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NEWS BULLETIN<br />
OF INSURANCE FIELD WORKERS<br />
Vol XXIV Book No 3 March 2009<br />
Chief Editor<br />
R. Jayprakash<br />
Associate Editors<br />
K. Venkatesh<br />
S. Sreekumar<br />
Editors<br />
J. Baburajan<br />
M. B. Vinod<br />
Editorial Board<br />
A. Gopakumar<br />
Shaji T Thelly<br />
P. K. Ajayakumar<br />
Hari T. Pillai<br />
Please send your<br />
suggestions, articles<br />
and contribution to<br />
CONTENTS<br />
Page No<br />
1. EDITORIAL 2<br />
2. VIEW POINT 4<br />
All India President<br />
3. PERSPECTIVE 5<br />
Secretary General’s Desk<br />
4. OPINION - Capitalism, Socialism and Crisis 12<br />
Prabhat Patnaik<br />
5. MEDIA WATCH 16<br />
The Editor<br />
News Bulletin<br />
Kalvit Bhavan<br />
Capital Heights<br />
Plamoodu, Pattom<br />
Trivandrum - 4<br />
or<br />
mail at<br />
editornf@gmail.com<br />
The views &<br />
opinion expressed<br />
in the articles need<br />
not necessarily be<br />
that of <strong>NFIFWI</strong>
News Bulletin March 2009<br />
EDITORIAL<br />
OUR VOTE decides OUR DESTINY<br />
The nation goes to poll in 5 phases from 5 th April to 13 th April to elect the 15 th Lok<br />
Sabha. The results will be declared on 16 th April. This is the world’s largest democratic<br />
exercise in action. It is also a tribute to the unwavering spirit and loyalty of the ordinary<br />
Indian citizen in democracy.<br />
This is perhaps the only time when the common man is made to feel like masters in<br />
this country. It is also a time when we get a chance to assert ourselves. An occasion to look<br />
back and analyse how we were governed. A rare moment to asses the policies and decisions<br />
that affected us. The political scenario in the country is fragmented and pasted along<br />
many weird lines that can be subjected to many interpretations. One point where we all<br />
invariably agree without dispute is the need to strengthen the public sector in insurance<br />
industry and protect LIC. The present economic scenario in India and the global economic<br />
crisis highlights this need much more than ever before. Nations world over are taking the<br />
path of nationalization and providing Govt. guarantee.<br />
Unfortunately, in India the Govt. seems to learn nothing from this crisis. They showed<br />
scant respect for democracy and disregarded all parliamentary ethics by introducing The<br />
Insurance Amendment Act and LIC Amendment Act in the fag end of the parliamentary<br />
session. The main provisions of the bills providing for 49% increase in FDI of Foreign<br />
Insurance Companies, to remove the Sovereign guarantee by Govt.of India to LIC policies<br />
and reduce the bonus payment to the policy holders by 5%.<br />
This will only lead to de nationalization and expose the public money to speculative<br />
business by multinational companies. This is at a time when even President Obama<br />
expressed outrage at the greed and recklessness of the US insurance giant AIG. Here, in<br />
India, a red carpet is rolled out to them shamelessly. When the entire world is reeling<br />
under the economic crisis, it was heartening to note the statements made by Madam Sonia<br />
Gandhi and Prime Minister that India is lucky to have strong public sector presence which<br />
really props up the country and such PSUs should be protected and strengthened rather<br />
than destroyed. But, soon, true to their colours, they proved that politicians seldom practice<br />
what they preach, by bringing the Insurance and LIC amendment Acts.<br />
Thanks to the sustained opposition of the Left parties, the bills were send to the<br />
standing committee for Finance. But the position is that, even if the standing committee<br />
disagrees with the bills and returns it, the Govt. can overrule that decision.<br />
So, it becomes very important who is in the Govt. or who influences it. It is not the<br />
politics that we are concerned about. National Federation is a non-political organization<br />
and will always continue to be so. But that does not deter us from taking a political stand<br />
for protecting the Dev. Officer class and LIC. It is clearly a non-political agenda which is<br />
to focus ONLY AND ENTIRELY on :<br />
1. strengthening the public sector in Insurance Industry<br />
4
News Bulletin March 2009<br />
2. save and protect LIC in the public sector<br />
3. protect the dignity and welfare of the Development Officer Class<br />
This must be our prime concern and paramount interest. All other considerations<br />
are immaterial. Let there be a strong campaign for that. We can create awareness among<br />
our Agents, our policyholders, all family members, other employees and everyone we<br />
know. Speak convincingly and from heart. Mobilise all support that for this justified<br />
cause.<br />
We are very emphatic that this support is not for any political party or political<br />
ideology. Our politics is only the politics of existence and survival. We can hope to change<br />
the policy decisions at the top only through this. The management’s anti-DO attitude will<br />
also get a fitting reply. The management’s ill-directed decisions can also be reversed by<br />
this. Our members should take a clear stand cutting across party lines to save and protect<br />
L.I.C of India and the industry as a whole.<br />
Wherever possible, we should meet the candidates or members of political parties<br />
explain to them the importance of this issue and request them to take a strong political<br />
stand on this. The election manifesto should clearly state with clarity the intentions and<br />
promises. The Left parties have included in their manifesto the reversal of increase in<br />
FDI in insurance and strengthening the public sector. Our aim is that all parties should<br />
acknowledge and take an open stand on this. There is a minority in the main political<br />
parties who also agree to our stand. Our endeavour is to strengthen their hands. This<br />
must become the overwhelming opinion across the political spectrum.<br />
They may agree with us or disagree with us, but they will never be able to ignore<br />
us. If our vote in this election will decide our destiny, then let us resolve to exercise our<br />
vote with caution and discretion because this organization is so dear to us.<br />
“only if this is there, every thing else is there,<br />
if this is not there, nothing else is there”<br />
ORGANISATIONAL ROUND-UP<br />
Biennial General Body meeting of Visakhapatnam Division was held at Visakhapatnam<br />
on 25.1.2009. Zonal President, Com. M. Vinay Babu, Zonal Secretary, Com. G. Nagesh, Zonal<br />
Joint Secretary, Com. PV. Krishna Reddy and President and General Secretary of Rajahmundry<br />
Division, Com. Murali Krishna and Com. A. Suresh and nearly 200 members from the 3 districts<br />
of the division attended the meeting. The following members were elected as office bearers<br />
for the term 2009 – 11:<br />
President : Com. B. Rama Rao, (Yellamanchili Branch)<br />
General Secretary : Com. T. Chandra Sekhar, (Shipyard Branch.)<br />
5
News Bulletin March 2009<br />
Dear comrades ,<br />
After suspension of agitation in may 2008,<br />
organization is waiting for concrete results from<br />
management on our issues of incentive formula,<br />
Work Rule, CLIA, and other pending issues. Hope<br />
management will become serious on ongoing<br />
situation of LICI. Organization has observed that<br />
the members at grass root level are unhappy and<br />
are showing their concern in a different and matured<br />
way . Therefore in 52 yrs of Corporation’s history,<br />
Life Insurance Corporation is showing huge minus,<br />
continuously from the beginning of this financial<br />
year. At the time of giving black proposal to<br />
federation on 12th Aug 04 the management had<br />
claimed that there will be 35% natural growth in<br />
business where Development Officer has no role<br />
to play. That market share will go up to 95% due<br />
to GOIB scheme and that due to gradation there<br />
will be huge net addition of agency.<br />
NF has always maintained its stand that<br />
these assumptions cannot be true. Unfortunately<br />
our resentment from 2004 has fallen on deaf ears<br />
and management is solely responsible for the<br />
disturbed condition of LIC of India today. Actually<br />
the global meltdown and recession is an opportunity<br />
for LIC of India. But unfortunately management<br />
dumped the enthusiasm, creativity, innovation,<br />
mobility and involvement of field force. Management<br />
is not paying heed and not utilizing the energy<br />
and strength of Development Officers. Management<br />
should provide all facility and right atmosphere<br />
to do aggressive marketing of life insurance. Time<br />
and again organization has appealed to management<br />
to come up with amicable solution on all concerned<br />
issues. It is solely in the hands of management to<br />
make every LICan including field force happy. The<br />
response from management is very slow almost at<br />
a snail’s speed<br />
NF has always been on the right path of<br />
truth and concerned about the interest of members,<br />
agents and policy holders. This pious work<br />
undertaken by the federation is always showered<br />
by the blessings of God and positive forces of<br />
nature. The recent fall in market , global economic<br />
VIEW POINT<br />
All India President<br />
meltdown have only indicated that we are on right<br />
path and the convention business has once again<br />
gained importance. History is a witness to the fact<br />
that convention business cannot be sold without<br />
Development Officers who are the backbone of<br />
three-tier system of life insurance marketing. In this<br />
time of struggle , perseverance is the need of hour.<br />
The active participation in Yogakshema march and<br />
Parliament march , and understanding our problems<br />
has had a direct impact on LIC and has resulted in<br />
its negative growth. This active participation has<br />
paved way for further struggle. Even after the global<br />
recession hitting the common man the government<br />
still seems to be ignorant and is sticking to the agenda<br />
of 49% FDI in life insurance. Though it has been<br />
time and again proved that whoever has touched<br />
this 49% FDI issue have paid for their mistakes.<br />
I realise the hardships and turbulence<br />
suffered by all the members. NF is proud of all its<br />
members for their tremendous sacrifice , patience<br />
and faith on organization and salutes to everybody<br />
for passing calmly through all odds. Organizational<br />
activities and financial discipline is also an important<br />
concern of organization. Hope all the General<br />
Bodies , branch visits and organizational tours are<br />
in order. All the dues , levies and subscriptions are<br />
taken care of. Reading of News Bulletin, Regular<br />
visits to our website will keep you updated on latest<br />
events.<br />
Organization congratulates our Secretary<br />
General for his appointment on IRDA advisory<br />
committee. We shall keep a tab on the latest situation<br />
and keep on marching forward .<br />
Victory is ours !!!<br />
Wishing you all , happy and<br />
prosperous days ahead !!!<br />
National Federation Zindabad …..!!!<br />
Workers Unity Zindabad ……!!!!!<br />
Yours lovingly<br />
Uttam Laxmanrao Jagdhane<br />
( All India President)<br />
6
News Bulletin March 2009<br />
PERSPECTIVE<br />
From the Secretary General’s Desk<br />
REPORT OF N.E.C MEETING HELD AT MYSORE ON 16-12-2008 & 17-12-2008<br />
The National Federation flag was hoisted<br />
by our National President Com Uttam Jagdhane.<br />
Com Putta Swamy, the dynamic divisional secretary<br />
of Mysore divisional federation welcomed the<br />
gathering and delivered his welcome address. Com<br />
Nagesh Murthy addressed the house and<br />
concluded the inaugural function by thanking the<br />
Federation for giving a chance to host the NEC at<br />
Mysore.<br />
Com.Vinay Babu President,South Central<br />
Zone welcomed all delegates on behalf of the zone<br />
and addressed the NEC delegates. The house<br />
placed on record the services rendered by Com.<br />
C.L.Chandok and observed two minutes silence<br />
to pay homage to Com C.L.Chandok, former<br />
Zonal Secretary of North Zone and former Central<br />
secretariat member.<br />
The minutes of the previous meeting was<br />
confirmed and passed. Our President Com.Uttam<br />
Jagdhane welcomed all the NEC delegates to the<br />
city of palace and gardens. Managements claim of<br />
increase in Agency force and premium proved<br />
negative by introduction of CLIA.The President<br />
requested the house to educate the membership<br />
on MOU,GOIB, CLIA and other issues. The<br />
President requested the Secretary General to<br />
present his report to the house.<br />
The Secretary General welcomed all<br />
members and congratulated new members and reelected<br />
members. The house observed two<br />
minutes silence to pay homage to our former Prime<br />
Minister V.P.Singh, Com R.K.Chandra Mauli,<br />
former Secretary Nellore Division and Joint<br />
Secretary S.C Zone and to all our comrades who<br />
died recently.The Secretary General’s report<br />
already circulated was placed before the house<br />
and while submitting the same, informed the house<br />
with regard to work norms and the continuing<br />
efforts to impress upon the management and<br />
government the difficulties faced by the cadre of<br />
Development officers and how the unilateral<br />
changes in Special rules (1989) will adversely affect<br />
Development officers. The following petitions were<br />
read for the benefit of members.<br />
(1)Petition to IRDA on CLIA (2) Petition<br />
to Government on CLIA (3)Petition to Petitions<br />
committee (4) Petition to Chairman, LIC and letter<br />
written to Government on the matter of wage,<br />
arrears for the purpose of Income Tax were also<br />
read in the house for the information. The legal<br />
opinion on CLIA was placed and explained in detail<br />
to the house. The issue of PLLI Quantum to<br />
Development Officers and also costing of PLLI was<br />
explained to the house. Matters of housing loan,<br />
increased mediclaim (Cashless process), second<br />
option for pension and the issue of confidential<br />
reports issue also explained by the Secretary<br />
General. Secretary General gave the gist of<br />
discussion held with management on 17-07-2008<br />
and 6 th September 2008 on the above issues. The<br />
gist of the statement of Accounts was also placed<br />
for information as part of the report. Before<br />
concluding the report to the house, newly elected<br />
and re-elected NEC Members and C.S Members,<br />
were introduced to the House.<br />
President requested the members to<br />
deliberate on Secretary General’s Report. Members<br />
deliberated on the report in which 46 members<br />
participated. The following were the matters raised<br />
for clarifications and as suggestions<br />
1) Basic membership seeking details about the<br />
position of special rules, national holidays out<br />
of costing, C.R for the purpose of promotion<br />
2) The rationale and logic behind Jeevan Aastha<br />
which is introduced to achieve the target.<br />
7
News Bulletin March 2009<br />
3) Work norms are more important than I.B<br />
and form a strategy to fight out the issue.<br />
4) Equitable relief for wage arrears<br />
5) Unscientific recruitment of Development<br />
Officers without infrastructure was brought<br />
to the notice of House.<br />
6) In Mussorie it was informed that<br />
management was positive and agitation will<br />
be reviewed within 3 months.<br />
7) Election duty must be exempted and<br />
demanded exemption from costing.<br />
8) Demanded clear cut message to pass on to<br />
the members and suggest agitation.<br />
9) Court case on CLIA.<br />
10) Minutes of previous meeting must be read in<br />
the house and should be passed<br />
11) On work norms why we should fight for the<br />
Development Officers who are not working<br />
and attracting norms.<br />
12) The logic for empowerment. CLIA is a threat<br />
to development officers. The agitations must<br />
be implemented uniformally.<br />
13) On 20.11.2008 every body in LIC was on<br />
strike except Development Officers and now<br />
take a decision since cabinet cleared 3 bills<br />
affecting LIC.<br />
14) We got the legal position on CLIA. Even<br />
though we are strong, why there is no legal<br />
action taken.<br />
15) RCA gap of 4 must be withdrawn and cost<br />
ration must be 23% only<br />
16) CLIA was not dealt properly by Federation.<br />
How can any other person can give agency<br />
to the spouse of my agent without sitting<br />
arrangements ADO were posted in SSO.<br />
17) Management is desperately trying to make<br />
CLIA successful, Vision 2010 will be very<br />
easy for the management.<br />
18) Rumors are being unnecessarily spread by<br />
members including CS Members against<br />
Secretary General and leadership. This is<br />
damaging the organization and demanded<br />
strong action to stop it.<br />
19) Problems of CLIA, alternative channels and<br />
multi level marketing by “Sarath” was<br />
mentioned.<br />
20) Try for good wage revision.<br />
21) Position of attendance of SSO posted<br />
Development Officers.<br />
22) We must do our work as Divisional Leaders.<br />
The Parliament and Yogakshema March are<br />
the strength of the organization. We must<br />
inform all issues to the basic membership and<br />
give call to recruit more agents so that the<br />
doors will be closed to CLIA<br />
23) Leadership training demanded.<br />
24) Management is practicing double standards.<br />
They say about conventional plans and<br />
pressurizing for ULIPs.<br />
25) On special rules go for MOU to reduce the<br />
damage. On work norms if required we<br />
should go to court. 50% agency force at the<br />
beginning for rural credit and CR for<br />
development officer is bad. There must an<br />
escape for grading, demand functional<br />
allowances, CA and good wage revision.<br />
26) Management has vision to abolish this cadre.<br />
27) We should focus on conventional Insurance<br />
business.Let CLIA be scrapped.<br />
28) What ever we achieved in this adverse<br />
situation is not small thing and we should<br />
congratulate for the same. On CLIA don’t<br />
go to court.<br />
29) The Orrisa IT department is asking to deposit<br />
the tax from 1998.<br />
30) Management has cheated Development<br />
officers by not paying Big Leap competition?<br />
Demand salary cut for 5th, 15th and 30th<br />
only. For car we should ask for change of<br />
scheme and similar to scheme VI.<br />
31) In North Central Zone Branch Managers and<br />
Assistant Branch Managers are interested in<br />
8
News Bulletin March 2009<br />
CLIA only, since they are getting money. Let<br />
us fight,don’t fear and face the situations.The<br />
IB can be bifurcated into 2% ACA and<br />
10.5% IB.<br />
32) What we can inform the members after<br />
returning to the headquarters. What is the<br />
position of petitions? We must have vision to<br />
save this cadre. Recruit agents and sell<br />
conventional plans. We are not getting <strong>news</strong><br />
<strong>bulletin</strong>. Don’t go to court on CLIA. Fight<br />
for special rules and get an MOU and not<br />
unilateral changes.<br />
33) Cashless medical scheme demanded. We<br />
need some Hindi speeches.<br />
34) We are not getting <strong>news</strong> <strong>bulletin</strong> and<br />
demanded Hindi version also. Let us decide<br />
priorities and strategy. Decide whether<br />
management is friend or enemy.<br />
35) Give direction regarding issue of empowerment<br />
of Development Officers and removal<br />
of grading for ULIPs and single premium.<br />
36) Membership is waiting for quick results and<br />
leadership is working with petitions.<br />
37) No place to sit in the branches and new<br />
developmental officers are posted. SSO<br />
design must be changed to accommodate all<br />
developmental officers.<br />
38) Only revival credit and EOL achieved so far.<br />
Revival credit is from 2000 or 2004.CLIA<br />
agents giving agency to spouse by violating<br />
the existing rules. Growth condition in IB<br />
scheme must be withdrawn.<br />
39) Leadership is not able to deliver any thing to<br />
the cadre. 19 issues placed before<br />
management. Waiting for some relief in GOIB<br />
because of growth condition we are loosing<br />
heavily.<br />
40) If we don’t get solution by the existing<br />
petitions on CLIA let us go to court.<br />
41) EOL of 2004 not condoned. Bifurcation of<br />
Pune division done without consent and<br />
consideration of the area. After the resistance<br />
by 7 branches, management withdrew the<br />
bifurcation.<br />
42) Revival credit from 2004 circular came and<br />
not from 2001. In special rules we must<br />
discuss all the conditions and go for MOU.<br />
RCA Cap of 4 agents must be removed.<br />
43) Secretary’s report is elaborative and covered<br />
all the issues. The achievement of revival<br />
credit, tour mileage rates, EOL are not<br />
simple things in the present situations.<br />
44) Recruitment of Development Officers and<br />
heavy amounts are paid to the managers to<br />
the competitions and our Big Leap is not<br />
cleared.<br />
45) We must take a decision about posting of<br />
development officers and providing table and<br />
chair, It is not question of money but survival.<br />
Since it is a scenario of ULIPs demand for<br />
full credit for ULIPs and single premiums.<br />
In special rules demand for deletion of<br />
termination clause and increment cut.<br />
46) Anomalies in 2 wage revisions is not settled<br />
even today hence care must be taken for<br />
the present one.<br />
47) What is the result of positive attitude. Give<br />
direction we are prepared to fight.<br />
48) The CS should give direction to the NEC<br />
after taking the views of the speakers. In<br />
last NEC Secretary General informed to<br />
review the agitation after 3 months.<br />
49) CLIA is giving agency to spouse and<br />
diverting the business. Let there be<br />
continuous negotiations and also negotiate<br />
on recruitment and single premium credit.<br />
50) There should not be any debits to those who<br />
achieved cost. Because of unscientific<br />
recruitment most of the ADOs are going<br />
back.<br />
51) Late Com.Pawan Gaur has small kids and<br />
nobody to support the family. Let us fix a<br />
date for contribution. Try for more credit in<br />
the policies and plan for agitation for<br />
February and March to speed up solutions.<br />
52) What is the status of Development Officer<br />
today. Private companies came and<br />
9
News Bulletin March 2009<br />
snatching our agents. 2004 GOIB reduced<br />
our income, wage revision, equitable relief<br />
is not guaranteed. Single premium policies<br />
are the order of the day, so how to get on<br />
this situation.<br />
53) The leadership is doing what best they can<br />
do in this difficult situation. Demand for more<br />
recruitment and increase the cadre so that<br />
LIC will depend only on Development<br />
Officers.<br />
54) Supreme Court judgment that the<br />
development officers are work man is useful<br />
for the future. Right now plan for agitation<br />
like demonstrations and non co operations.<br />
55) Let us work for 3% ACA and allotment of<br />
agents, space for development officers in<br />
office.<br />
56) Why suspended agitation was not reviewed<br />
after 3 months. Congratulated for Bihar<br />
donations. What can we tell to members<br />
after returning to headquarters.<br />
57) Has CS discussed on special rules and the<br />
outcome. We have not received any<br />
information on FDI hike which is very<br />
dangerous. There is no discussion on GOIB<br />
and grading.<br />
After all the speakers completed their<br />
deliberations the President requested the Secretary<br />
General to give his response to the queries raised<br />
and clarify matters. .<br />
Secretary General in his reply thanked all<br />
the members for excellent deliberations. It was<br />
clarified that suspension of agitation is based on<br />
CS decision. In April, 2008 CS discussed and<br />
decided to take steps for breaking the ice and<br />
reopen the negotiations. After negotiations started<br />
on 22 nd May 08 the office bearers decided to<br />
suspend the agitation to reciprocate and work<br />
together to create a positive atmosphere. Though<br />
the resolution was proposed at Mussoorie for<br />
review after 3months, the NEC had decided to<br />
review it in the next NEC. We must review and<br />
take a decision today about whether to restart the<br />
agitation. The decision of suspension of agitation<br />
was ratified by the NEC. Let us analyse and think<br />
with our mind and heart whether we got something<br />
or not. EOL came after lot of persuasion and we<br />
have not surrendered the image of the organization.<br />
Revival credit and Granting of agency to direct<br />
agents Spouse was the demand of the organization.<br />
Our philosophy is to resist unilateral changes and<br />
adversely affecting development officers, fight<br />
against alternate channels and private companies.<br />
We are very frequently visiting Central Office,<br />
following up matters and discussing all the issues<br />
and it is not possible to publish all the things.<br />
On special rules our demand is to continue<br />
the existing work norms. We demand for<br />
improvements like automatic absorption to class-<br />
III,100% credit for all policies and removal of<br />
National holidays,election duty days and maternity<br />
leave from costing. Across the negotiating table<br />
we negotiated on all aspects of Special rules. We<br />
have represented to management and government<br />
that the existing work norms itself is very harsh and<br />
that many ADO’s and PDO’s are terminated based<br />
on special rules 1989.<br />
We are opposing the proposed bills of FDI<br />
hike and increase of the capital to 100 crores. The<br />
amendment to increase the capital is very<br />
dangerous, as a loophole is being created which<br />
may lead to issue of IPO’s in future.<br />
In GOIB we have represented to the<br />
management and government what we want, and<br />
we are pursuing for settlement of the GOIB issue.<br />
The major points of our dispute has already been<br />
informned to all of us.<br />
We have demanded for scraping of CLIA<br />
and called upon members to implement the<br />
guidelines to protect the interests of our agents and<br />
development officers. On CLIA let us wait for the<br />
disposal of the petitions and decide in the next NEC.<br />
We have placed a number of issues and<br />
got few issues cleared. We continue to negotiate<br />
on all the issues. Stop believing rumors. We have<br />
put all the issues before you today and if you feel it<br />
10
News Bulletin March 2009<br />
is negative attitude we are free to review and take<br />
a decision to restart agitation if felt necessary.<br />
On recruitment our policy is for continuous<br />
scientific recruitment and we can demand to post<br />
DOs in SSOs along with infrastructure and seating<br />
arrangements.<br />
On wage revision we submitted charter of<br />
demands after discussion in NEC at Siliguri. We<br />
are demanding a good wage revision commensurate<br />
to the hike for central government employees based<br />
on sixth pay commission. Our pension is directly<br />
linked to salary and therefore a good salary is the<br />
need of the hour. The incentives are not secured.<br />
We have already represented about exempting<br />
wage arrears from costing and removal of<br />
anomalies in the wage revision. Housing loan,<br />
mediclaim, RMES and other aspects have been<br />
represented.<br />
During Parliament and Yogakshema<br />
March we have raised our protest against FDI hike<br />
and ammendments to Insurance bills. We sought<br />
the support of all the political parties and unions.<br />
We had protested and were not party to the<br />
decision of 20th August’08 strike and hence our<br />
decision not to join in 20 th August ’08 strike.<br />
Now business is going down and all are<br />
worried. In News <strong>bulletin</strong> failure to print in bilingual<br />
(Hindi and English),we will try to print in bilingual.<br />
In News <strong>bulletin</strong> we are not advocating any<br />
ideology but only projecting the social; and national<br />
issues which is affecting the common man and all<br />
of us. Printing of only circulars in News <strong>bulletin</strong><br />
was criticised previously hence we are giving only<br />
information about circulars. We are trying to make<br />
it a excellent News Bulletin in every aspect. Only<br />
93 divisions addresses were updated and sent to<br />
us. We are printing sufficient copies to reach all<br />
members. If anyone is not getting the News <strong>bulletin</strong><br />
we have directed that “the member should first<br />
check the address in the list with the divisional<br />
secretary and then if correct give a complaint to<br />
the local post office with a copy to secretary<br />
general”.<br />
Regarding expenses we are taking all steps<br />
for need based expenditure. The fund position of<br />
the organization has to improve. We have to build a<br />
good base fund so that the interest from it will enable<br />
the organization to meet various expenses other than<br />
routine expenses. Today as a organization we cannot<br />
respond to any demand for emergency relief like<br />
that in Assam, Bihar, or for our comrades. We are<br />
not in a well equipped position to fight continuous<br />
legal battles engaging good advocates or carry out<br />
rigorous PR activities. We cannot go on collections<br />
every time we need funds. Even contributions for<br />
Late Com.Pawan Gaur relief fund is pathetic. Only<br />
few divisions have contributed. This situation is not<br />
appreciable. Organisation will have to decide in the<br />
near future to create a good fund for our organization.<br />
All divisions were asked to clear the long pending<br />
dues. We appreciate the members and divisions who<br />
contributed generously to the Bihar relief fund.<br />
In tough times we are trying to get the best<br />
and not surrendering any issue. Subscription is a<br />
must and there is no other way. Members have to<br />
be told clearly that subscription is meant for the day<br />
to day running of the organization. Our organization<br />
is a must for our protection and to resist all offensive<br />
decisions of Management and Government. It is<br />
only because of <strong>NFIFWI</strong> that we all are continuing<br />
to go ahead in Life strongly. CS, NEC’s, Council<br />
meetings are all regular constitutional and<br />
organizational requirements to conduct the affairs<br />
of the organisation systematically. Members cannot<br />
be expecting only benefits after every meeting.<br />
Benefits will come to members as and when issues<br />
are settled. The meetings are for reporting, analyzing,<br />
reviewing matters and deciding on our stand and<br />
strategies. Leaders should have confidence that we<br />
are going strong and taking up all the issues and the<br />
<strong>NFIFWI</strong> The direction is not to give any<br />
commitment for any activity except for the<br />
existing marketing activity. As and when any<br />
official communication received by us we will discuss<br />
and decide further.<br />
On Federal Council members suggested for<br />
3 days FCM, restriction of veteran Leaders and if<br />
allowed time limit for speech, appointment of<br />
11
News Bulletin March 2009<br />
election officer and printing of ballot papers in<br />
advance with names after withdrawal, restriction<br />
to delegates only, announcement of valid<br />
nominations on the first day of the meeting etc. Even<br />
one member suggested that ours is trade union and<br />
need not give so much importance for elections.<br />
The Secretary General informed the house that all<br />
suggestions are taken in to consideration and come<br />
with proposal to the next NEC after discussing the<br />
same in CS meeting at the time of NEC.<br />
On constitutional amendments let us<br />
concretize in the coming NEC and present to FCM<br />
2010. Some constitutional requirements are lacking<br />
and hence ammendment is required and requested<br />
the delegates to send their recommendations so<br />
that we can concretize in the next NEC.<br />
On fund position Secretary General<br />
requested to clear Late Com.Pawan Gour<br />
contributions immediately before leaving the<br />
meeting hall. Requested to clear all the dues of<br />
subscriptions and News <strong>bulletin</strong> and they can<br />
deposit directly in the bank also. Zonal level and<br />
Central level financial support is a must and<br />
requested to clear all the outstanding dues as per<br />
the list circulated.Review of agitation is not required<br />
as on date and if needed the same will be informed.<br />
In the Organizational matters Secretary General<br />
directed the Organization not to believe the<br />
rumors,negative propaganda against the decisions<br />
of the organization. Informed the House about the<br />
decision of CS Meeting with due respects to the<br />
veteran leaders it was decided not to invite such<br />
people who speak against the organization and<br />
decisions and NEC accepted the proposal.<br />
Secretary General directed the divisional Units to<br />
register under Trade Union act and the information<br />
is available on our web site.<br />
Based on the discussions the following<br />
resolutions were proposed. Com. Sankyan Zonal<br />
Secretary placed the proposed resolutions for<br />
approval of NEC<br />
1. On special rules 1989<br />
2. On CLIA scheme<br />
3. On GOIB 2007<br />
4. On unscientific recruitment<br />
5. On Big leap competition<br />
6. Condonation of EOL pending from 2004<br />
7. Condonation of EOL of Ahmedabad and Delhi<br />
8. On confidential reports for promotion and<br />
increment<br />
The copy of resolutions sent to Chairman<br />
is enclosed alongwith.<br />
Com R Venkateswara rao Joint Secretary<br />
proposed vote of thanks and specially thanking<br />
Mysore Comrades under the leadership of Com<br />
Puttaswamy and Nagesh Murthy for excellent<br />
arrangements and hospitality.<br />
The President adjourned the meeting after<br />
National Anthem.<br />
Comradely Your’s<br />
R.Jayprakash<br />
Secretary General<br />
<strong>NFIFWI</strong><br />
<strong>NFIFWI</strong> Zindabad…….<br />
<strong>NFIFWI</strong> Zindabad……<br />
<strong>NFIFWI</strong> Zindabad……..<br />
NEWS BULLETIN thanks<br />
Com. Himanshu Pandya,<br />
Com. H. R. Narasimhan,<br />
Com. Rajiv Gulati,<br />
for contributing to this issue of NEWS BULLETIN<br />
12
News Bulletin March 2009<br />
RESOLUTIONS ADOPTED BY NEC OF NATIONAL FEDERATION<br />
Ref: Resolutions adopted by National Federation<br />
of Insurance Field Workers of India at our<br />
National Executive Meeting held at Mysore on 16 th<br />
and 17 th of December 2008<br />
Dear Sir,<br />
The Federal council meeting held on the 16 th and<br />
17 th of December 2008 at Mysore had indepth<br />
deliberations on various matters concerning LIC,<br />
Insurance sector and Development officers. The<br />
house expressed it’s unhappiness and anger over<br />
many issues which are yet to find a solution from<br />
your end and government. The house discussed ,<br />
moved and adopted the following resolutions. We<br />
place before you the resolutions for your kind<br />
consideration and necessary action for favorable<br />
solutions at the earliest.<br />
RESOLUTIONS<br />
This NEC Meet held at Mysore on 16 th and 17 th<br />
December 2008 unanimously resolved<br />
1. That, looking into the worldwide Economic Market<br />
recession, nose diving sensex, stiff competition<br />
from the private players, hardship of the policy<br />
holders in running the existing policies and cut<br />
throat competition prevailing in the insurance<br />
market, the present service conditions (special<br />
Rules-1989) itself has become very tough.<br />
Therefore any negative changes to special rules<br />
1989 will make matters very difficult for the<br />
Development officers. We call upon LIC<br />
management and Government, to not make any<br />
negative changes in the special rules 1989. This<br />
will boost the morale of the Dev officers who are<br />
already disturbed and help them in performance<br />
of their duties with better efficiency. We also call<br />
upon the management to suggest for positive<br />
change or amendment as per the suggestions made<br />
by the <strong>NFIFWI</strong>, which should be done through<br />
bilateral discussions resulting into an MOU.<br />
2. That, the introduction of CLIA scheme has made<br />
a dent in the relationship between Dev.Officers<br />
and agents spoiling the atmosphere of the branch<br />
offices and reduction in individual business of<br />
CLIA is not in the interest of LIC. Moreover<br />
the practice adopted by CLIAs is contrary to the<br />
Agents Regulation 1972 and IRDA Agents Reg,<br />
2000. The house is of the firm opinion that<br />
withdrawal of CLIA scheme is in the larger<br />
interest of the organization, otherwise the entire<br />
marketing force will be continued to be disturbed<br />
and trust amongst the Dev.Officers and agents<br />
which is existing will be lost forever. The CLIA<br />
scheme has been destroying the fabric of the<br />
most successful channel of Development officers<br />
and Tied agents.<br />
3. That, the amendments in the GOIBS -2007 should<br />
be made immediately as per the suggestions<br />
made by the NF to address the concerns of the<br />
class of the Dev.Officers and LIC to pave the<br />
way for aggressive marketing. It is further<br />
resolved that in the absence of reimbursement<br />
of Marketing and conveyance expenses it is<br />
extremely difficult to carry out the marketing<br />
activities to the desired levels.<br />
4. That, the hap-hazard and unscientific recruitment<br />
of ADOs is a financial loss to the corporation<br />
due to huge termination creating a band of orphan<br />
and unskilled agents. It is not desired from a<br />
PSU like LIC to adopt “hire and fire policy”.<br />
The house suggests that the recruitment of ADOs<br />
should be based on the socio- economic profile<br />
of the place and the previous system of<br />
consultation with the representatives of NF at<br />
the divisional level to identify the vacant pockets<br />
as per the guidelines of our former MD<br />
Sri.Chidambaram. Further, total infrastructure<br />
needed for a Dev.Officer should be provided in<br />
all offices of posting.<br />
5. That, the long pending awards of “Big Leap<br />
Competitions” should be released immediately.<br />
This is also to motivate the Dev.Officers to<br />
participate with full belief in the ongoing and<br />
future competitions. The <strong>NFIFWI</strong> sought the<br />
path of agitation which had absolutely no agenda<br />
affecting the business performance or<br />
participation in “BIG Leap Competition” hence<br />
depriving the qualified Dev.Officer is unjust and<br />
unfair practice on the part of Management.<br />
6. That, the condonation of EOL’s pending in the CO<br />
pertaining to various parts of the country is long<br />
awaited. The house calls upon the management<br />
to condone the EOL’s to generate a team spirit<br />
and set right the anomalies arising out of it.<br />
7. That, the issue of condonation of unfair EOL’s<br />
imposed in Ahmedabad and Delhi -1 should be<br />
sorted out amicably across the table.<br />
With Best Wishes and Regards,<br />
Yours Sincerely<br />
R.Jayprakash<br />
Secretary General<br />
13
News Bulletin March 2009<br />
CAPITALISM, SOCIALISM AND CRISIS<br />
Prabhat Patnaik<br />
A COMMON view of the current financial<br />
crisis of capitalism holds that it is essentially<br />
an aberration. Some attribute this aberration<br />
to specific mistakes committed in the past, for<br />
instance by the US Federal Reserve with<br />
regard to monetary policy. Some hold the lack<br />
of adequate regulatory mechanism as being<br />
responsible for this aberration. Paul Krugman,<br />
the current year’s Nobel laureate, blames it on<br />
insufficient supervision of the financial system.<br />
And even Joseph Stiglitz, the well-known radical<br />
economist and Nobel laureate, characterises<br />
it as a “system failure”, a term which makes<br />
the crisis a phenomenon that in principle could<br />
have been avoided with impunity. This entire<br />
perception however is untenable. The crisis is<br />
a result not of the failure of the system but of<br />
the system itself; it is a part of the mode of<br />
operation of contemporary capitalism rather<br />
than being unrelated or extraneous to it.<br />
MASSIVE SPECULATION<br />
In a “free market” regime, asset markets tend<br />
to be subject to speculation. Speculators buy<br />
assets not because of the yield on these<br />
assets but because they expect its price to<br />
appreciate in the coming days. They have no<br />
long term interest in the assets and are<br />
concerned exclusively with capital gains. Since<br />
buying today to sell tomorrow entails carrying<br />
the asset during the intervening period for<br />
which a “carrying cost” has to be incurred, the<br />
assets most suitable for speculation are those<br />
whose carrying costs are low; and these are<br />
typically financial assets which have virtually<br />
zero carrying costs (requiring only a few taps<br />
on computer keys to effect all necessary<br />
transactions). Financial asset markets<br />
therefore are always subject to massive<br />
speculation.<br />
Speculation generates bouts of euphoria or<br />
“speculative excitement” which have the<br />
cumulative effect of pushing up asset prices.<br />
An initial rise in some asset prices, caused no<br />
matter how, gives rise to expectations of a<br />
further rise, and hence to an increase in the<br />
demand for the assets in question which<br />
actually raises their prices further; and so the<br />
process feeds upon itself and we have asset<br />
price “bubbles”. Such “bubbles” typically<br />
characterise financial assets, which, as already<br />
mentioned, are particularly prone to speculation;<br />
but they are not confined to financial assets<br />
alone (as the housing market “bubble” in the<br />
United States has just demonstrated).<br />
Such “bubbles” have an obvious impact on the<br />
real economy. The rise in asset prices fed by<br />
speculative euphoria improves for individuals<br />
who own these assets the estimation of their<br />
wealth position, and hence causes an increase<br />
in their consumption expenditure, and thereby<br />
in employment. Likewise such a rise in asset<br />
prices, where the assets in question are<br />
producible, causes an increase in investment<br />
expenditure on these assets, which leads to<br />
their larger production, and hence to larger<br />
employment. In short, speculative euphoria in<br />
the asset markets makes the boom in the real<br />
economy, stimulated by whatever had caused<br />
the initial rise in asset prices, more pronounced<br />
and prolonged.<br />
Precisely because of this however if for some<br />
reason the asset price increase wanes or<br />
comes to a halt, speculators attempt to get out<br />
of the assets in question causing a crash in<br />
the asset prices. This causes a fall in aggregate<br />
expenditure on goods and services; a collapse<br />
in the state of credit, as banks face insolvency;<br />
and a possible collapse even in the inclination<br />
of depositors for holding bank deposits (since<br />
they fear banks’ insolvency), as had happened<br />
during the Great Depression. In short there is a<br />
collapse of the state of confidence all around,<br />
and hence a corresponding increase in liquidity<br />
preference; i.e. there is a disinclination to hold<br />
any asset other than pure cash, or in extreme<br />
14
News Bulletin March 2009<br />
cases only currency, and of course claims<br />
upon the government, which is considered to<br />
be the only safe and reliable borrower. Not all<br />
crises display this severity; but to a greater or<br />
lesser extent these features mark any crisis.<br />
Speculation therefore has the effect of making<br />
the boom more pronounced and prolonged; but<br />
it has also the effect of precipitating a severe<br />
crisis, as distinct from a mere cyclical<br />
downturn. In the absence of speculation the<br />
boom in the real economy will be a much more<br />
truncated and tame affair. But precisely<br />
because it is not a tame affair, it is followed by<br />
a crisis.<br />
Two conclusions follow from the above<br />
analysis. First, since speculation is endemic<br />
to modern capitalism, where financial markets<br />
play a major role, speculation-engendered<br />
euphoria and the consequent pronounced<br />
booms, together with the crises that invariably<br />
follow, are also endemic to modern capitalism.<br />
“Bubbles” constitute in other words the mode<br />
of operation of the system. “Bubbles”, together<br />
with the crises that follow their collapse, are<br />
not a “system-failure”; they are the system.<br />
Secondly, if “bubbles” are to be eliminated and<br />
speculation is to be curbed, then it is not enough<br />
to put in place some regulatory mechanisms;<br />
an alternative instrument for generating<br />
pronounced booms in the real economy has<br />
to be found, for otherwise the economy would<br />
remain perennially sunk in stagnation and largescale<br />
mass unemployment.<br />
The alternative instrument suggested by John<br />
Maynard Keynes, the well-known English<br />
economist, was State intervention through fiscal<br />
measures to ensure that the level of demand<br />
remained as close to full employment as<br />
possible. Keynes’ suggestion, made in the<br />
1930s during the Great Depression, was<br />
strongly opposed by finance capital, which<br />
always opposes all State intervention that does<br />
not promote its own exclusive interest. The<br />
Keynesian remedy got accepted only in the<br />
post-war period when the balance of class<br />
forces had shifted, with the working class,<br />
which had made immense sacrifices during the<br />
war, acquiring greater social and political weight,<br />
and finance capital, experiencing a<br />
corresponding weakening of its position, forced<br />
to make concessions.<br />
Over time however this balance changed once<br />
again. “Centralisation of capital” and the<br />
formation of larger and larger blocs of finance<br />
capital, during the period of Keynesian demand<br />
management itself, forced open the barriers<br />
imposed on cross border financial flows.<br />
Finance capital consequently acquired the<br />
nature of international finance capital, through<br />
a process of “globalisation of finance”. Since<br />
the whims of international finance capital<br />
necessarily had to triumph over the<br />
autonomous predilections the nation-State, in<br />
order to avoid capital flight, Keynesian “demand<br />
management” was rejected, and neo-liberal<br />
capitalism emerged triumphant again, bringing<br />
back the era of speculative financial crises,<br />
leading to real crises, in the capitalist world. This<br />
is the phenomenon we are currently<br />
witnessing, a phenomenon that has been<br />
compared with the Great Depression of the<br />
1930s.<br />
SOCIALIST ECONOMY IMMUNE TO CRISES<br />
One of the hallmarks of the 1930s Great<br />
Depression is that the Soviet Union, the only<br />
socialist economy of the time, had been<br />
completely unaffected by it. In fact, when<br />
capitalism had been afflicted by the severe<br />
crisis, the Soviet Union had experienced such<br />
unprecedented economic construction that it<br />
had completely got rid of unemployment. This<br />
fact, as is well-known, had so impressed a<br />
whole generation of Indian freedom fighters like<br />
E M S Namboodiripad that they had embraced<br />
Communism because of it.<br />
This contrast arises owing to a fundamental<br />
difference between the mode of operation of<br />
the two systems. A socialist economy is<br />
fundamentally immune not just to speculationinduced<br />
crises but to all crises arising from a<br />
deficiency of aggregate demand. This fact is<br />
15
News Bulletin March 2009<br />
recognised even by staunch opponents of<br />
socialism like the Hungarian economist Janos<br />
Kornai who calls capitalism a “demandconstrained<br />
system” and socialism a “resourceconstrained<br />
system” where the available<br />
resources are fully utilised without being<br />
constrained by insufficient demand.<br />
A socialist economy of course has the usual<br />
fiscal instrument suggested by Keynes for<br />
overcoming deficiency of aggregate demand,<br />
unlike a capitalist economy where the use of<br />
this instrument requires overcoming opposition<br />
from finance capital, and where, even when the<br />
instrument is perchance used, there is a limit<br />
to its use arising from the fact that the system,<br />
being based on antagonism, needs a<br />
sufficiently large reserve army of labour to<br />
prevent inflation and maintain “work discipline”.<br />
But even apart from this, a socialist economy<br />
can overcome deficiency of aggregate demand<br />
in another way which brings out its basic<br />
character.<br />
In any economy where in any period the money<br />
wages are given, the production of a certain<br />
output requires a certain unit cost of production<br />
to be incurred. The term “deficiency of<br />
aggregate demand” or “insufficient demand”<br />
simply means that the level of demand in the<br />
economy is such that this output can be sold<br />
only at a price that falls below this unit cost of<br />
production plus the customary profit margin.<br />
When this happens, then in a capitalist economy<br />
firms cut back on output, so that there is<br />
unemployment; and this gives rise to a further<br />
reduction in demand since the workers’ demand<br />
shrinks owing to unemployment; and this<br />
causes a further reduction in output and<br />
employment; and so the process, referred to<br />
as the “multiplier” effect of the initial output/<br />
employment decline, goes on and the economy<br />
is caught in a crisis.<br />
In a socialist economy however since firms are<br />
socially owned, the State can issue a directive<br />
asking them to lower prices when they initially<br />
find that the demand for output at the base price,<br />
i.e. at the price equal to the unit cost plus profit<br />
margin, is less than the output. While issuing<br />
this directive it can assure the firms that any<br />
losses they make will be covered from the State<br />
budget. In such a case, firms simply lower their<br />
prices to clear the market, and there is no<br />
question of any unemployment to start with, and<br />
hence no question of any “multiplier effect”.<br />
Putting it differently, in a capitalist economy any<br />
decrease in demand gives rise to “output<br />
adjustment” and hence “employment<br />
adjustment”; in a socialist economy it can give<br />
rise only to “price adjustment” and keep output<br />
unchanged.<br />
Why does this difference arise? When price<br />
adjusts downwards, since the money wage rate<br />
is given, there is an increase in the real wage<br />
rate. So, a socialist economy, faced with a<br />
decline in aggregate demand, gets rid of it by<br />
raising real wages of workers, i.e. by raising the<br />
demand of the workers. But a capitalist<br />
economy, precisely because it is based on class<br />
antagonism, where the slightest increase in the<br />
wage rate is bitterly opposed by capitalists, will<br />
never raise real wages to get rid of demand<br />
deficiency. This is why any such deficiency gives<br />
rise to output adjustment, and hence mass<br />
unemployment.<br />
But now we come to the real crux of the matter.<br />
It was mentioned above that the socialist State,<br />
while directing firms to reduce prices to clear<br />
markets, would assure them that any losses<br />
they incur would be covered by the State budget,<br />
i.e. that they would get a State subsidy to cover<br />
their losses. The question may be asked: how<br />
does the State finance these losses? And the<br />
answer interestingly is that for all the firms taken<br />
together there will be no losses. In other words,<br />
while the State issues this directive it will never<br />
be actually called upon to make any additional<br />
budgetary provisions for subsidies. True, firms<br />
in the aggregate will make less profits after price<br />
adjustment than they otherwise would have done<br />
in the absence of the original deficiency of<br />
aggregate demand; but they will make profits in<br />
the aggregate all the same. The State may at<br />
the most have to divert the profits of some firms<br />
to cover the losses of others, but it will have to<br />
16
News Bulletin March 2009<br />
make no additional provisions. This follows from<br />
the fact that since profits in any period in a<br />
socialist economy are more or less<br />
synonymous with the savings of the economy,<br />
and since (ignoring external borrowing/lending),<br />
investment in any period must equal savings,<br />
as long as investment remains positive, profits<br />
in the aggregate must remain positive no<br />
matter what the level of aggregate demand.<br />
A socialist economy, being both free of<br />
antagonism (so that real wages can be raised)<br />
and free of anarchy (so that some firms’ profits<br />
can be diverted to cover others’ losses), has<br />
thus a mode of functioning that makes it in<br />
principle immune to crises, caused by the<br />
deficiency of aggregate demand, which afflict<br />
capitalism.<br />
IN THE PRESENT CONTEXT<br />
So far we have discussed the inner workings<br />
of a socialist economy that is unconnected<br />
with world capitalism through trade and<br />
financial relations. Since the Soviet Union in the<br />
1930s was unconnected with world capitalism,<br />
and even later had only tenuous links, it<br />
remained actually immune to crises of<br />
aggregate demand. But what can be said of a<br />
socialist economy that is closely linked to the<br />
capitalist world through trade and financial<br />
relationships? Does such an economy<br />
continue to remain immune to crises of<br />
aggregate demand, especially those emanating<br />
from the capitalist world?<br />
In an economy where all important means of<br />
production are socially owned, the answer in<br />
principle should still be “yes”. When exports of<br />
such an economy decline, it is always open to<br />
it to raise domestic demand, either through the<br />
fiscal route suggested to capitalism by Keynes,<br />
i.e. through larger State expenditure, or through<br />
larger workers’ consumption via a rise in the<br />
real wage rate, caused by the lowering of prices<br />
for a given money wage rate, as discussed<br />
above. Since the rationale of the socialist<br />
economy’s participation in the world market is<br />
that it has generally lower prices than the<br />
capitalist world (at the prevailing exchange rate),<br />
which after all is why it is able to out-compete<br />
the capitalist countries and have burgeoning<br />
trade with them, any further lowering of its<br />
domestic prices in response to the reduced<br />
demand owing to world recession, should<br />
cause no “leakages” in the form of larger<br />
imports. Such reduction in other words should<br />
boost its own domestic demand, and, if<br />
anything, even help somewhat in countering<br />
export decline. Likewise, if it provided a larger<br />
fiscal stimulus, as China has announced it<br />
would, then the main impact of such a stimulus<br />
should be on its own domestic demand. In short<br />
the socialist weapons against crises mentioned<br />
earlier remain intact even when the socialist<br />
country has trade relations with the capitalist<br />
world.<br />
Of course switching from export production to<br />
production for the home market may take some<br />
time, during which there may be transitional<br />
unemployment, but this is very different from<br />
the unemployment encountered in capitalist<br />
countries during a crisis.<br />
The problem however may arise from a different<br />
source, namely when in the process of entering<br />
into relations with capitalist countries, the<br />
socialist economy has also accommodated<br />
within its midst a large private sector, owned<br />
by powerful capitalists from home and abroad.<br />
There would be resistance from them to the<br />
use of the standard socialist weapons against<br />
crises, just as there is resistance from<br />
capitalists in capitalist countries to the use of<br />
similar weapons, and indeed for the very same<br />
reasons. It follows in such a case that the<br />
capacity of the socialist economy to thwart a<br />
crisis arising from the deficiency of aggregate<br />
demand, depends upon the strength of the<br />
socialist State in confronting the opposition of<br />
the internal capitalists to the socialist measures<br />
against the crisis.<br />
[The author is a noted economist and<br />
Deputy Chairman of the Kerala State<br />
Planning Commission]<br />
17
News Bulletin March 2009<br />
MEDIA WATCH<br />
Life cos should focus on traditional biz for<br />
stability -Shri. T.S. Vijayan LIC Chairman.<br />
The Economic Times ;23 Feb 2009,<br />
When India Inc faced credit crunch, the only<br />
institution that had the money to invest was Life<br />
Insurance Corporation of India (LIC).<br />
With expected total premium income of over Rs<br />
1,70,000 crore for the current fiscal (FY09), the<br />
corporation is the country’s largest institutional<br />
investor.<br />
Recently, LIC helped bridge the gap between<br />
investors looking for guaranteed returns and<br />
corporates trying to raise long-term funds by<br />
launching Jeevan Aastha, a single-premium<br />
guaranteed returns policy, which mopped nearly<br />
Rs 10,000 crore.<br />
In an interview with Mayur Shetty, LIC<br />
chairman TS Vijayan explains why traditional<br />
policies are here to stay.<br />
LIC’s Jeevan Aastha has taken the market by<br />
surprise. What made you launch a guaranteed<br />
traditional product?<br />
We launched Jeevan Aastha when interest rates<br />
were falling. We were sure that rates prevailing then<br />
would be unsustainable. That’s why we decided on<br />
a single-premium product.<br />
There was also a tendency, among insurers, to bring<br />
out a capital-guaranteed product on the unit-linked<br />
platform. We thought that Jeevan Aastha would be<br />
a better alternative to capital guarantee because the<br />
product guarantees capital as well as returns.<br />
The option was to either design it on a unit-linked<br />
platform or a non-unit-linked platform. Because of<br />
the guaranteed returns, we thought it was better to<br />
launch it on the traditional platform (where<br />
investments are directed by the regulator and<br />
invested largely in debt). Since the rates prevailing<br />
then were not sustainable, we thought of keeping it<br />
open only for a short period.<br />
Has the launch helped in regaining market<br />
share?<br />
IRDA is still to come out with business figures for<br />
January. But I expect that our market share should<br />
cross 60% with Jeevan Aastha. Year-on-year, there<br />
may not be any growth in new business premium,<br />
but our total premium (new business and renewals)<br />
growth is very robust.<br />
Till January 2009, we have grown 13% with a total<br />
premium of Rs 1,09,000 crore. This shows that our<br />
conservation ratio is very high. I am not sure what<br />
these figures are for the industry since other life<br />
companies do not publish their renewal premia.<br />
Do you see the market reverting to traditional<br />
endowment policies?<br />
We have brought out another guaranteed-returns<br />
product - Jeevan Varsha - on the traditional platform.<br />
We do have our Ulip product, but it’s not doing as<br />
well as last year because of the current market<br />
condition. But there is a huge market for non-unitlinked<br />
traditional products that was vacated by<br />
private players, either for capital constraints or for<br />
some other reasons.<br />
However, I believe that a life company, which looks<br />
for stability, has to look at traditional business —<br />
both for profitability of the business and strength of<br />
the business. Once private players start making<br />
profits, I think they will also seriously promote<br />
traditional products.<br />
Internationally, the share of traditional and nontraditional<br />
is 50:50. In India, pension is just picking<br />
up. But in other countries, insurance companies have<br />
a large annuity basket for which you have to look<br />
for a large portion of fixed income. If companies do<br />
not do that, they can see wild swings, which is<br />
happening to companies, globally.<br />
But investment guidelines on traditional products<br />
would reduce your flexibility to invest... It will only<br />
help. What companies are looking for today is largely<br />
debt. There are no fresh equity issuances. Debt is<br />
what companies need today and traditional policies<br />
are able to support that.<br />
For instance, if an infrastructure company has an<br />
outlook for 15-20 years, it cannot be supported by<br />
equity, it needs long-term debt. As of today, we have<br />
enough headroom. There is also ample supply of<br />
paper. In addition to corporates, public sector banks,<br />
which are growing their business, are now issuing<br />
tier-II bonds to raise their capital adequacy.<br />
18
News Bulletin March 2009<br />
Satyam has stunned institutional investors.<br />
What are you doing to protect your investment<br />
and other exposures?<br />
With agencies working in tandem to revive the<br />
company, we are confident. Satyam is a fraud that<br />
has happened. There are two things that need to<br />
be done. First, we have to look at how to review<br />
the company and take care of investors and<br />
employees.<br />
Secondly, we also have to look at what has<br />
contributed to this and what are the early warning<br />
signals that can be caught by institutions and<br />
regulators. This is a big lesson for both. There must<br />
be some early warning signals that must be caught<br />
so that such frauds cannot be perpetrated again.<br />
What is the size of investments LIC is looking<br />
at in the current fiscal?<br />
We are targeting Rs 1,75,000 crore of total premium<br />
income for this fiscal. The figure may be slightly<br />
lower because of the slowdown. We will have<br />
around Rs 30,000-40,000 crore of investment<br />
income. Against this, there will be an outgo towards<br />
death and maturity claims. Last year, the outgo was<br />
around Rs 35,000 crore. This year, the figure will<br />
be higher. There will be some outgo towards pension<br />
annuities.<br />
But our investment income should balance the<br />
outgo. Of our investments, 25% has to be invested<br />
in G-secs, another 25% in state government bonds,<br />
15% has to go to infrastructure and the remaining<br />
35% is for other corporate investments. This would<br />
include investments in banks, etc. Equity<br />
investments may absorb around Rs 30,000 crore<br />
and we may invest more than 50% of our funds in<br />
G-secs.<br />
Our assets under management may cross around<br />
Rs 9,50,000 crore by the year end and Rs 14,00,000<br />
crore in three years.<br />
Outraged Obama goes after AIG bonus<br />
payment<br />
WASHINGTON (Reuters) - President Barack<br />
Obama sought to claw back bonuses paid to<br />
employees of insurer AIG on Monday, expressing<br />
outrage that taxpayer money was used to reward<br />
executives at the bailed-out firm.<br />
Though the insurance giant is being kept alive on a<br />
government bailout of up to $180 billion, it is now<br />
paying out $165 million in bonuses.<br />
“This is a corporation that finds itself in financial<br />
distress due to recklessness and greed,” Obama said.<br />
“Under these circumstances, it’s hard to understand<br />
how derivative traders at AIG warranted any<br />
bonuses, much less $165 million in extra pay,” he<br />
said at the White House.<br />
“How do they justify this outrage to the taxpayers<br />
who are keeping the company afloat?”<br />
Obama said he had ordered Treasury Secretary<br />
Timothy Geithner to pursue “every single legal<br />
avenue” to cancel the bonuses and a Treasury official<br />
said later it would modify a planned $30 billion capital<br />
infusion for American International Group to try to<br />
recoup the bonuses.<br />
White House spokesman Robert Gibbs said the<br />
Treasury could impose rules on the $30 billion loan<br />
facility for AIG but declined to go into specifics or<br />
spell out ways the legal avenues available to the<br />
administration to block the payments.<br />
Obama said Geithner was working on the problem.<br />
“I want everybody to be clear that Secretary<br />
Geithner’s been on the case. He’s working to resolve<br />
this matter with the new CEO, Edward Liddy, who,<br />
by the way, everybody needs to understand, came<br />
on board after the contracts that led to these bonuses<br />
were agreed to last year,” Obama said.<br />
Liddy told Geithner in a letter the insurer was legally<br />
obliged to fulfill 2008 employee retention payments<br />
but had agreed to revamp its system for future<br />
bonuses.<br />
Obama said overall financial regulatory reform was<br />
vital to ensure this did not occur again.<br />
He said the government needed “some form of<br />
resolution mechanism in dealing with troubled<br />
financial institutions, so that we’ve got greater<br />
authority to protect American taxpayers and our<br />
financial system in cases such as this.”<br />
Pausing to cough, Obama said he was “choked up<br />
with anger.”<br />
“We don’t have all the ... Regulatory power that we<br />
need. And this is something that I expect to work<br />
with Congress to deal with in the weeks and months<br />
to come.”<br />
19
News Bulletin March 2009<br />
LIC raises State Bank stake to 9.16%<br />
Friday, 13 March , 2009<br />
Mumbai: State-run Life Insurance Corp of<br />
India has raised its stake in top bank State Bank<br />
of India by 2.12 per cent to 9.16 per cent<br />
through market purchases, the state-run<br />
lender said in a stock exchange filing. LIC<br />
bought 13.46 million shares between mid<br />
November and early March, the filing showed.<br />
Last month, India’s second largest bank, ICICI<br />
Bank, said LIC had increased its stake in the<br />
private lender to 9.38 per cent.<br />
LIC hikes stake in Gail India to 9.98 pct<br />
Mumbai: Life Insurance Corporation of India has<br />
hiked its stake to 9.98 per cent in state-run Gail<br />
through open-market transaction as well as bonus<br />
allotment.<br />
In a disclosure on the Bombay Stock Exchange, Gail<br />
India said LIC has purchased over 5.92 crore shares<br />
representing two per cent stake in the company<br />
between March 21, 2007, and February 13 this year.<br />
LIC bought 7.38 crore shares worth Rs 1,132.97<br />
crore and sold 1.46 crore shares for Rs 546.77 crore,<br />
resulting in a net acquisition of 5.92 crore shares (2<br />
per cent), the filing added.<br />
Out of the 5.92 crore shares, over 3.88 crore were<br />
bonus shares, Gail added.<br />
Prior to the transactions, LIC held 7.98 per cent<br />
stake, which has increased to 9.98 per cent<br />
representing over 12.66 crore shares in Gail India.<br />
Shares of Gail India were trading at Rs 196.65, down<br />
1.75 per cent on the BSE.<br />
LIC hikes stake in IOB to 9.96 pct<br />
Mar 16, 2009<br />
Mumbai: The country’s biggest insurance service<br />
provider, LIC, has hiked its stake in Indian Overseas<br />
Bank (IOB) to 9.96 per cent after purchasing<br />
additional shares worth Rs 57.65 crore through openmarket<br />
transaction.<br />
Life Insurance Corp has purchased over 1.56 crore<br />
additional shares representing 2.86 per cent stake in<br />
the bank between February 19 and March 3, 2009,<br />
IOB said in a disclosure to the Bombay Stock<br />
Exchange.<br />
Prior to the aforesaid purchase, LIC held 7.09 per<br />
cent stake and now it holds over 5.4 crore shares<br />
representing 9.96 per cent stake in IOB.<br />
Shares of IOB were trading at Rs 44.10, up 1.85<br />
per cent on the BSE.<br />
Insurance regulator plans steps to check<br />
malpractices<br />
11 March , 2009<br />
Chennai: India’s insurance regulator now appears<br />
to be following the corporate sector’s credo - tough<br />
times are the right time to take difficult decisions.<br />
The Insurance Regulatory and Development<br />
Authority (IRDA) is drawing up plans to strictly<br />
monitor insurers’ expenses and premium charged<br />
for group and guaranteed return policies. “We are<br />
contemplating making insurers get all the payments<br />
made to a company over a threshold limit certified<br />
by an external auditor,” R. Kannan, member<br />
(actuary) of IRDA, told IANS on phone from<br />
Hyderabad. The certificate should also specify the<br />
kind of services insurers receive from the<br />
intermediaries for the payment they make.<br />
Now the insurers are paying huge sums to corporate<br />
agents and bancassurance partners - banks that sell<br />
insurance policies - apart from the agents’<br />
commission for selling their policies. In the past, there<br />
were cases when the insurers had to pay up to Rs<br />
60 crore as joining premium to banks and Rs 10 crore<br />
to corporate agents.<br />
This, according to IRDA officials, is a dangerous<br />
practice as insurers are forced to set aside huge<br />
sums only to save their partnership agreements in a<br />
highly competitive atmosphere. Though the expense<br />
certification regulation is expected to check this<br />
practice, Kannan did not set any time frame for the<br />
implementation of the proposal. He, however, added<br />
that the IRDA was also looking closely at the pricing<br />
of group insurance and guaranteed insurance policies<br />
as the premium of several such policies is too low.<br />
“Some of the rates quoted for software companies<br />
are mind- boggling. The rates are not even sufficient<br />
to cover the stamp duty payable on the policies,”<br />
said Kannan. He added: “We will study carefully<br />
the adequacy the policy charges and the premium<br />
levied by the life insurers in their policies that<br />
guarantee returns.” After the stock market’s recent<br />
fall, consumers have become wary of buying unitlinked<br />
insurance policies (ULIP), where the<br />
20
News Bulletin March 2009<br />
investment risk is borne by the policyholders. Many<br />
companies are now launching policies that guarantee<br />
payment of highest net asset value during the policy<br />
term or at the time of maturity. Industry officials said<br />
promoting such capital-intensive policies, where<br />
companies have to provide higher sum for solvency,<br />
is a bad business practice and would have disastrous<br />
consequences. “It will be difficult for the companies<br />
to survive with such products if the stock market<br />
indices go up the sky and crash to the earth once<br />
again as has happened now,” an official told IANS.<br />
He added that there was a lot of mis-selling going on<br />
in the guaranteed policy market. “Policyholders think<br />
there is whole lot of stock market investment activity<br />
being done on their behalf and they would immensely<br />
benefit. Actually it is not so. Life insurers will largely<br />
invest in debt and liquid securities and a very low<br />
percentage in equity,” the official said.<br />
Insurance cos not taking Ombudsman<br />
seriously’<br />
12 March , 2009<br />
Hyderabad: Insurance companies it seems are yet<br />
to take the institution of Ombudsman seriously in<br />
dispute resolution with the customers as well as<br />
execution of awards.<br />
This was the opinion expressed by a majority of the<br />
12 insurance Ombudsmen in the country in the<br />
operational reports for the last five years, submitted<br />
to the Insurance Regulatory and Development<br />
Authority (IRDA).<br />
The lack of seriousness on the part of insurers is<br />
quite apparent.<br />
“There are all shades of negligence. Delay in<br />
response, speedy response without substance,<br />
delayed as well as non-substantial response and so<br />
on,” points out a report from the Ombudsman Centre,<br />
Ahmedabad. It is also generally found that most of<br />
the documents lie in the hands of the insurance<br />
companies at the complaint stage, making disposal<br />
of complaints extremely difficult, observed the<br />
Ombudsman, Bhopal. “In few cases, the replies were<br />
not received at all,” the report adds.<br />
The Ombudsmen also pointed out that officials<br />
representing the case for insurance companies need<br />
to be well-versed with the contents of the file.<br />
In many cases, the officer representing on behalf of<br />
the insurers are not pleading the case properly.<br />
“All this would mean a serious loss for a policy-holder<br />
at a time when mis-selling of policies, especially in<br />
the unit-linked products is very alarming,” an<br />
insurance Ombudsman who did not want to be<br />
identified told Business Line.<br />
Not only private insurers, but even the State insurers<br />
are not spared in this regard. “In spite of clear<br />
instructions issued by Life Insurance Corporation of<br />
India for representing the cases properly, the office<br />
concerned with a specific complaint is not presenting<br />
the case properly,” said a review report from the<br />
Insurance Ombudsman, Bhopal.<br />
“There needs to be a stricter mechanism to ensure<br />
implementation of awards given by the Ombudsman<br />
in a specific timeframe. However, as the awareness<br />
about Ombudsmen is growing, things would<br />
improve,”R. Rangabhashyam, Insurance Ombudsman,<br />
Kolkata, said. When contacted, J. Hari Narayan,<br />
Chairman, IRDA, said: “In all probability, it will be<br />
brought under IRDA’s jurisdiction. Then, something<br />
more can be done,” he said. “The insurers should<br />
be more responsible in working for customers’<br />
benefit while dealing with complaints launched with<br />
Ombudsman,” he added.<br />
LIC leads the pack in fresh premium collection<br />
in Jan 2009<br />
MUMBAI: Public-sector Life Insurance Corporation<br />
of India (LIC) has clocked a robust 72.53% jump in<br />
fresh premium collection in January 2009, leaving<br />
behind major private-sector players, most of whom<br />
have posted a negative growth in the month.<br />
According to data released by insurance sector<br />
regulator IRDA, the first-year premium collected by<br />
private life insurers in January 2009 has seen a<br />
negative growth of 24.99% as compared to the same<br />
period last year.<br />
LIC, the country’s biggest life insurer, has, however,<br />
witnessed a growth of 72.53 per cent in fresh<br />
premium collected during the month.<br />
Leading private sector players such as Bajaj Allianz,<br />
ICICI Prudential Life, SBI Life, Aviva and HDFC<br />
Standard Life have posted a negative growth in the<br />
first month of 2009 as compared to last year, the<br />
regulator said.<br />
“Private insurers that garnered a total fresh premium<br />
of Rs 2,642.58 crore experienced a decline of 24.99<br />
per cent in January 2009 as against Rs 3,522.96 crore<br />
21
News Bulletin March 2009<br />
in January last year,” the Insurance Regulatory and<br />
Development Authority (IRDA) said in its monthly<br />
data.<br />
SCSL loses LIC contract<br />
HYDERABAD: What pushed out Satyam<br />
Computer Services Ltd. (SCSL) from the ‘front<br />
office modernisation plan’ of all branches of Life<br />
Insurance Corporation (LIC) of India? Sources in<br />
the insurance giant said that LIC had laid a condition<br />
that anybody to be considered for giving the proof<br />
of concept explaining their competency to take up<br />
the project should have “clean balance sheet” for<br />
three consecutive years.<br />
Fidelity raises stake<br />
With former chairman B. Ramalinga Raju himself<br />
declaring that the accounts were fudged in his<br />
confession statement, Satyam obviously lost out in<br />
the race. Interestingly, LIC, which owned about four<br />
per cent stake in Satyam, preferred L&T Infotech<br />
to be in the race along with Indian IT giants TCS,<br />
Infosys and Wipro.<br />
In an interesting development, Fidelity Management<br />
and Research LLC increased its stake in Satyam<br />
to 10.17 per cent by purchasing 18.27 lakh shares,<br />
emerging as the second largest stakeholder in the<br />
company after L&T.<br />
Meanwhile, half the employees who were on the<br />
project of State Farm Insurance, which terminated<br />
its contract with Satyam, had already left to join the<br />
competing vendors (IT companies) who are also<br />
working on the project.<br />
While all the 180 associates having H1-B visas<br />
working in the U.S. had moved over to other<br />
vendors, 40 out of the remaining 220 on-site<br />
associates with L1 visas have agreed to return to<br />
Satyam in India (offshore).<br />
The 180 staffers have resigned and joined other<br />
vendors like HTC and Patni Computers back home,<br />
for they cannot get L1 visa until they completed<br />
one year in offshore assignments.<br />
Irda seeks more disclosures<br />
March 10, 2009,<br />
In order to provide greater transparency and enable<br />
policyholders to take more informed decisions, the<br />
Insurance Regulatory and Development Authority<br />
(Irda) is asking insurance companies to disclose<br />
solvency margin, claim settlement record and loss<br />
ratio on a quarterly basis.<br />
The changes in the disclosure norms, along with<br />
the track record on dealing with customer<br />
grievances, are proposed to be effective from June<br />
this year.<br />
“Claim settlement will give an idea of the number<br />
of claims settled and the numbers pending with the<br />
insurer, while other figures will provide a picture on<br />
an insurer’s underwriting capacity. For<br />
policyholders, it is necessary to know the strength<br />
of the company he or she is dealing with,” said a<br />
senior Irda official. While there will be more<br />
disclosures for life and general insurance<br />
companies, the nature of data to be made public<br />
will be different, the source added.<br />
At present, the insurers disclose the audited annual<br />
numbers to the regulator and Irda publishes the data<br />
in its annual report.<br />
The insurance companies only disclose the new<br />
business income on a monthly basis. Since none of<br />
them are listed, flow of information is limited. This<br />
has prompted Irda to initiate steps to strengthen the<br />
disclosure system as part of a drive to improve<br />
corporate governance standards.<br />
LIC gets breather on 10% stake ceiling<br />
February 24, 2009<br />
The Insurance Regulatory & Development Authority<br />
(Irda) has allowed Life Insurance Corporation of<br />
India (LIC), the country’s largest institutional<br />
investor, to hold more than the mandated 10 per<br />
cent stake in at least 47 companies.<br />
The relief – termed temporary by the regulator –<br />
came six months after Irda decided to cap a life<br />
insurer’s holding in a company at 10 per cent of the<br />
paid-up capital.”In a downturn, policyholders will<br />
be at a loss if LIC sells its stake as 95 per cent of<br />
the money in equity belongs to policyholders,” a<br />
senior Irda official told Business Standard over the<br />
phone.While LIC would not have to pare its holdings<br />
immediately in the companies where it holds over<br />
10 per cent, the special dispensation came with the<br />
rider that in companies where it held less than the<br />
prescribed ceiling, it would not be allowed to breach<br />
the cap.<br />
22