Government gen insurers set to cut branches

Mumbai: Even as the public-sector general insurance companies (PSGICs) incur losses, the management of all the four PSGICs (New India Assurance (NIA), Oriental Insurance Company (OIC), National Insurance Company (NIC) and United India Insurance (UII), at the instance of Department of Financial Services (DFS), have started the process of rationalising their branches.

While New India's net fell by 62 per cent, GIC Re incurred loss of Rs538 crore in the first quarter of the current fiscal, ending June 30.

As part of the exercise, the HR heads of all the four state-run general insurers are reported to have written to all their regional offices (ROs) to furnish the details in a given format. As per the plan, branches of PSGICs will be reduced to 3,000 from 5,000 in next three years. It is to be noted that the Parliamentary Committee on Public Undertaking had reviewed the performance of all the four state-run general insurers in New Delhi on September 13, which was followed by the Panel's interaction with the senior officials of the finance ministry. The story was first published in Bizz Buzz on September 13.

Mails have been sent by the HR head of New India Assurance (NIA) to all ROs regarding their 'Office Consolidation' plans. The insurer, which has incurred net loss during the first quarter of the current financial year due to heavy claims settled by it due to Covid-19, plans to shut 30 per cent offices (nearly 650 offices) all over India before March 31 next year.

"ROs have been asked to hold discussion with unions/associations and give their recommendations soon, before sending promotion posting recommendations. It's understood that more or less similar steps are being initiated by other PSGICs also. Region level discussion with associations/unions isexpected to be held this week," a senior official of NIA told Bizz Buzz on condition of anonymity.

The restructuring process is being contemplated in all PSGI companies as per the direction of department of financial services (DFS). It is further learnt that for carrying out Performance Review and Monitoring Framework under KPI measures, two major key areas have been identified which include profitable growth and efficiency & optimization.

Asset monetization for all the four PSGICs will also be carried out in the current financial year itself. As per the plan, divisional offices (DOs) with less than Rs10 cr premium, branch offices (BO) less than Rs5 cr and micro branch less than Rs1 cr will have no feasibility to continue.

"We do understand that the PSGI companies are going through critical phase and being a responsible association, we too are feeling concerned to this effect. CONFED, which is the umbrella organization of the check-off qualified officers' community of all four PSGICs is always in the forefront of any programme intending to make PSGICs more competitive and stronger," says Vijay Kumar Mishra, secretary general, National Confederation of General Insurance Officers' Association (CONFED), said.

In a letter, written by CONFED to the financial services secretary early this month, it has referred to the detailed approach paper submitted by it to NITI Ayog on restructuring and consolidation of PSGI companies to improve its efficiency.

As the major stakeholder, the union has requested the government to share with them with the complete road map of the restructuring plans and how it is intended to be implemented. Also, it has urged the government to make this process transparent and not to be too rigid on implementation, because it feels that the management should take all stakeholders into confidence by taking its views/suggestions before the road map is implemented in true spirit and right earnest.

While there have been many suggestions for improvement of the performance of PSU General

Insurance Companies, there has not been any steps taken to cut down inter PSU competition, which is primarily responsible for adverse selection of risks, poor underwriting controls and inadequate pricing. All these led to negative performance of the companies.

No guidance has been given in the draft proposal, alleges the trade union leaders. In one of the Performance review & Monitoring Framework parameter, under Efficiency & Optimization - Branch Optimization and Asset Monetization – to promote Branch Productivity and Return on Capital Employed (ROCE) target has been given to each PSGI company to close down offices in a phased manner. While rationalization of offices is required keeping in mind the business potential, cost to the company and manpower availability, the union leaders have strongly opposed any closure for the sake of showing numbers.

Only a very short period of time has been given towards deadline which closes on March 31. The previous closure exercise was highly defective in selecting profitable offices for closure and closing operations where no other insurance office was available.

There are many genuine apprehensions from our side which needs to be addressed, as per the demand raised by the union leaders. They include norms fixed to indemnify the office to be merged/closed, ultimate intention behind this process, how the officers in these offices will be affected, the unions said.

On asset monetization, they want it to be done only where the asset/investment is lying unutilized for a long period, without any returns. 'For the sake of asset monetization, we should not sell the family silver. We sincerely appeal to you to clear our very long pending wage revision and boost the employees' morale before embarking on this process. On the above line, we are sure that suitable advice shall be rendered to GIPSA to call us for a discussion in this matter to express our opinion and to make the process more effective and successful,' said another union leader.