Page 72 - India Insurance Report 2023- BIMTECH

60 India Insurance Report - Series II

2.5.Vehicles For Implementing Government Schemes for The Poor

The government introduced PMSBY, a personal accident policy with a two lakhs sum insured for a
very low premium of Rs 12 per person. These companies almost entirely shouldered it. The private
insurers were nearly absent. The result, of course, was huge losses every year. Being government schemes
with a social orientation, these companies bore it all. Similar was the position when many other socially
oriented schemes were introduced.

2.6.Implementing National Policies

Policies of National importance like reservations in recruitment or adherence to the tenets of the
Official Language and so many others are done assiduously, being government companies.

3. Then why the Downfall?

Even as the market was opening up, there was apprehension that the PSUs would face tough times.
The field was being modified so that they would be running uphill. A plethora of causes has led to the
current state of affairs for government insurers. A few important decisions taken over the years which
had major deleterious effects are briefly discussed here:

Human Resources : It is an important component in a service industry like insurance. Things
were going well with an integrated cadre of existing and new recruits being developed. This hit a roadblock,
and there were no fresh recruitments for two decades from 1990 onwards. Both government banks and
insurers were hit by this policy, resulting in shortages at various levels. Once recruitments were started
after this long interval, the companies went overboard and recruited large numbers and that too in fits
and starts, creating its own problems. No organization can have this approach for long and not be
adversely affected.

Voluntary Retirement (VRS) : 2004, a special voluntary retirement scheme was implemented.
A lump-sum payment was given along with a handsome pension for a lifetime. It resulted in a whole lot
of trained talent exiting and joining the newly opened private companies, brokers and other intermediaries.
The loss was to the government companies and was an obvious gain to the new private organizations,
which got trained human resources on a platter.

Were there excess human resources which had to be shed? Perhaps no. A clue can be had from the
fact that around the same time, the companies decided to hand over servicing the medical insurance
business to a new intermediary called Third Party Administrators (TPA). Usually, outsourcing is done
when they do not possess the required skills, operational ease or because of staff shortage. These were
companies already handling the portfolio competently. So, was staff shortage the cause and if so, was a
VRS called for?

Dismantling of the Marketing Force : Worse, this voluntary retirement was also given to the
marketing staff. They were given three options – opt for VRS and leave, continue in the same post, or