March 2008 VOL XXIII Issue No. 3 - NFIFWI

VOL XXIII Issue No. 3
March 2008
HISTORY !

Submitting memorandum to Mps
Sri Basudev Acharia
CPI (M) Parliamentary Party Leader (LS)
Sri Sharad Pawar,
Union Minister for Agriculture
Sri Babulal Marandi MP - Hazaribagh
Sri Vayalar Ravi
Union Minister for Overseas Indian Affairs
Smt Jayaben Thakkar MP - Vadodara
Sri Munsiram MP Meerut

NEWS BULLETIN
OF INSURANCE FIELD WORKERS
Vol XXIII Book No 3 March 2008
CONTENTS
Page No
Chief Editor
R. Jayprakash
Associate Editors
K. Venkatesh
S. Sreekumar
Editors
J. Baburajan
M. B. Vinod
Editorial Board
A. Gopakumar
Shaji T Thelly
P. K. Ajayakumar
Hari T. Pillai
Please sent your
suggestions, articles
and contribution to
The Editor
News Bulletin
Kalvit Bhavan
Capital Heights
Plamoodu, Pattom
Trivandrum - 4
or
mail at
editornf@gmail.com
The views &
opinion expressed
in the articles need
not necessarily be
that of NFIFWI
1. EDITORIAL 2
2. COVER STORY 3
3. OPINION 14
CURRENT MARKET STRATEGY OF LIC OF INDIA – A CRITICAL REVIEW
By S. Chidambaram, Consulting Actuary
3. MEDIA WATCH 19
We deeply regret the error in names of National Office Bearers in the Feb’2008 issue of
the News Bulletin. The list of National Office Bearers is as follows.
Mr. Uttam Jagdhane, All India President
D-7, Chandramil Apartments, Nr. R. K. Ashram. Parvati Singad Rd. Pune - 411030
Mr. K.P.Singh, All India Vice President
Hospital Road, Khurja - 203131 Tel : 05738-247177 Cel : 9412227415
Mr. R.Jayprakash, Secretary General
Vijay TC 6/1164, H. No. 124-KERA, Harismirthi Lane, Kanjirampara, Trivandrum -30, Kerala
Tel : 0471 2362071 Fax : 0471 2304039 Cel : 09447077011
Mr. R.Venkateswara Rao, All India Joint Secretary
Plot No. MIG - 42, Sector - 1, MVP Colony, Vishakapatnam - 530017 (A.P)
Tel : 0891 2551225 Cel : 98482 10217
Mr. Lalit kumar Dixit, All India Joint Secretary
Behind Hotel Sonchirraiya, Devipuram, Shartiya Vidyalay Road, Shivpuri Hills, Pin - 473551
Tel : 07492 220403 Cell : 98260 62166
Mr. Nishikant Tharthare, All India Resident Secretary (Mumbai)
A-501, Soni Paradise, Near Pranay Nagar, Mumbai 400092 Cell : 022 28993449
Mr. Dr. Vijay Kaushik, All India Resident Secretary (Delhi)
59, Vasudha Enclave, Pitampura, Delhi 110034
Tel : (R) 011 27180049, 27103874 Cell : 09212201625
Mr. M.G.Ramachandran Nair, All India Treasurer
Pranamam, TJRA 187, Sasthamangalam P.O., Thiruvananthapuram - 10
Tel : 0471 2312806 Cell : 9447038862
Mr. Santhosh Kumar Cheetirala, All India Resident Secretary (Hyderabad - IRDA)
Plot No. 9, Street No. 10, Rajarajeswari Nagar, Old Bowen Pally, Secunderabad - 500011
Tel : 040-27951822 Cell : 56607809

Let the Authorities Open Their Eyes
EDITORIAL
We sincerely thank each and everyone who contributed to the success of the Parliament march on
5 th March 2008. Ignoring the threats and rumours let loose by the management, around 16,000 Development
Officers assembled at the citadel of Indian Democracy, and the treacherous mask of the management was
exposed to the citizens of India. Setting aside their political, ideological and philosophical barriers, the
Parliamentaries from all over the country and our other benefactors came all out in support of our protest
rally due to their conviction about our cause. Now the management and the authorities in power cannot shut
their eyes as this is just a beginning of the battle and the war is yet to start.
On being questioned about NFIWI’s Parliament March by the media, the response from the
management was that it was a small minority that was participating. When out of 21,000 Development
Officers 16,000 persons from all over the country gathering it was a revelation even to sister Trade Unions
and Political Parties, let alone the management. The clear cut message that all the Development officers are
united under the banner of NFIFWI and that they cannot be separated has reached the management. The
rumour that these members are not with the leadership has been killed with this clear cut evidence. More
than being a protest of a particular group of employees this was the reaction of the nation towards the savings
of LIC and with it the country as a whole. The responsibility to give leadership for this purpose lies with the
National Federation and we feel the nation’s welfare is our responsibility.
This protest was not for increasing our salary. We have not demanded the increase of a single rupee.
We have only asked that, what was removed from our emoluments be reinstalled and the Memorandum of
Understanding that came about though years of struggle be retained as such, without any changes. The
effect of the above changes on the field force and how it drained their Capacity to work which effected the
country’s economic progress, loss in LIC’s market share, etc has all been brought to the focus of the Citizens
of India through this strike. Thus this became a “peoples protest” against the management of LIC. More
than 60 Members of Parliament came to address the march and others conveyed their support to our cause.
The left party candidates and members of NDA, UPA and their supporters spoke on the occasion and
promised their support to our cause. The whole nation is behind us in this struggle and we do not stand
alone. We thank all those who came forward to support us especially all the Parliamentarians and other
leaders. Let us continue this united move to Protect and Save LIC OF INDIA.
The coming days are highly important. Management has already started their move after seeing the
success of the Parliament march. They will take all steps to break our morale and prevent the “Yogakshema
March.” We are sure that no such steps can affect the commitment and zeal of the members of National
Federation. By the time this News Bulletin reaches you. the March 15 th Divisional Office Dharna will also
be over. The next and most crucial part of our protest is at yogakshema, Mumbai on 31 st March. We have
to prove to the management that petty issues will not hinder us from reaching the gates of yogakshema even
though it is on the most crucial day as far as the marketing force of a financial institution is concerned. No
management will be able to hold fort against this united force and that is what we have got to prove. The
management will have to see the facts and correct itself thereby aiding us in our endeavor to fight the private
companies. It is the duty of the management to equip us in every way for this purpose and the time has come
for them to change their ways. Our protests should enlighten the management to look at the interest of the
institution and the nation. When the establishment is burning we are not going to allow any one to play his
harp. This is the commitment that National Federation has to this institution. For us individuals are cipher,
but protection of the institution and its upkeep is our committed goal so are stand against this formidable
army of 21,000 at your own peril.
4

COVER STORY
5 th March 2008 is the D-Day in the history of NFIFWI which will be etched in golden letters
forever. It was history repeating after 30 years.
Comrades from all over the Country started
assembling at the Ramlila Grounds by 9:00 am itself. Many
divisions donned separate T. Shirts, Caps and Shawls.
Banners and Placards raising our demands were abound
in regional langua-ges also. There was a buzz of
excitement every where. By 10 am, almost 17,000
Comrades had assembled at the venue. The Volunteers
of the host division led by Zonal Sec. Com Sankhyan
were busy arranging the Divisions for the march.
At 10:30 am, the Secretary General Com. R.
Jayprakash came to the stage. He cong-ratulated the members who had come all the way to make this
march a grand success. He called to make this a disciplined and committed effort.
“You were agitating for 3 years to settle your
issues. Still your issues are not addressed or
redressed.”
Soon, Com Basudev Acharia, Leader of the CPI (M)
Parliamentary Party, Loksabha arrived at the podium.
He addressed the gathering and congratu-lated them. He
said,“You were agitating for 3 years to settle your issues.
Still your issues are not addressed or redressed.” He
promised to raise these issues is the Loksabha and Rajya
Sabha. He wished the Parliamentary march all success and flagged it off at 10 : 45 am.
The march started with the Central Secretariat members leading from the front. The host divisions
were next.
The organizers provided every one with food packets
and bottled water. It was really a noble gesture. The
march was for 3 kms to the Parliament. There was strong
police presence. The traffic in this route was brought to
a stand still for 6 hours. All along the route, there was
posters of the Parliamentary March every where. The
Delhi comrades had done an excellent job. The march
was blocked by police at Jantar Mantar marg. There
were barricades put up to block further progress. All
the members sat down on the road braving the morning
5

sun. It was virtually jampacked and not an inch to keep one’s foot down. In a make shift stage that was
arranged, the Secretary General addressed the gathering.
Com. R. Jayaprakash said that ‘This show of
strength is before the Govt of India, Finance Minister
and the Country. There is problems in the decision
making of the management. Our main demands before
the parliament is
a) Retain LIC as a public Sector Organization
b) Protect Sovereign guarantee of LIC.
c) LIC should not be turned into a mutual fund
d) Restore the withdrawn benefits of Dev. Officers.
‘This show of strength is before the Govt of
India, Finance Minister and the Country. There
is problems in the decision making of the
management.
He called upon the members to continue this fight
to safe guard the interests of LIC, customers, Agents,
Public and the Country.
Members of Parliament
Support the March
More than 46 MPs came to adverse the march, and support our cause. The main speakers are.
Sri. Rajnidhi Prasad (RJD) Rajya Sabha
The guarantee that the maturity amount will be
paid to the policy holder can only be given by LIC. The
private companies don’t have such commitment. They
will disappear without keeping up promises.
LIC officers take retirement and join private
companies with high pay package and they in
turn work to destroy LIC of India.
LIC officers take retirement and join private companies with high pay package and they in turn
work to destroy LIC of India. He promised to raise these issues in the Parliament.
6

Sri. Chandran Pillai CPI(M) Rajya Sabha
He congratulated all the members. He said 75%
of the total strength, ie 15,000 members are already
here. It is one of the major mobilizations, the parliament
street has ever seen.
75% of the total strength, ie 15,000 members
are already here. It is one of the major
mobilizations, the parliament street has ever
seen.
By your slogan Save LIC Protect LIC, you are actually trying to save the country and its economy.
The Economic Survey is pointing to a privatization spree. This is not acceptable to the working class. LIC
is going to be privatized slowly. We are losing the market share to private companies. This is achieved by
demoralizing the work force. They are giving only disincentives. The GOIBS initiated in 2004 is the real
villian. Though it was claimed to improve to the income, actually it reduced 50% of the income. So the
Dev. Officers are demoralized, as a result the market share has come down. Govt. is playing to the tune of
MNCs.
The argument of lifting the Govt guarantee for LIC policies in the name of level playing ground is a
move to help the private companies. This should not be allowed. He assured that we will have the support
of the whole working class and Patriotic people of this Country. He also said that there will be struggles in
future and we will achieve all our demands in near future.
Dr. Sebastin Paul (CPI(M)-Independent) Lok Sabha
The MP observed that this was one of the biggest mobilization ever seen . It is a mammoth
Congregation. All Dos are united here. He added that
LIC which was united in 1956 is a symbol of United
India.
We will not allow LIC management or Govt. to
weaken LIC. I wish this gathering will send a
message to the authorities that this will not be
accepted. This issue will definitely be raised
in the Parliament.
We will not allow LIC management or Govt. to weaken LIC. I wish this gathering will send a
message to the authorities that this will not be accepted. This issue will definitely be raised in the Parliament.
I wish ultimate victory for you. You are espousing a national cause.
7

Sri. Tarlochan Singh – Rajya Sabha
(Former Member of Minorities Commission)
He assured NFIFWI all support. “We are with you. We support
your demands. You have done a lot for the welfare of this country. The
Govt. must appreciate what NF has done.”
Sri S. S. Potti, Working President, Agents Organisation of India
Sri. Dutta Meghe (Former Dev. Officer) M P (NCP)
He extended a warm welcome and support to all members on behalf of
Agents Organisation of India. He congratulated NF for this massive show
of strength and a successful conduction of this Parliament March. Your
slogan is the slogan of the people of this Country. In the last 51 years the
growth of LIC is only due to the Dev. Officers. Now even IRDA is acting
against LIC.
He proudly recalled his 13yrs service in LIC. This is the first time
such a mammoth rally has been conducted by National Federation. He
assured full support for the agitation and said he would definitely oppose
the moves, to destablise LIC, in the parliament. He also said he would
take up this issue with his party leader Sharad Pawarji, Prime Minister,
Finance Minister and Soniaji.
Sri Balasaheb Vikhe Patil (Shiv Sena) :
He greeted the rally and assured
all support of his party.
Sri Jaideep Biswas MP Hajipur
He extended all support to the success of this rally and for our struggle.
Sri Kirith Somaiya MP (BJP)
The finance minister is misusing LIC to raise
the sensex index. “You are misusing the name
of the policy for this. You are cheating the small
investors.”
He congratulated Jayprakash for the success of such a
mamoth rally. The concept of social security is lost while investing
in capital markets. All parties are assembled here in One
8

platform. The investors interests should also be protected. What will happen to the 22 crore policy holders
if LIC goes the UTI way? The finance minister is misusing LIC to raise the sensex index. “You are misusing
the name of the policy for this. You are cheating the small investors.”
Sri Kanshi Ram Rana MP (BJP)
He asked Dos to be rest assured that the entire
parliamentarians and entire nation was with
us.
The MP assured NF all support and extended
full co-operation. He promised the support of all
parliamentarians and called upon the Dev. Officers to
continue the fight. He requested the Finance Minister
and Government to settle all the pending issues, especially that of the expenses. He asked Dos to be rest
assured that the entire parliamentarians and entire nation was with us.
Sri Bhanu Pratap Singh MP (BJP)
Also greeted the gathering and offered support.
Sri. Anand Kumar MP (BJP)
Karnataka State Unit Chief of BJP, Chairman, Finance committee.
Spoke on behalf of the following MPs of the BJP.
Sri Pramar Joshi
Sri Gaddi Gowdar
Sri Manjunath Ayanur
Sri G. M. Jitheesh
“The BJP and its allies, the whole of NDA is
with you. I had talked to our Parliamentary
party leaders Sri L. K. Advani and Sri V. K.
Malhotra and they have assured of full support
to the NF in the parliament.”
Sri. Anand Kumar in his emphatic address to the gathering
said “Yogaskhemam Vahamyaham’ is the slogan of LIC
of India. But who will look after your Yogaskhemam.
Certainly not the Finance Minister Sri P. Chidambaram. The federation is quite justified in its demands for
protecting the sovereign guarantee of LIC and not to raise the FDI limit. “The BJP and its allies, the whole
of NDA is with you. I had talked to our Parliamentary party leaders Sri L. K. Advani and Sri V. K.
Malhotra and they have assured of full support to the NF in the parliament.”
9

He also added that BJP would support any move or agitation for the welfare of LIC and Dos. He
said very strongly that this issue would be raised in the BJP parliamentary party meeting and will be raised
as calling attention motion in Lok Sabha and Rajya Sabha. He recollected his fond acquaintance with Dev.
Officers ever since his childhood.
Sri M. P. Veerendra Kumar. MP (JanataDal (United)
“we will fight for you in the Parliament. We
will see it as a nation, to protect LIC. My
congratulations and greetings.”
The MP and former Minister of state for Finance
in the Union Cabinet Former Minister for Forest in
Kerala Govt and Managing Director of leading regional
daily (Kerala) ‘Mathdru bhumi’ showered glowing
tributes to the members gathered there.
He opined that the Government is trying to destroy an Organisation which was, which is and which
should be the backbone of India. The Unilateralism is not good. The move to raise the FDI Unit is also not
correct. The Finance Minister said that LIC is a jewel of India. Who made it a Jewel? The Dev. Officers.
He said, “we will fight for you in the Parliament. We will see it as a nation, to protect LIC. My congratulations
and greetings.”
Sri Roopchandpal MP CPI (M)
Chairman, Public Sector Organisations grievances committee.
Sri P. C. Thomas MP (Kerala Congress)
Tomorrow 1 lakh people will come to the
parliament march because this is an issue of
the people.”
The veteran leader said, “We do not see this as an
issue of Dev. Officers alone. If today 15, 000 have come
here and if the issue is not settled, Tomorrow 1 lakh people
will come to the parliament march because this is an issue
of the people.” He assured of all support to our cause
inside the parliament and outside it.
“I am sorry you had to come all the way to protect your interests.
The government should take note of this”.
10

“I am sorry you had to come all the way to protect your interests. The government should take note
of this”. He said, we want LIC to flourish. Dev. Officers are the main pillars of LIC. The GOIBS is actually
a disincentive scheme. The review of cost norms is also not in the interests of LIC. The demands by
NFIFWI should be immediately redressed.
Sri Harish Rawot MP
The member of Parliament from Uttaranchal said the 15,000 Dev. Officers assembled here denotes
the presence of 20 crore policy holders of India. When you have come to the parliament street, the parliament
has to come to you.
To day the entire parliament is with you. Finance Minister said that LIC is the jewel of India, then the
Dev. Officers must be protected, because they are the creators of this jewel”. He assured NF of all support.
Sri. Mahavir Singh Bhagora MP (BJP)
The leader congratulated the march and assured NF of all support. He said the Dev. Officers are the
pillars of LIC and the pillars have to be protected at any cost. The parliamentarians will do their best to
protect the Dev. Officers. He also assured that all MPs are with NF and they will take up our issue in all
earnestness.
Sri Penumalli Madhu MP CPI (M)
The MP from Andra Pradesh cautioned the government that the people of the country are going to
teach them a lesson. He said, save LIC means save India If you don’t save LIC, there will not be this
country. We will not allow the Govt. to raise the FDI limit. We are here to support this warrior group in LIC.
Sri Ajoy Chakraborthy MP (CPI)
The Lok Sabha MP conveyed his congratulations and greetings to the march. He also conveyed his
party’s support to NF. He said the economic policies of the Congress and BJP are the same. It is not only
the policies of Mr. Chidambaram but that of Mr. Jaswant Singh and Mr Yashwant Sinha. He assured that in
the next available occasion, this issue will be raised in the Parliament.
11

Sri Nanda Kumar Sahay MP
The member of parliament from Chattisgarh assured all co-operation and solidarity to this movement
by NFIFW
Sri Devendra Prasad Chatterjee MP
Greeted the rally and assured of all his and his party’s support.
Sri Ram Prasad Yadav (RJD)
He said the job done by a Dev. Officer is really great. You
receive praise for this and LIC should treat the Dev. Officers with
dignity. He promised all support and informed that RJD is against
the injustice shown to Dev. Officers. He congratulated NF for this
huge turnout and said his leader Laloo Prasad Yadavji was also
with us.
Sri Aboo Aiyar M.P. extended his support and expressed solidarity with NFIFWI.
Ms. C.S. Sujatha M.P. CPI(M) :The MP from Alappuzha, Kerala greeted the march and extended support.
Sri. Ramdas Athawale M. P. (RPI)
He expressed his support for the issues raised by NF and greeted the march. He assured to raise the
issue in parliament.
Sri. Pramod Panda MP
He congratulated the Dev. Officers for organizing this march. He said LIC provides Social Security
and so the govt. should protect LIC and not destroy it. Out of 21,000 members more than 15,000 have
assembled here. This is a wonderful effort.
Sri Prof Rewat MP
He congratulated the efforts of NF for arranging such a mammoth rally. He extended all support and
assured that their matter would be raised in parliament.
Sri Mohan Rawale MP (Shiv Sena)
The MP from Maharastra said he had given notice in
the zero hour. He assured all support for Dev. Officers
cause.
The MP from Maharastra said he had given notice in the
zero hour. But due to certain pre occupation it has not come
today. He assured all support for Dev. Officers cause.
12

Com. Uttam Jagdane,
National President of NFIFWI
He was struck down severely by food poisoning
and was hospitalized. He was not allowed to move out.
By afternoon, he came to the venue of the march, ailing
and weak, just to catch a glimpse of the gathering. He
greeted the gathering and congratulated all members.
Sri Basudev Acharia M P CPI (M)
The long time associate of NF, Com Acharia in a strongly worded address said this is the first
programme where thousands of Dev. Officers have come to Delhi to tell their UPA Govt that the Dev.
Officers of LIC will not tolerate these policies and fight
back against the Govt and LIC management.
In reply to a calling attention motion in parliament
in 2004, the Finance Minister replied that we have to
wait for result and the performance of Dev officers and
then take a decision. Now 3 years have passed. Finance Minister had met a delegation three or four times
and assured that the problems will be addressed. But even after 3 years nothing has happened. But the
performance of LIC has doubled in this 3 years. He actually thanked NF for taking up the cause of lakhs
and lakhs of Agents The Finance Minister is misusing the insurance industry to help the private companies.
He opposed the Govt. move to hike the FDI to 49%. He said we are prepared to take a delegation to the
Prime Minister to settle the issues.
Sri M M Sadana Former President NFIFWI
He opposed the Govt. move to hike the FDI to
49%. He said we are prepared to take a
delegation to the Prime Minister to settle the
issues.
The frail and weak veteran leader of yesteryears
could not keep away from the show of strength by NF.
He came immediately after an eye surgery of his wife in
the morning. The lion hearted Sadanah was cheered by
the huge gathering.
He challenged the management to dare to stop
the NF express.
He nostalgically recalled the day when the march was made 30 years back. He challenged the
management to dare to stop the NF express. He expressed happiness that the NF has come to the streets
13

to demonstrate and convince the public about our problems. He added that incentives are actually rewards
for the efforts put in. He offered his best wishes for the march.
Sri P. Karunakaran M P CPI (M)
The member of Parliament from Kasargod,
(Kerala) and Deputy leader of the CPI (M) in Loksabha
said this was a big agitation. Out of 21,000 members
more than 15,000 are here. This is really a big effort and
he congratulated NF for this grand success.
Out of 21,000 members more than 15,000 are
here. This is really a big effort and he
congratulated NF for this grand success.
This is a struggle against the policies of the government. This is the struggle of the working class of
this country. The hike in FDI is not beneficial to LIC or its employees. It is only for the sake of many
multinationals. He stated that the CPI (M) and the left parties are supporting this issue unconditionally.
Since LIC is the only public sector organization which offers maximum benefit to the country it should be
protected at any cost.
Ms. Sathee Devi M P (CPI (M)
The lady member of Parliament from Badagara
(Kerala) said she was delighted to see the Dev. Officers
sitting on the streets braving every thing else. She said,
“It is your tears and blood that made LIC such profitable
organization.
“It is your tears and blood that made LIC such
profitable organization.
She said many of the agents under Dev. Officers
in her constituency are women. The disregarding of MOU and unilateral imposition is dangerous. The
Finance Minister is willfully deviating from the CMP. He had assured that he will protect LIC, but is
actually acting against it and in favor of multinational companies. This gathering will raise your issues and
hope it will be redressed.
She assured of all support and said the issue will be raised in Parliament.
It was 6 pm by then. Most of the members were where they were in the morning itself. They have
not even stretched a limb. The Secretary General addressed the concluding of the Successful Parliament
March.
14

Com, R. Jayprakash thanked the members and the Parliamentarians for their over whelming support.
Every member had contributed to the success of this march.
The South Central Zone met the maximum
number of MPs. East Zone and North East Zone also
took lot of efforts to meet many MPs.
Western Zone Comrades mobilized many MPs to attend the Parliament March. It is special to
note that an MP came all the way from Maharastra only to attend this March.
In the North Central Zone, an MP addressed the press conference along with NF leaders. This is
also a matter of great pride. In South Zone, the Comrades hired a Special Train called the “National
Federation Express” to reach Delhi. We offer our standing applause to these Comrades.
We are a Vibrant Organization now. The Secretary General thanked the host zone North zone
Comrades and the Zonal Secretary Com. Sankyan on behalf of the entire membership. He thanked the
members for maintaining discipline and decency. He
thanked all the authorities, and for the media support.
He called upon members to continue meeting
the MPs and take the struggle forward. It is our duty to
protect LIC. There are forces to destroy LIC, inside
and outside. We are pushed to the wall. All has been
placed before the Govt. and Management. He
challenged the management to restore all the lost benefits
and see the market share 90% will be brought back.
The alternate channels, even after so much hue and cry
by the management has contributed only 1.3% to the
premium. The contributions from LIC are utilized for
infrastructural development, Social Security Schemes and now even to steady the stock market. We have
to protect LIC. There are force to destroy LIC even from within. We are pushed to the wall now. Every
thing has been placed before the Govt. and Parliament. We will continue to meet the MPs and seek their
support for our cause. The struggle and agitation will continue.
The Sec. General thanked all the authorities for their help and support. He once again said the
discipline an decency maintained in the march was the strength of National Federation. Even the police
authorities were appreciative of that.
Members left the venue with a sense of fulfillment and pride.
The struggle continues………
He challenged the management to restore all
the lost benefits and see the market share 90%
will be brought back. The alternate channels,
even after so much hue and cry by the
management has contributed only 1.3% to the
premium.
15

OPINION
1. Introduction
CURRENT MARKET STRATEGY OF LIC OF INDIA – A CRITICAL REVIEW
By S. Chidambaram, Consulting Actuary
The LIC of India is at the moment the market leader in India for Life Insurance business. It is a 100% Public
Sector entity espousing principally the following objectives:
(a) Ensure widest possible coverage against financial and demographic risks particularly among the rural
masses
(b) Maximise people’s savings
(c) Operate the funds lodged with it as a trust money of the people and channel it to meet national priorities
(d) Conduct business with utmost economy
(e) To ensure maximum returns to policyholders and address changing insurance needs
It seems a desirable exercise to keep in view how far these are realised by LIC’s business operations
year after year.
2. The Objectives and Realities
It is now clearly noticeable that the LIC’s operations are making a quantum shift in the composition of
its business. Broadly insurance is operated as a collective pool from which the individual insured’s needs for
financial and health related risks are secured. In short such covers issued by an insurer are Guarantees which
people seek to apply in their days of need. In this the insurer acts as a facilitator. LIC’s track record till
recently was remarkably guarantee oriented with the result people took LIC as a byword for security. This is
the reason for its market dominance.
An insurer can also operate in a different way. It can act as a facilitator to drive people’s savings into
market related investments. Here, instead of the usual guarantee, the insurer is offering exposure to market
volatility – a step which many would characterise as the opposite of insurance. Instead of transferring to
himself the risk from the insured, he is now offering the risk back to him in a different form. The insured’s
financial and health risks are sought to be addressed by the market volatility in which his funds are played.
The pool effect of collectivism is now substituted by the greed effect of individualism. Let us see how LIC
moves.
EFFECT OF GROWING PREDOMINANCE OF LINKED BUSINESS
PREMIUM RECEIVED ON NEW BUSINESS
(All Figures in Rs. Lacs)
YEAR NON LINKED UNIT LINKED TOTAL YEAR LINKED AS A % TO
TOTAL
2002-03 179504.34 7.89 179512.2 2002-03 0.0044%
2003-04 198707.12 990.9 199698 2003-04 0.4962%
2004-05 179481.39 3639.84 183121.2 2004-05 1.9877%
2005-06 283763.74 4045.91 287809.7 2005-06 1.4058%
2006-07 201620.74 100849.2 302469.9 2006-07 33.3419%
The graphical depiction of the above trend is given below. It can be seen that while in the year 2002-03 the
percentage of new Unit Linked Business to total new business was negligible, in the next year it climbed to
half a percent to become 1.40% in 2005-06 and in 2006-07 it made a quantum leap to 33.34%
16

PERCENTAHE
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
LIC'S UNIT LINKED NEW BUSINESS AS A
PERCENTAGE OF TOTAL NEW BUSINESS
What is the effect of this change on LIC’s insured
population? Till 2005-06 LIC was a guarantor of
protection for almost 100% of its policyholders. But in
2006-07 the fact is true for only for 66% of the new
policyholders and the rest 34% is offered Market
Volatility through the artefact of insurance! The security
objective of LIC has been already diluted by 34%!
3. A Review of LIC’s recent Business Growth
0.00%
The new premium flowing from Non-linked
business in the year 2005-06 is Rs. 283763.74 lacs.
In the following year 2006-07 this figure dips to Rs.
201620.74 lacs. The traditional new business income
thus dropped by an amount of Rs.82,143.04 lacs in 2006-07. But the corresponding figures for Unit linked
policies are: for Year 2005-06 it is Rs. 4045.91 lacs and for Year 2006-07 it is Rs. 100849.2 lacs. That is the
new premium under Unit linked grew by Rs. 96,803.29 lacs. If we set the growth in Unit linked against the dip
in the traditional for the year we arrive at a net growth of (96,803.29 – 82,143.04) = Rs. 14.660.25 lacs ignoring
the character of the growth. But character of the growth is quite important.
2002-03
2003-04
2004-05
2005-06
2006-07
There is reason to suspect that the growth of new premiums under Unit linked could be an offshoot of
growth at the expense of the traditional clients of LIC. One of the major sources of new business for any insurer
including LIC is its clients. When an existing policy becomes a claim there is the prospect of writing a new
policy through the same client. In the ordinary course the policyholder who benefited by one of his traditional
policies becoming a claim should plump for a similar protection, having already tasted its virtue. But if deliberate
mis-selling is resorted to then such a policyholder can be induced to buy the unit linked. This kind of a
misdirected swap could be one reason. There is no way of knowing for certain whether it has happened in this
manner because it is next to impossible to keep a track record of new policies and their origins from an
existing client background.
On the contrary if we assume that no such mis-selling took place and no such recycling happened,
then all the new premium must have come from sources beyond the existing clientele of LIC. This is a difficult
pill to swallow, but still going by that surmise, we have to examine why the traditional business showed such
a large dip in the year concerned. They were either not solicited to go for protection based guarantees under
the traditional policies or they are wondering what could happen with such drastic shift in the character of LIC’s
business portfolio. May be they are watching and waiting keeping their monies in other safer channels of
investment.
The following tables give some insight into this by looking at the Surrenders of existing policies.
LIC’s Claims and Surrenders Experience – All figures in Rupees Crores
Particulars 2003-04 2004-05 2005-06 2006-07
Claims by Maturity 16,656.38 20,356.01 24,743.42 32,093.90
Claims by Death 2,939.73 3,302.74 3,769.04 4,443.32
Surrenders etc 3,149.67 3,325.52 3,734.35 15,955.31
Rate of growth of Claims and Surrenders compared to just previous year
Particulars 2004-05 2005-06 2006-07
Claims by Maturity 22.21% 21.55% 29.71%
Claims by Death 12.35% 14.12% 17.89%
Surrenders etc 5.58% 12.29% 427.26%
17

500.00%
450.00%
400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
Graphical representation of Rate of Growth of LIC's
Claim & Surrender Experience
2004-05 2005-06 2006-07
Claims by Maturity Claims by Death Surrenders etc
We shall now capture the rate of growth of Claims and
Surrenders in a graphical form. See the graph.
This graph shows that there is a phenomenal jump in
the Surrender Experience in 2006-07. If you compare
the growth of Unit linked business of LIC for the same
year from the graph, the correlation between surrenders
and growth of unit linked business is quite evident.
What would be the nature of this shift in the year 2007-
08 will now shortly be known. If it is the same story
repeating there is ground to take a deep look at the
marketing strategies of LIC.
4. Why should one review the Marketing Strategy?
The Unit linked policies now being sold like any other instrument of insurance savings has two
components. One is the mortality risk or the longevity risk. For a short term policy since mortality rates are
drastically falling, the cost of this protection is becoming quite minimum and very little capital is required to
back this as insurers can safely introduce margins into it without being branded as too greedy, for the pure risk
premium is really very low. But the other component is the financial risk associated with a guarantee. Under
the traditional policies the insurer offers a guarantee whose value is increasing year after year by the addition
of accrued bonuses declared. The saver is able to ride the tide of changing economic scenarios by such
guarantees. But under the Unit Linked this financial risk is not underwritten, it is simply left to the market to
decide for the policyholder. It may be favourable or it may be adverse to you and if you are the lucky favoured
lot, you benefit much more - that is the inducement. Seekers of protection turn to insurers simply to protect
against such volatilities but such transfer back of the risk is certainly unattractive.
It is difficult to believe that unit linked policyholders are aware of the dangers of the market. However
much you forewarn them, a great many such forewarning either in unreadable small print and enigmatic super
fast gibberish from the TV screens are there aplenty, they are driven to believe only on the rosy side of the
market and when it proves otherwise is doubly angry. The problem is not merely with the performance of the
market and its volatility but more seriously with the time when contracts mature. The purpose of the policy is
not well answered by the adverse turn of events.
If the policies that become a claim are proportionately small in number when the markets are not very
upbeat, then the insurer may not be that uncomfortable. But if such a trend persists or the number of claimants
is quite substantial, then the reputation of the insurer is at a discount. You can argue that they are all cautioned
about the market’s behaviour and legally you may be safe, but clients and future prospects will view things in
a lurid light. The whole philosophy of insurance could be in debate. For LIC in particular this could prove grave.
Like any other insurer, LIC too will look for better profits from operations. If linked business is more
profitable, why grudge it? But is it really that profitable and more concernedly for whom LIC is making profits?
The stakeholders of LIC are: First, its policyholders, secondly its field, administrative and managerial staff and
thirdly the owners of LIC, the Government. The surpluses that may be generated are to be equitably shared
between these stakeholders.
The traditional portfolio’s surplus goes to with profit policyholders through reversionary bonuses released
prudently by the valuing actuary from time to time. For non-profit policies these surpluses can induce revision
of premium rates for the new prospects. For staff and management, salary hikes and incentives can be given.
For field staff apart from incentives, the profitability of the business itself drives the future business and hence
earnings. The Government derives a statutory share of the surplus besides better revenues through larger tax
income.
18

One of the major sources of such surpluses is investment income from retained surpluses. Allocation of
such surpluses can be done equitably so that the generation of policyholders that made that possible by the
retention of their surpluses are benefited satisfactorily in proportion.
But under the unit linked the whole question of surplus or deficit is decided by the market. The insurer
has no role in it except perhaps to the extent of what their portfolio manager can do to maximise returns by a
cautiously active sell, buy and hold policy. One could argue that here there is fourth stakeholder that is the
market players themselves. Any gain or loss is reflected in the market price of the stock or share.
This gain may be representative of the intrinsic performance of the institution to which the stock or
share belonged. Secondly and more importantly how highly or lowly the market players value the stocks is also
reflected in the prices. So the gains are reaped by the more diligent players and it can happen that gains too are
made at the expense of others in the market. So, ultimately any intrinsic gains from the aggregate of stocks in
play in the market are shared by others also. How best this answers the purpose with which an insurance policy
was taken is debatable. Through insurance one accumulates value to reach a certain desired level to meet a
contingency. There is no certainty as to how a purely market driven instrument will be able to achieve this. Just
when the contingency happens if the market is hostile, then the very purpose of insurance is defeated.
While insurers can apply their funds in the market to make gains, to expose their insured is riskier. The
insurer backed up by substantial capital and free reserves can operate better and that is why he is in a position
to guarantee. No such guarantee is available to the unit linked policyholders. Of course, they are told so at
inception. Not only that the insured is sharing the ultimate gains in the market with others, the insurer is also so
placed as he is not a player but just a manager on behalf of his policyholders.
If we look upon premium as the generator of profits, by pumping most of it in the market the stakeholders
of the insurer has to necessarily share a part of the gains to the market also. The only genuine source of profit
is the risk premium underwritten by the insurer that is contained in the collected premium
5. Some Observations
The objective of LIC is to achieve the widest possible spread of its security cover among the population.
Though there is business growth for LIC it is doubtful whether such growth in most recent times is to provide
security. The facts seem to point that the emphasis has moved from security of insurance cover to market
related greed. This is certainly not in conformity with the avowed objectives LIC has set for itself.
Not only that the new policies are relatively getting concentrated in Unit Linked types but there is good
reason to believe that even the existing policyholders under the usual security cover are also being driven into
the band wagon of market greed. To me it does not look a healthy trend. The new companies that appeared
following the opening of the market took to this kind of market related products for probably two reasons. First,
they find it that they are no match to LIC to compete against it as LIC’s traditional products are capable of giving
larger bonuses which the new companies cannot hope to do likewise until they build enough reserves. That
would take very long time and they are hesitant to wait that long. Secondly, being new comers they are not able
to absorb the risks of granting guarantees as much as LIC is able to do. To play safe and make some gains they
have necessarily to emphasise market related products. They took the message the Indian markets conveyed
to investors and adopted that route. For them it is a compulsion but such compulsions do not exist for LIC.
By following suit LIC is getting as much exposed to market risks as other private insurers also and if
any sinister thing happens to the market every insurer’s reputation as a provider of security will be at stake.
There seems to be distant rumblings of a gathering market storm. Should LIC be caught in it?
It is no argument that prospective clients have become market friendly. This will be so, so long as the
market is able to assure a high return. But markets can turn adverse also as is indicated by the very recent
happenings. The friendlier client can become vociferously hostile. LIC is in a strong position to underwrite this
kind of hostility risk. They have a comfortable written business and a well organised field force. They have a
mechanism to put across to the field force what they want. There should be a balance in the portfolio of business
between what is really security and what is really market greed. It would not be advisable to allow the clients of
LIC to be carried away in a current and a truly concerned insurer like LIC should do all that is possible to
discourage such trend fraught with danger for everybody.
19

We thank the following MPs and leaders who came to address the Parliament March,
expressed solidarity and supported our agitation
S.No. Name Party Constituency House State
1 Sri Penumalli Madhu CPI-M Rajya Sabha Andhra Pradesh
2 Sri Devender Prasad Yadav RJD Jhanjharpur Lok Sabha Bihar
3 Sri Ram Kripal Yadav RJD Patna Lok Sabha Bihar
4 Sri Nand Kumar Sai BJP Surguja-ST Lok Sabha Chhattisgarh
5 Sri Kashiram Rana BJP Surat Lok Sabha Gujrat
6 Sri Rajniti Prasad RJD Rajya Sabha Bihar
7 Sri Tarlochan Singh IND Rajya Sabha Harayana
8 Sri Anantha Kumar BJP Banglore south Lok Sabha Karnataka
9 Sri H.D.Devegouda JD-S Hassan Lok Sabha Karnataka
10 Sri Gaddigoudar Parvatagouda C BJP Bagalkot Lok Sabha Karnataka
11 Sri Karunakara Reddy G. BJP Bellary Lok Sabha Karnataka
12 Sri Manjunath kunnur C. BJP Udupi Lok Sabha Karnataka
13 Sri Prahlad V. Joshi BJP Dharwad North Lok Sabha Karnataka
14 Sri Siddeswara G.M. BJP Davangere Lok Sabha Karnataka
15 Sri Karunakaran P. CPI-M Kasargod Lok Sabha Kerela
16 Adv. Satheedevi P CPI-M Badagara Lok Sabha Kerela
17 Dr. Sebastian Paul IND Ernakulam Lok Sabha Kerela
18 Ms. Sujatha C.S CPI-M Mavelikara Lok Sabha Kerela
19 Sri. P.C. Thomas KEC Muvattupuzha Lok Sabha Kerela
20 Sri Veerendra Kumar JD-S Calicut Lok Sabha Kerela
21 Sri Mohan Rawale SS Mumbai South Central Lok Sabha Maharastra
22 Sri Ramdas Athawale RPI-A Pandharpur-SC Lok Sabha Maharastra
23 Sri Datta Meghe NCP Rajya Sabha Maharastra
24 Sri Mahavir Bhagora BJP Salumber-ST Lok Sabha Rajasthan
25 Prof. Rasa Singh Rawat BJP Ajmer Lok Sabha Rajasthan
26 Sri Bhanu Pratap Singh Verma BJP jalaun-SC Lok Sabha Uttar Pradesh
27 Sri Harish Rawat INC Rajya Sabha Uttrakhand
28 Sri Abu Ayes Mondal CPI-M Katwa Lok Sabha West Bengal
29 Sri Ajoy Chakraborty CPI Basirhat Lok Sabha West Bengal
30 Sri Alokesh Das CPI-M Nabadwip-SC Lok Sabha West Bengal
31 Sri Basudeb Acharia CPI-M Bankura Lok Sabha West Bengal
32 Sri Gurudas Dasgupta CPI Panskura Lok Sabha West Bengal
33 Sri Hannan Mollah CPI-M Uluberia Lok Sabha West Bengal
34 Sri Joachim Baxla RSP Alipurduar-ST Lok Sabha West Bengal
35 Sri Prabodh Panda CPI Midnapore Lok Sabha West Bengal
36 Sri Rupchand Pal CPI-M Hooghly Lok Sabha West Bengal
37 Sri Swadesh Chakraborty CPI-M Howrah Lok Sabha West Bengal
38 Sri Moinul Hassan CPI-M Rajya Sabha West Bengal
39 Sri Sitaram Yechury CPI-M Rajya Sabha West Bengal
40 Sri M.Ramadass PMK Pondicherry Lok Sabha West Bengal
41 Sri Ambani Roy RSP Rajyasabha West Bengal
42 Sri Debrata Biswas AIFB Rajyasabha West Bengal
43 Sri Gurudas Das Gupta CPI Rajyasabha West Bengal
44 Sri S. Ramachandran Pillai CPI (M) Polit bureau Member
20

MEDIA WATCH
News of the Parliament March on 5.3.2008 in National and Regional dailies.
The Hindu 8.3.2008
Navbharath Times 6.3.2008
Rashtriya Sahara 6.3.2008
21

Desabhimani 7.3.2008
Malayala Manorama 7.3.2008
Madhyamam 7.3.2008
Mathurbhoomi 7.3.2008
22

Secretary General Com. R. Jayprakash
addressing media at press conference at New Delhi on 1.3.2008
MPs addressing the Parliament March

Glimpses of Parliament March on 5.3.2008