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C. Shivkumar

Bangalore , Jan. 13

IN a move intended to ensure that the four public sector insurance companies are right-sized, the Government has indicated that all the posts created by exits under the fresh VRS scheme would stand abolished.

The sources said the Government's move was intended at paring the management ratios and bring them in line with statutory norms of 19.5 per cent. At present, the management ratios of all the companies — New India Assurance Company Ltd, United India Insurance Company Ltd, National Insurance Company Ltd and Oriental Insurance Company Limited — are well in excess of these norms. Of these costs, wages comprise the highest component of the high management ratio.

Consequently, the VRS was intended at shedding the manpower at the Class three and the lower levels. Only exits at the management level (class 1) would be filled, the sources added.

The public sector insurance companies have an employee strength of about 80,000. The managements are targeting a workforce reduction by at least 20 per cent.

However, the sources said current indications are that less than 10 per cent of the employees were expected to opt for the VRS. This would include mostly employees who had opted for the pension scheme. Barely 10 per cent of the employees have opted for the pension operated by the Life Insurance Corporation of India. The remaining employees have opted for the provident fund schemes.

Consequently, even if a paring of the management ratios takes place, it is expected to be only marginal, the sources said. Even in the first year, the impact was expected to be minimal, they added. This was even after factoring large outflows.

In fact, this was precisely what had occurred in the first round of the VRS targeted exclusively at development officers. Barely 5 per cent had opted for the scheme. The sources said the main reason for this expectation was that VRS optees had few opportunities for investments.

Besides, none of the public sector insurance companies was keen on a deferred payment mechanism for settling the VRS liabilities.

This was because none of them was prepared to fork out high interest payments. Employees unions had sought parity with the rates paid out by the banking sector for the staggered payments.

Instead, the managements of all the four companies have expressed confidence that they would be in a position to meet the VRS payments in cash out of the extraordinary reserves created in 2002-03.

But with the exit numbers itself projected to be low, the expectation was that even after meeting the expenditure, all the four companies would be left with a surplus, the sources added.

But the low VRS turnout would allow the companies greater flexibility in redeploying manpower across the country, the sources said. Some of the surplus staff in the metro and urban areas would be redeployed in the rural areas for market expansion.

More Stories on : General Insurance | Manpower

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