail­able) in Q2FY19 was ~868 crore (against a loss of ~36 crore be­fore tax in the cor­re­spond­ing pe­riod last fis­cal). For Na­tional In­sur­ance, the loss was ~707 crore in Q2FY19 (against a profit of ~90 crore in Q2FY18).

Lastly, for Ori­en­tal In­dia In­sur­ance, the loss fig­ure stood at ~240 crore in Q2FY19 (against a profit of ~200 crore over the cor­re­spond­ing pe­riod in FY18).

While the gov­ern­ment has not put any of­fi­cial freeze on re­cruit­ment, there has been no fresh re­cruit­ment since Fe­bru­ary 2018 as the Union Fi­nance Min­istry ad­vised the com­pa­nies to put the new staffing plan on hold till the merger ex­er­cise was com­plete, ac­cord­ing to a top of­fi­cial of a pub­lic sec­tor gen­eral in­sur­ance com­pany. No­tably, in the next two to three years, about 25 per cent of work force, es­pe­cially in the cler­i­cal level is ex­pected to re­tire.

Each year, ev­ery pub­lic sec­tor gen­eral in­sur­ance firm re­cruits 200-300 new staff at the of­fi­cers’ level, in gen­eral. The re­cruit­ment at cler­i­cal and subor­di­nate grades are on hold for the last four to five years due to cost-cut­ting mea­sures.

“We will take up the mat­ter of staff crunch with the gov­ern­ment,” said a se­nior ex­ec­u­tive of Na­tional In­sur­ance.

Ac­cord­ing to K Govin­dan, Gen­eral Sec­re­tary of the Gen­eral In­sur­ance Em­ploy­ees’ All In­dia As­so­ci­a­tion, each of the state-owned gen­eral in­sur­ance firms need to re­cruit at least 3,000 cler­i­cal and subor­di­nate staff. There­fore, at the cler­i­cal level, the to­tal staff short­age stands at close to 12,000.

In 2007-08, when the to­tal un­der­writ­ten pre­mium of the four pub­lic sec­tor gen­eral in­sur­ance com­pa­nies was around ~16,831 crore, staff strength in grade 3 (cler­i­cal) and grade 4 (subor­di­nate) was around 43,654, ac­cord­ing to data from Gen­eral In­sur­ance Em­ploy­ees All In­dia As­so­ci­a­tion.

Ac­cord­ing to Govin­dan, in 2017-18, while the to­tal un­der­writ­ten pre­mium rose to ~67,920 crore, the staff strength in the two cat­e­gories re­duced to nearly 33,386.

In 2018, ahead of the gov­ern­ment an­nounc­ing its plans to merge the three pub­lic sec­tor gen­eral in­sur­ance com­pa­nies, Na­tional In­sur­ance had planned to re­cruit about 600 peo­ple at the cler­i­cal level.

How­ever, the re­cruit­ment plan was put on hold on ac­count of the merger plan, said peo­ple with knowl­edge of the mat­ter.

As on March 31, 2016, the to­tal staff strength of the four gen­eral in­sur­ance com­pa­nies was about 64,130 — with United In­dia In­sur­ance at 16,345; Ori­en­tal In­sur­ance at 13,923; Na­tional In­sur­ance at 15,079; New In­dia As­sur­ance at 18,783 — ac­cord­ing to data avail­able with the Union fi­nance min­istry. The fate of the merger of the three gen­eral in­sur­ance com­pa­nies is also in fire, as it would de­pend upon the pol­icy stance of the gov­ern­ment elected in the up­com­ing gen­eral elec­tions, said a se­nior of­fi­cial of pub­lic sec­tor gen­eral in­sur­ance firm.

In the Fe­bru­ary 2018 Bud­get, the cen­tral gov­ern­ment an­nounced its plan to merge three pub­lic sec­tor gen­eral in­sur­ance firms —United In­dia In­sur­ance, Na­tional In­sur­ance and United In­dia In­sur­ance.

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