Former Kerala Finance Minister Thomas Isaac has said customers of the Life Insurance Corporation (LIC) and the nation at large are ultimate losers after its IPO. After all, the insurance behemoth has been distributing 95 per cent of its surplus as bonuses and incentives, or three times more than its rivals in the private sector.
Isaac said this while delivering the Sixth Gulati Memorial Lecture organised here on Thursday by think-tank Gulati Institute of Finance and Taxation (GIFT) on ‘Liberalisation and privatisation in the financial sector: Case of Life Insurance Corporation of India’.
Total insurance business
The LIC has the best performing financial institution after Independence and holds roughly 60 per cent of the total insurance business in the country. Its contribution to development is immense, especially in sectors like infrastructure development, social security and housing.
The company will not be able to continue this type of investment when it enters the private sector. It has had a good track record after the 1980s as all business parameters had registered excellent progress, Isaac said. Various committees studying the finance sector, including the Narasimham and Malhotra committees, had acknowledged as much. But the Centre did not consider any of these while giving the green signal to the IPO.
Serious lapses committed
Issac also found serious lapses in calculating the market valuation of the company as factors such as the brand value and landholdings were not considered. Most public sector finance companies have performed well during the last 70 years. Their contributions to the social security sector have been immense and LIC has been a frontrunner.
Among those who spoke on the occasion were Susheel Khanna, former faculty member of IIM-Kolkata and a governing body member, GIFT; Amanulla Khan, former president, All-India Insurance Employees Association; KJ Joseph, Director, GIFT; and MA Oommen, developmental economist.