The Hindu Business Line : New VRS for insurance staff likely

FOUR public sector general insurance companies have begun preparations for a new round of voluntary retirement scheme to offset the poor response to the earlier ones.

Sources said the insurers were keen on a second round for administrative staff, in line with the suggestions made by A F Ferguson report. A F Ferguson are consultants for restructuring of the four public sector general insurance companies - New India Assurance Company Ltd, United India Insurance Company Ltd, National Insurance Company Ltd and Oriental Insurance Company Ltd.

This will be the third round of VRS in the general insurance sector, if it goes through. The first round was targeted at development officers in 2002 and the second, which closed in March this year, at administrative and technical cadres.

The sources said the fresh VRS was to further trim non-productive segments. This objective was not achieved in the last VRS. A further scaling down of employees was essential, the sources added, in view of the planned large-scale networking of branches. Insurers had targeted reduction of 20 per cent of the excess manpower last time. The bulk of the exits was highly experienced officers, including technical cadres. Of the 13,500 officers in the industry, at least 34 per cent of them had exercised the voluntary exit option. Of the 36,000 clerical staff, only about 11 per cent opted for VRS.

Accordingly, the sources said some of the terms in the VRS were likely to be relaxed to ensure that the manpower restructuring objectives were achieved.

Among the conditions expected to be relaxed is the age norm. In the last round, the minimum age prescribed was 40 years or a minimum of 15 years service. This time minimum age requirement is likely to be removed.. The cadres targeted , were non-technical employees who had joined service in the mid 80s, the sources said.

The separation packages are not likely to undergo any major changes, the sources added. This time also, the sources added, the insurers were in a position to meet the liabilities upfront out of the large profits earned during the last years through liquidation of some of their investments and treasury operations.

The sources said, however, for the new round, they would still have to obtain government approval, in view of the financial implications. In the last round, the average cost implications were estimated to be in the region of about Rs 500 crore for each of the companies. Although, the PSU insurers met the costs upfront, for tax purposes all of them have opted to amortise the costs over a five-year period.

An important reason for the insurers to push for the VRS is to ensure compliance with some of the statutory norms, particularly the management ratios, which are still above the statutorily prescribed norm of 19.5 per cent.

Salaries and employee benefits account for a large component of the insurers' costs, contributing to the escalation in the management ratios.

More Stories on : General Insurance | Manpower

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Andhra Bank cuts farm loan rates

Rupee sheds 13 paise; gilts fall

Corporation Bank Q1 net down 17 pc

UCO Bank Q1 net rises to Rs 142 cr

SBT net up 84 pc in first quarter

South Indian Bank Q1 net falls to Rs 18 cr

HDFC opens new office in South Chennai

Non-life insurers asked to withdraw packaged products

New VRS for insurance staff likely

Corporates get out of g-secs; move into bank deposits

Govt sounds Left parties on dumping insurance FDI hike

LIC staff stage demo at Vizag