The (under)writing is on the wall

Venkatachari Jagannathan
05 February 2002

"Gipsas move is suicidal and repressive, and it disregards the long-term financial implications on the industry. In addition, excluding one segment of employees from the purview of the scheme is discriminatory," says GIC Employees Union general secretary M Karthikeyan.

He says the VRS payout for the four companies put together will amount to not less than Rs 2,500 crore. "This will impact the industrys underwriting capacity and its ability to negotiate reinsurance contracts. The progressive weakening of the financial position will make the staff and pension optees remain in a continued state of uncertainty. The companies will not be able to recoup the lumpsum payout by way of savings in the salary cost even over a period of five years."

"Gipsa is actually looking at the wrong place to reduce its cost. Instead of the clerical cadre, it should look at the officers cadre first. For every four Class III staff, there is one officer in the industry. The flab is elsewhere," says a union member. Adds Karthikeyan: "The proposals relating to merger or closure of branches go against the government policy of spreading the good word on insurance."

Many of the branches in central India are understaffed to the extent that the officers there are forced to even man the letter despatch section. Gipsa, in a note circulated to the unions, had proposed several measures like consolidation of offices, VRS for Class III staff, organisational restructuring, recognition of trade unions, transfer policy and revision of working hours.

Gipsa also said that the special VRS was aimed at bringing about an overall reduction in Class III and IV staff strength by a minimum of 30 per cent (around 25,000 employees) following the computerisation of the operating offices. The VRS is aimed at all permanent employees aged 40 years and above and who have put in at least 20 years of service, but it excludes employees who have undergone special training in computer systems.

In support of its proposals, Gipsa has argued that all the four companies are operating at a high cost, ranging between 23 to 24.5 per cent as against the statutory cap of 19.5 per cent. Gipsa is of the opinion that the cost factor has been going up at the rate of 18 per cent and is expected to increase further with the fall in premium income due to new competition.