The Insurance Laws (Amendment) Bill was passed by the Rajya Sabha on 12th March 2015. With this, the cap on foreign direct investment (FDI) in the insurance sector has been raised to 49% from 26% hitherto. At the same time, FDI in pension funds will also get raised to 49% since the Pension Fund Regulatory Bill links the FDI in the pension sector to that in the insurance sector.
It is significant that the Insurance Laws (Amendment) Bill, which had been passed earlier in the Lok Sabha, was passed in the Rajya Sabha in March 2015 with the active support of the Congress party. 84 members voted in favour and only 10 against. Members of parties such as JDU, SP, Trinamool and BSP walked out. This unity on the part of bourgeois parties to pass this anti-people legislation is truly condemnable.
The move to increase the FDI in the insurance sector is part of the drive to privatise and liberalise the financial sector in India in the interests of the Indian and foreign bourgeoisie. Indian private insurance companies entered into insurance business following the passage of the Insurance Regulatory and Development Authority (IRDA) in 2000. They have grown steadily and are now seeking to grow further in greater collaboration with their foreign partners, who are some of the biggest global financial monopolies.
These financial monopolies will now have easy access to a huge fund of finance capital that is the source of their profits. Both the Indian monopolies like Reliance, Tata, Bharti, Bajaj and others, and their foreign partners are anticipating massive growth and coverage of the Indian market. Among those set to raise their holdings in joint ventures are Prudential and Bupa of the UK, Nippon Life of Japan and Metlife of the US. As expected, various leaders of industry and finance capital, Indian and foreign, have applauded the passing of the Bill in Parliament as a “positive development that will bring the much needed investments for the growth of the Insurance Industry.” The “much needed” investments are not referring to the need of people for security but the need of the private players to realise a huge profit potential. For the working people, this legislation is retrograde and anti-people.
The insurance companies are expected to maintain and invest funds collected as insurance premiums in such a way that claims of the insured or their successors due to deaths, accidents, or eventualities can be readily fulfilled. But insurance is one of the fastest growing sectors of finance capital worldwide, precisely because big capitalists see the large funds of the insurance companies as an abundant source of capital, which can be used for their own ends and speculative gains. This also puts insurance companies and the people at large at great risk, since speculative deployment of funds at the behest of the big capitalists can mean that the companies do not have funds available to pay genuine claims of insured when calamities strike.
Soon after independence in India, the government founded the Life Insurance Corporation (LIC) and five other general insurance companies. Till recently, insurance was in the public sector and highly regulated. The funds were secure and there were moderate earnings for the worker on the accumulation of his savings in a pension fund or Insurance scheme. The LIC alone has a huge corpus of funds and has been paying an annual dividend of around 120,000 million Rupees each year to the government. Moreover, the demands for various types of insurance and the funds that could be collected as premiums have been growing year after year. No wonder that capitalists Indian and foreign were ogling the sector and had demanded permitting private players to operate and FDI. Bringing FDI into the insurance and pension sectors and increasing privatisation in these sectors is being pushed by the big capitalists on the pretext that pensioners and insured should not have to be satisfied with fixed returns on their contributions to their pension or the premium they pay for their insurance. By choosing to allow investments of their future receipts in various financial instruments in the financial markets, they can make higher returns. But what is hidden is that investing in financial markets is subject to massive risks and may end up with the working people losing everything that they have carefully saved. Besides, what is not revealed is that the big capitalists Indian and foreign want to control the massive funds available in these sectors. At the same time, the cost of premiums for insurance will go up. The average premium in many types of insurance policies shot up by almost 40% in India with the earlier round of liberalisation of the insurance sector.
The private insurance companies have profit as their motive force, not the protection of toiling peasants and workers from unforeseen exigencies. They concentrate on getting business which will bring in more profit, among the relatively richer sections of the people in the cities. They claim that their purpose is to increase “financial inclusion” in India, i.e., bring more people under insurance cover, but they aggressively promote schemes wherein the premium required to be paid are not within the reach of the masses of working people. This can be seen from the fact that the average annual premium receipts collected from an insured person covered by the government-owned LIC is around Rs 9,000/- per year, while the amount collected by the average private insurance company client is around Rs 60,000/- per year.
Instead of protecting the toiling people from risk, private insurance companies with profit as their main motive put the future of the toiling peoples at greater risk. Most of the private insurance companies already operating in the country have invested their funds in instruments and sectors which are likely bring them higher profits but are also riskier at the same time. It may be recalled that the US insurance company AIG almost collapsed in the year 2008 due to risky investments that became bad debts. In this way it endangered not only the security and future of millions of toiling insured people, it also brought the economy of the company into deep trouble. AIG was bailed out by the US government, using public money collected as taxes from the toiling people, at a cost of almost 200 billion US dollars. It is known that many private insurance companies around the world do not have a good track record in settling claims. In India the claim settlement ratio for LIC is over 99% while the average claim settlement ratio of the private insurance companies is 79%, which means that over 20% of those who lodged claims did not get paid.
The “reforms” in insurance and hiking of FDI cap will mean risking the future of larger and larger numbers of working people. Their hard earned savings which they have used to buy insurance premiums will be subject to risks; and if the risks go bad, they will have to end up bearing the damages. Increasing the FDI and privatisation in the insurance sector has been consistently opposed not only by insurance sector workers, but by many others. As part of this broad opposition to the privatisation and increase in FDI, employees of LIC and other insurance companies participated in massive protest actions all over the country on March 9, 2015.
In the capitalist system that dominates the economy, the working class and toiling peasantry, as well as the mass of urban petty bourgeoisie are forced to fend for themselves. The state does not guarantee the majority of working people and their families any security, in case of death, accidents, ill health, loss of property, a failed crop, natural disasters, etc. Instead people are forced to put aside a portion of their hard earned savings in different forms of insurance funds to cover up partially for such contingencies. It is this uncertainty and risk that is being preyed upon by insurance companies today.
The working people must step up their opposition to the bourgeois agenda of liberalisation and privatisation and fight for an alternative agenda, in the interests of all those who toil and deserve a secure present and future. They must demand that the state take complete responsibility for social security. Toiling people must have job security and be provided for in case of untoward eventualities like accidents and deaths. They must demand of the government that privatisation of insurance must be stopped along with increase in FDI and reversed and that their future claims must be protected for inflation.