The Hindu Business Line : `To lure more to opt for VRS' — PSU insurance staff wage hike at 8.5%

THE wage hike in the public sector general insurance companies has been restricted to only 8.5 per cent in line with the recommendations of the consultants for restructuring the insurance sector.

The consultant, A F Ferguson,was appointed in May 2003 for chalking out a viable, future strategy for the insurance companies.

Highly placed sources said the low wages were recommended with a view to eliciting a better response to a planned second round of voluntary retirement scheme (VRS) for employees of the four companies - New India Assurance Company Ltd, National Insurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd.

In fact, in February this year, only 8,500 employees opted for VRS and the bulk of them was high skilled officers. The response from the clerical staff, at whom the entire package was aimed, was only 11 per cent.

One explanation advanced by the consultant, the sources said, for the low wage increase package was the need to contain costs. The insurers were presently operating way above the statutorily prescribed management ratio of 19.5 per cent.

The sources said the unions havd rejected the recommendation made by the consultants. The unions argued that it was considerably lower than what was offered to employees of the public sector banks Moreover, they pointed out that after taking into account the current inflation, this increase suggested by the consultant was barely 2 per cent.

The offer comes at a time when promotions for the employees have already been put on hold. As a result, the unions have now threatened to strike work, sources said.

What has also upset the unions was that the report has focussed on the issue of manpower costs in isolation. Issues relating to the fall in market share due to intense private sector competition have not been addressed. This related to high commissions paid out by some of the private sector players and undercutting of premiums.

Besides, issues relating to rationalising of premiums in some of the high loss sectors have still not been touched, the sources said. As a result, the public sector insurers are still faced with red-lined core operations. In fact, what supported last year's balance sheet was the equity sell out by all the insurers. These sale of investments resulted in each of them earning profits upwards of Rs 300 crore.

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