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The Rediff Business Interview/ N M Sundaram

'India wants the US to lift its economic sanctions and opening the insurance sector is the price'

N M Sundaram is the soft-spoken general secretary of the All-India Employees Union, the country's largest and oldest insurance trade union. Life Insurance Corporation and General Insurance Corporation workers number over 200,000 people, and the AIIEA represents 80 per cent of them.

With the success of Friday's strike to protest against the move to introduce the Insurance Regulatory Authority bill in Parliament, the AIIEA is all set to intensify its struggle and ensure that LIC and GIC's monopolies continues unhindered. Sundaram spoke to Amberish K Diwanji on his opposition to the bill.

Tell us something about your current agitation.

We are protesting against the move to privatise the insurance sector, whether to Indian firms or to Indian companies with foreign equity. We feel the move to privatise is nothing but succumbing to the pressure from the United States in the aftermath of the Pokhran nuclear tests. India wants the US to lift its economic sanctions and opening the insurance sector is the price.

Today we have organised this nationwide protest which is a total success. All over, 200,000 insurance employees have participated. We plan to hold another strike on the day after the bill is introduced in the Lok Sabha. We are also mobilising public opinion against the move. So far we have collected 6.5 million signatures against the privatisation move and over 2 million people have written to us expressing support.

Thus, even if the government manages to get the bill passed, our struggle will continue.

We doubt if the government will get the bill passed. We have lobbied with various MPs, cutting across party lines, and many of them are sympathetic to our cause. We have given them evidence on how opening the insurance sector will harm the country.

Why do you oppose allowing the private companies into the insurance sector?

It is totally unnecessary. Just look at our track record and compare it to the rest of the world. LIC has the world's best settlement claims record of 97 per cent, while GIC settles 74 of all claims. The world's average is just 40 per cent. Even the world's biggest insurance firm, Prudential, has settled only 45 per cent of its claims.

Moreover, when private companies fail, then the investor's money is lost and the poor investor is the sufferer. Last year, over 300 insurance firms failed worldwide. If that happens in India, what will happen to the poor who have no other social security? The investors receive only a fraction of the returns promised to them.

Then there are complaints that LIC has not penetrated the market sufficiently. But 50 per cent of India lives below the poverty line, and many barely above it. Insurance is a middle class phenomenon. You cannot compare the insurance business of India with a per capita income of $ 300 and that of Malaysia, with a per capita income of $ 3,000. Even then, LIC has begun to garner investments from the lower middle class by offering them lower premia. This is because we cross subsidise the premium from the others.

LIC's premium is among the highest in the world. Will not competition bring about lower premia besides mopping up domestic savings for investment?

I agree that our premium is among the highest, but it is because are forced by government laws to put our investments into the social sector with a four per cent return. Which financial firm in the world will invest in institutions and sectors where the returns are an abysmal four per cent? We invest in municipal corporations enabling them to provide the citizens of India with drinking water. Thus, we have our handicaps that force us to charge such high premia.

Private insurance companies will invest their money in private companies, not in the social sector. We in India believe that insurance firms will bring in foreign direct investment for infrastructure. Yet, records show that private insurance companies spent 75 per cent of their money on acquisitions and mergers, rather than in creating fresh assets. Moreover, their investments are in consumer sector companies with high returns. Thus to believe that allowing private insurance will bring in funds for infrastructure is a myth.

Today, savings are stuck at 25 per cent of the nation's GDP, and have been so for quite a few years now. Unless this goes up, there is no way that insurance savings will go up. Even then, LIC has grown at 20 per cent annually, we continue to collect savings.

And to give another aspect: for the Ninth Plan, the government needs Rs 9 trillion (9,000 billion), LIC has offered to provide Rs 1 trillion. GIC has offered another 300 billion.

Still, worldwide financial services are integrating. Can we resist this trend of globalisation?

I think we should. There is a growing realisation that governments do have a role and everything cannot be left to market forces. Even George Soros has warned against unbridled capitalism.

But apart from that, there is no general agreement on financial services. The World Trade Organisation has postponed negotiations on this tricky subject to 2000, so why are we in a hurry to open this sector before the other countries? Even in Japan the insurance sector is controlled while no Indian firm can be registered in the US.

What about the quality of service in LIC?

I agree there is scope for improvement. There always is, no matter how good an institution. And our union is willing to implement any measure to improve our services or cover our shortcomings. When former finance minister Palaniappan Chidambaram met us to seek our opinion on opening the insurance sector, we had told him, 'Tell us our weaknesses, tell us what you want, and if we don't achieve it in five years, you open the sector'. But there was no response. And the same is for this government.

Still, the previous United Front government and the present BJP-led government, both have spoken on opening the insurance sector. Surely the government must have its reasons.

In the case of the United Front, the Left parties supporting it were against opening the insurance sector. But Chidambaram nevertheless went ahead with it. I think it is because he is a very individual person, with strong convictions and opinions. There is no doubt that he is brilliant, and this leads him to think he knows best. That is why he must have introduced the bill.

And the present government's move stems from the current Jaswant Singh-Strobe Talbott talks following the nuclear blasts. The BJP had earlier opposed, in the name of swadeshi, foreign participation in the insurance sector. Today, they have decided to allow them and the reason can only be US arm-twisting. What was the need for the nuclear blasts for a poor country like India? And we can't even stand up to the US pressure today.

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