A Motivated And Orchestrated Campaign Against LIC

OF late, there has been an orchestrated campaign against the Life Insurance Corporation of India (LIC), aimed at manipulating public opinion and thus creating an environment for this institution’s privatisation. While two financial dailies came out with editorials denigrating the financial health of the LIC and suggesting privatisation as the cure, some other papers carried ‘stories’ along the same line, though of course without any substantiating evidence. It all started with an interview of the union minister of state for finance Anandrao Vithoba Adsul, published in Business Standard on June 16, wherein it was reported that the minister expressed concern over the health of the LIC and went on to compare it with the UTI. These remarks were interpreted by vested interests as the government’s lack of confidence in the LIC, and this is what gave birth to a campaign to denigrate the LIC. In addition, the minister’s comparison of a most successful institution like the LIC with the UTI created concern, uncertainty and confusion among the more than 130 million policyholders as well as the prospective clients of the LIC.

The All India Insurance Employees Association (AIIEA), the most representative body of insurance workers in the country, has already joined issue. On June 17, the AIIEA issued a press statement debunking the minister’s claim, followed by a letter to him, asking him to clear the whole muck and reassure the LIC policyholders. The AIIEA has drawn attention to several hard facts in regard to the LIC’s sound performance, saying the Life Insurance Corporation of India has been playing a vital role in the Indian economy, and its contributions to nation building has been immense. Successive finance ministers have commended the performance of the LIC, and on the floor of parliament a number of times the government too has appreciated the role of LIC and its strength to meet the challenges of a liberalised era. The government has also said it is proud of the LIC and is committed to further strengthen this institution.

The AIIEA has also recalled how, when the UTI was restructured as UTI-I and UTI-II, the government saw it fit to entrust the job of running the UTI-II to the LIC and three leading banks. Further, the government’s decision to introduce a pension scheme for the senior citizens and entrusting its administration to the LIC, must have been based on its assessment of the LIC’s strength. The government, surely, must have been convinced that the LIC will prudently manage this scheme.

The LIC made a humble beginning in 1956, when the life insurance business of various private companies was nationalised and taken over by the LIC. Then, the assets transferred to it were less to the extent of Rs 75 lakh in comparison to the liabilities inherited. It was from this humble position that the LIC has now emerged as a world class organisation. Today, it assets are worth over Rs 2,90,000 crore and its life fund is nearly Rs 2,70,000 crore. The LIC serves more than 130 million policies. For the year 2002-03 it settled 95.34 lakh claims amounting to Rs 17,647 crore. In fact, by settling 99.7 per cent of the reported claims, the LIC has set a world standard. Therefore, it is not surprising that the name of LIC has become synonymous with total security. The ever increasing efficiency of LIC can also be judged from the fact that it has been generating a huge surplus year after year and is making increasing payouts as dividend to the government. For the year 2001-2002 alone the LIC paid a dividend of Rs 431 crore to the government. The LIC has also been making massive contributions to the successive five-year plans. All these facts are public knowledge and clearly demonstrate the tremendous financial strength of the LIC. Therefore, one is perplexed as to why the minister of state for finance chose to doubt the financial health of the LIC and its solvency.

There are reasons to believe that the campaign against the LIC is deliberate and motivated. The institution’s massive achievements are belittled and this successful institution is being maligned and denigrated. Hence one may not be wrong to conclude that this is being done to help the private insurance companies, with an ulterior motive --- to create conditions for privatisation of this premier public sector institution, as the editorials of leading financial dailies have maliciously suggested. But doing so would be, in any case, a great disservice to the nation.

Expressing hope that the government has total confidence in the strength of the LIC, the AIIEA said the government must also make every effort to strengthen this institution as it committed in parliament. The association, as a short term measure, demanded the government’s immediate intervention to clear the air of uncertainty and confusion.