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January 3, 2000

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The Rediff Business Interview/G Krishnamurthy

'LIC will be more than a match for competitors'

LIC chairman G Krishnamurthy The budget session of Parliament is expected to witness fireworks particularly when debating the Insurance Regulatory and Development Authority Bill, recently passed in the Lok Saba. The Life Insurance Corporation of India is under focus, what with widespread fears that foreign insurance companies will drive Indian insurance companies out of business. LIC chairman Gnanasundaram Krishnamurthy believes otherwise. In an interview with V Gangadhar, he says LIC is gearing up to face new challenges. Excerpts:

What is the general mood in the corporation now that the IRDA Bill had been passed? Employee unions backed by the Left parties are still bitterly opposed to the bill.

LIC Logo The general mood is one of confidence and optimism. This had been created following changes in the organisation effected over the years through many innovations designed to provide better customer care and servicing. You see, the market potential is large enough for more players and LIC had prepared itself suitably to operate in the competitive environment.

Email this interview to a friend Yet, employees and agents continue to agitate against the bill....

LIC is a large organisation served by a huge workforce. There may be grievances at various levels. The insurance bill is a major development and sections of the employees are opposed to it, on ideological grounds. Others fear privatisation may affect the market-share of the corporation. These fears are unfounded. Through our HRD (human resource development) exercises and in-house communication systems, the facts are percolating to all levels.

Hundreds of thousands of LIC agents, despite lacking academic qualifications, had been very active in getting business for the corporation. The bill stipulates that they should undergo certain tests in future. The agents seem to resent this.

I agree that our agents had done remarkably well over the years. Since the IRDA is yet to frame regulations on this issue, I cannot comment on this for the time being

What is the logic and philosophy behind the privatisation move? Lack of progress by the LIC?

I don't think so. In the 1950s, LIC handled 942,000 policies and today, we are handling 14.8 million policies. We have 650,000 agents and 125,000 employees. Yet, we are able to cover only about 110 million out of the 350 million insurable population. The untapped field is huge, offering scope to competitors. LIC cannot grow beyond a certain level. Privatisation of insurance will also generate more funds for the government. Out of our annual income of Rs 360 billion, we invested nearly Rs 120 billion in national and state government schemes.

Despite such huge investments, LIC, by and large, had remained free from any scams or investment scandals. How did this happen?

From the beginning, LIC had followed rigid regulations and has several control mechanisms. All possible investment plans are checked and counter-checked. I guess there is more honesty and a sense of social commitment among our staff. We are not interested in making a quick buck.

Will things change now? After all, foreign competitors are bound to take more risks and invest more aggressively hoping for high returns. LIC has to play the game according to the new rules.

Our present investment policy is as laid down in the Insurance Act and government rules and guidelines. Now that the IRDA has been set up to stipulate changes in the investment policy through regulations on the subject, we will be adopting whatever policies recommended by the regulatory authorities.

All these indicate a basic difference in approach between LIC and the private agencies.

It had always been like that. Let me make it clear. LIC is not an investment venture. It is understood all over the world that insurance cannot be viewed purely as an investment. LIC covers life risks and cannot be compared to other savings schemes which offer more.

After insurance was nationalised in the 1950s, it had to reflect our political philosophy. We had opted for a socialistic pattern of society and LIC had to contribute its bit. When insurance was in private hands before independence, the benefits did not reach the people. Unlike insurance firms abroad, LIC's sole motive is not profits. We have social commitments to the Indian people.

Are these views valid in the post-IRDA Bill period?

Why not? We shall face the competition with our own methods. LIC will have to be more alert. We have to work hard and show more initiative. This is a challenge which sounds exciting.

Our Grievance Redress Cells and Claim Review Committees are working with zeal and a sense of purpose.

LIC's Inter Active Voice Response System and the Wide Area Network, will help customers enormously and simplify the existing routine work considerably. Make no mistake, we will be more than a match for our competitors.

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