Employees will campaign against LIC privatisation in upcoming polls: AIIEA

Employees who are wedded to democratic principles and strengthening public sectors and their families will oppose privatisation of Life Insurance Corporation (LIC) tooth and nail in the upcoming elections, says Shreekant Mishra, general secretary of All India Insurance Employees’ Association (AIIEA).

The veteran leader is of firm belief that LIC privatisation is a part of the overall economic policy being pursued by the BJP-led NDA government at the Centre. Given the penchant of the current regime for privatising anything and everything under the sun, privatisation will naturally become an important issue. One has to note that the Modi government accounts for a whopping 72 per cent (Rs.4.48 lakh crore) of what has been earned from disinvestment since the process first started in 1991. So the basic ethos of this government is against the public sector.

He told Bizz Buzz in an exclusive interview that of late, the corporate media has started a campaign that the government can unlock nearly Rs 1.2 lakh crore if it plans on monetising its excess stake in the LIC. As per the SEBI’s minimum public shareholding norms, companies in the public and private sector need to have promoter shareholding of 75 per cent or less

As of now, 3.5 per cent of equity has been offloaded. What about the rest?

Since the government had offloaded only 3.5 per cent of its equity by way of LIC’s IPO in 2022, it is still left with a 96.5 per cent stake. The detractors of LIC have raked up a campaign that the government should immediately shed this excess liquidity even though LIC has sufficient time till 2032 to comply with the SEBI requirement. This campaign has gathered momentum after the recent surge in LIC share prices.

How do you explain LIC’s robust performance despite opening floodgates to private operators?

The LIC has been performing admirably well even in a fiercely competitive environment. LIC’s contribution in providing security to the hard-earned savings of the policy holders while fetching decent returns for them is acknowledged by one and all. Similarly, LIC’s contribution to the overall economic development of the country has been phenomenal. In fact, the footprints of LIC are visible in every aspect of the life of the nation. LIC has eminently fulfilled each of its foundational objectives. It would be a truism to say that LIC today is the finest public sector financial institution in the country. The trust and goodwill that the LIC has earned over the years has been its sine qua non in ensuring a robust performance despite stiff competition from private players.

How is LIC performing during the financial year?

LIC is doing very well in the current fiscal. LIC continues to be the market leader in the life insurance industry with around 60 per cent market share in premium income and 65 per cent in number of policies. Even at the global level, no company has consistently maintained a market share of around 60 per cent over a period of 25 years; this rare distinction is achieved by the LIC only. The profits after tax of the LIC have reached Rs 26,913 crore for the nine months period ending December, 2023. The assets under management have touched an astronomically huge sum of almost Rs 50 lakh crore. The solvency ratio of LIC is at 1.93 as against the IRDA mandated requirement of 1.5, reflecting the strong fundamentals of the LIC. In fact, in terms of claims settlement ratio, rate of growth of profit, rate of growth of investment income and all other important parameters, the LIC is way ahead of its competitors in the private sector.

What do you feel is the reason behind the somewhat muted business growth of LIC in the post IPO period?

The adversaries of LIC and the public sector were going gung-ho over this, even going to the extent of suggesting that LIC is unable to face the heat of competition from the niche private players. There are two issues here. First, one has to understand that this relatively subdued growth had come after a strong top-line growth of LIC in the last financial year. The government’s decision to withdraw tax exemptions on maturity proceeds of non-ULIP plans with an annual premium exceeding Rs. 5 lakh led to a surge in the sale of high-value non-linked policies before 31 March 2023 and followed up by a somewhat muted growth in the quarter ended June 30, 2023. Second, one has to factor in the huge base on which LIC’s growth is taking place. So the so-called muted growth was nothing but a base effect. One must appreciate the fact that LIC’s growth has come in the most difficult macro-economic environment. To give just one example, net financial savings today are at a 47 year low of 5.1 per cent reflecting the miserable conditions of the people. Given the huge response that LIC is getting to some of its recently introduced policies like Jeevan Utsav, Jeevan Dhara II and Index Plus, we can safely say that 2024 will be another year of bumper business for the LIC.

What is the status of LIC privatisation?

As of now, there is no overt move to privatise LIC. But our organisation is of the view that disinvestment is the first step towards privatisation. The government has already disinvested 3.5 per cent of its equity from the LIC as I told you earlier. We cannot afford to lower our guard so far as the threat of privatisation is concerned.

What is your action plan for the future?

We have taken up a two-pronged campaign. The first element of our campaign is a political campaign against the policy of privatisation in general. We have been trying to integrate our struggle against privatisation with that of other sections of the workers who are in struggle on similar issues. Our attempt is to build a narrative signifying the huge contribution of the public sector to the national developmental effort. Secondly, we have been calling upon our employees not only to serve the policy-holders as employees of the institution, but to act as ambassadors of goodwill for the LIC. Towards that end, for example, our organisation AIIEA gave a call to celebrate March 13 as “My LIC My Pride Day" across the country. Each zone of LIC was seriously engaged in observing this day as a mega business day trying to mobilise at least 75,000 policies. We are getting a very encouraging response from all sections of the officers, employees and field forces. Given the complementarity of these two forms of campaign, we are confident that the enthusiasm generated through this and other campaigns of such nature would go a long way in ensuring the continued pre-eminence of the LIC in the insurance landscape.

What is your stand on GST being imposed on life and general insurance premium?

We are opposed to GST on life and general insurance, particularly medical insurance, premium. We have in the past raised the demand for withdrawal of the GST on these two segments of insurance businesses on sound reasoning. Levying GST on life insurance premium means levying tax on the uncertainties of life. The person who covers the risk of life’s uncertainties to give some protection to the family should not be levied tax on the premium to purchase cover against this risk. Similarly, when the public spending on health is on the decline, the premiums paid to purchase medical and sickness insurance should not be charged the GST. The Covid-19 has increased awareness about the need for health insurance. However, 18 per cent GST on health insurance premium is proving to be a deterrent for the growth of this segment of business which is socially so necessary. The high rate of GST is also retarding the growth in life premium that basically goes to fund the infrastructure and social sector.

GST on life and general insurance premium also runs contrary to the government’s avowed objective of increasing insurance penetration and achieving the objective of “Insurance for All” by 2047. We have taken up this issue with the Finance ministry umpteen number of times. The AIIEA has also been demanding a substantial hike in deduction under Section 80 (D) of the Income Tax Act. The amount of deduction presently allowed under Section 80 (D) towards health insurance premium is too meagre now. Health insurance has become an imperative need today in view of the progressively increasing cost of hospitalisation. Recently, the Parliamentary Standing Committee on Finance chaired by BJP MP Jayant Sinha, also recommended a lowering of GST on health insurance. Unfortunately, the Finance Minister decided to ignore all these suggestions while she placed the Interim Budget for the year 2024-25. The AIIEA is committed to building up public opinion on these issues in the days to come.