news bulletin - NFIFWI

NEWS BULLETIN 

OF INSURANCE FIELD WORKERS 

Vol XXIV Book No 3 March 2009 

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 send your 

suggestions, articles 

and contribution to 

CONTENTS 

Page No 

1. EDITORIAL 2 

2. VIEW POINT 4 

All India President 

3. PERSPECTIVE 5 

Secretary General’s Desk 

4. OPINION - Capitalism, Socialism and Crisis 12 

Prabhat Patnaik 

5. MEDIA WATCH 16 

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

News Bulletin March 2009 

EDITORIAL 

OUR VOTE decides OUR DESTINY 

The nation goes to poll in 5 phases from 5 th April to 13 th April to elect the 15 th Lok 

Sabha. The results will be declared on 16 th April. This is the world’s largest democratic 

exercise in action. It is also a tribute to the unwavering spirit and loyalty of the ordinary 

Indian citizen in democracy. 

This is perhaps the only time when the common man is made to feel like masters in 

this country. It is also a time when we get a chance to assert ourselves. An occasion to look 

back and analyse how we were governed. A rare moment to asses the policies and decisions 

that affected us. The political scenario in the country is fragmented and pasted along 

many weird lines that can be subjected to many interpretations. One point where we all 

invariably agree without dispute is the need to strengthen the public sector in insurance 

industry and protect LIC. The present economic scenario in India and the global economic 

crisis highlights this need much more than ever before. Nations world over are taking the 

path of nationalization and providing Govt. guarantee. 

Unfortunately, in India the Govt. seems to learn nothing from this crisis. They showed 

scant respect for democracy and disregarded all parliamentary ethics by introducing The 

Insurance Amendment Act and LIC Amendment Act in the fag end of the parliamentary 

session. The main provisions of the bills providing for 49% increase in FDI of Foreign 

Insurance Companies, to remove the Sovereign guarantee by Govt.of India to LIC policies 

and reduce the bonus payment to the policy holders by 5%. 

This will only lead to de nationalization and expose the public money to speculative 

business by multinational companies. This is at a time when even President Obama 

expressed outrage at the greed and recklessness of the US insurance giant AIG. Here, in 

India, a red carpet is rolled out to them shamelessly. When the entire world is reeling 

under the economic crisis, it was heartening to note the statements made by Madam Sonia 

Gandhi and Prime Minister that India is lucky to have strong public sector presence which 

really props up the country and such PSUs should be protected and strengthened rather 

than destroyed. But, soon, true to their colours, they proved that politicians seldom practice 

what they preach, by bringing the Insurance and LIC amendment Acts. 

Thanks to the sustained opposition of the Left parties, the bills were send to the 

standing committee for Finance. But the position is that, even if the standing committee 

disagrees with the bills and returns it, the Govt. can overrule that decision. 

So, it becomes very important who is in the Govt. or who influences it. It is not the 

politics that we are concerned about. National Federation is a non-political organization 

and will always continue to be so. But that does not deter us from taking a political stand 

for protecting the Dev. Officer class and LIC. It is clearly a non-political agenda which is 

to focus ONLY AND ENTIRELY on : 

1. strengthening the public sector in Insurance Industry 

4


2. save and protect LIC in the public sector 

3. protect the dignity and welfare of the Development Officer Class 

This must be our prime concern and paramount interest. All other considerations 

are immaterial. Let there be a strong campaign for that. We can create awareness among 

our Agents, our policyholders, all family members, other employees and everyone we 

know. Speak convincingly and from heart. Mobilise all support that for this justified 

cause. 

We are very emphatic that this support is not for any political party or political 

ideology. Our politics is only the politics of existence and survival. We can hope to change 

the policy decisions at the top only through this. The management’s anti-DO attitude will 

also get a fitting reply. The management’s ill-directed decisions can also be reversed by 

this. Our members should take a clear stand cutting across party lines to save and protect 

L.I.C of India and the industry as a whole. 

Wherever possible, we should meet the candidates or members of political parties 

explain to them the importance of this issue and request them to take a strong political 

stand on this. The election manifesto should clearly state with clarity the intentions and 

promises. The Left parties have included in their manifesto the reversal of increase in 

FDI in insurance and strengthening the public sector. Our aim is that all parties should 

acknowledge and take an open stand on this. There is a minority in the main political 

parties who also agree to our stand. Our endeavour is to strengthen their hands. This 

must become the overwhelming opinion across the political spectrum. 

They may agree with us or disagree with us, but they will never be able to ignore 

us. If our vote in this election will decide our destiny, then let us resolve to exercise our 

vote with caution and discretion because this organization is so dear to us. 

“only if this is there, every thing else is there, 

if this is not there, nothing else is there” 

ORGANISATIONAL ROUND-UP 

Biennial General Body meeting of Visakhapatnam Division was held at Visakhapatnam 

on 25.1.2009. Zonal President, Com. M. Vinay Babu, Zonal Secretary, Com. G. Nagesh, Zonal 

Joint Secretary, Com. PV. Krishna Reddy and President and General Secretary of Rajahmundry 

Division, Com. Murali Krishna and Com. A. Suresh and nearly 200 members from the 3 districts 

of the division attended the meeting. The following members were elected as office bearers 

for the term 2009 – 11: 

President : Com. B. Rama Rao, (Yellamanchili Branch) 

General Secretary : Com. T. Chandra Sekhar, (Shipyard Branch.) 

5


Dear comrades , 

After suspension of agitation in may 2008, 

organization is waiting for concrete results from 

management on our issues of incentive formula, 

Work Rule, CLIA, and other pending issues. Hope 

management will become serious on ongoing 

situation of LICI. Organization has observed that 

the members at grass root level are unhappy and 

are showing their concern in a different and matured 

way . Therefore in 52 yrs of Corporation’s history, 

Life Insurance Corporation is showing huge minus, 

continuously from the beginning of this financial 

year. At the time of giving black proposal to 

federation on 12th Aug 04 the management had 

claimed that there will be 35% natural growth in 

business where Development Officer has no role 

to play. That market share will go up to 95% due 

to GOIB scheme and that due to gradation there 

will be huge net addition of agency. 

NF has always maintained its stand that 

these assumptions cannot be true. Unfortunately 

our resentment from 2004 has fallen on deaf ears 

and management is solely responsible for the 

disturbed condition of LIC of India today. Actually 

the global meltdown and recession is an opportunity 

for LIC of India. But unfortunately management 

dumped the enthusiasm, creativity, innovation, 

mobility and involvement of field force. Management 

is not paying heed and not utilizing the energy 

and strength of Development Officers. Management 

should provide all facility and right atmosphere 

to do aggressive marketing of life insurance. Time 

and again organization has appealed to management 

to come up with amicable solution on all concerned 

issues. It is solely in the hands of management to 

make every LICan including field force happy. The 

response from management is very slow almost at 

a snail’s speed 

NF has always been on the right path of 

truth and concerned about the interest of members, 

agents and policy holders. This pious work 

undertaken by the federation is always showered 

by the blessings of God and positive forces of 

nature. The recent fall in market , global economic 

VIEW POINT 

All India President 

meltdown have only indicated that we are on right 

path and the convention business has once again 

gained importance. History is a witness to the fact 

that convention business cannot be sold without 

Development Officers who are the backbone of 

three-tier system of life insurance marketing. In this 

time of struggle , perseverance is the need of hour. 

The active participation in Yogakshema march and 

Parliament march , and understanding our problems 

has had a direct impact on LIC and has resulted in 

its negative growth. This active participation has 

paved way for further struggle. Even after the global 

recession hitting the common man the government 

still seems to be ignorant and is sticking to the agenda 

of 49% FDI in life insurance. Though it has been 

time and again proved that whoever has touched 

this 49% FDI issue have paid for their mistakes. 

I realise the hardships and turbulence 

suffered by all the members. NF is proud of all its 

members for their tremendous sacrifice , patience 

and faith on organization and salutes to everybody 

for passing calmly through all odds. Organizational 

activities and financial discipline is also an important 

concern of organization. Hope all the General 

Bodies , branch visits and organizational tours are 

in order. All the dues , levies and subscriptions are 

taken care of. Reading of News Bulletin, Regular 

visits to our website will keep you updated on latest 

events. 

Organization congratulates our Secretary 

General for his appointment on IRDA advisory 

committee. We shall keep a tab on the latest situation 

and keep on marching forward . 

Victory is ours !!! 

Wishing you all , happy and 

prosperous days ahead !!! 

National Federation Zindabad …..!!! 

Workers Unity Zindabad ……!!!!! 

Yours lovingly 

Uttam Laxmanrao Jagdhane 

( All India President) 

6


PERSPECTIVE 

From the Secretary General’s Desk 

REPORT OF N.E.C MEETING HELD AT MYSORE ON 16-12-2008 & 17-12-2008 

The National Federation flag was hoisted 

by our National President Com Uttam Jagdhane. 

Com Putta Swamy, the dynamic divisional secretary 

of Mysore divisional federation welcomed the 

gathering and delivered his welcome address. Com 

Nagesh Murthy addressed the house and 

concluded the inaugural function by thanking the 

Federation for giving a chance to host the NEC at 

Mysore. 

Com.Vinay Babu President,South Central 

Zone welcomed all delegates on behalf of the zone 

and addressed the NEC delegates. The house 

placed on record the services rendered by Com. 

C.L.Chandok and observed two minutes silence 

to pay homage to Com C.L.Chandok, former 

Zonal Secretary of North Zone and former Central 

secretariat member. 

The minutes of the previous meeting was 

confirmed and passed. Our President Com.Uttam 

Jagdhane welcomed all the NEC delegates to the 

city of palace and gardens. Managements claim of 

increase in Agency force and premium proved 

negative by introduction of CLIA.The President 

requested the house to educate the membership 

on MOU,GOIB, CLIA and other issues. The 

President requested the Secretary General to 

present his report to the house. 

The Secretary General welcomed all 

members and congratulated new members and reelected 

members. The house observed two 

minutes silence to pay homage to our former Prime 

Minister V.P.Singh, Com R.K.Chandra Mauli, 

former Secretary Nellore Division and Joint 

Secretary S.C Zone and to all our comrades who 

died recently.The Secretary General’s report 

already circulated was placed before the house 

and while submitting the same, informed the house 

with regard to work norms and the continuing 

efforts to impress upon the management and 

government the difficulties faced by the cadre of 

Development officers and how the unilateral 

changes in Special rules (1989) will adversely affect 

Development officers. The following petitions were 

read for the benefit of members. 

(1)Petition to IRDA on CLIA (2) Petition 

to Government on CLIA (3)Petition to Petitions 

committee (4) Petition to Chairman, LIC and letter 

written to Government on the matter of wage, 

arrears for the purpose of Income Tax were also 

read in the house for the information. The legal 

opinion on CLIA was placed and explained in detail 

to the house. The issue of PLLI Quantum to 

Development Officers and also costing of PLLI was 

explained to the house. Matters of housing loan, 

increased mediclaim (Cashless process), second 

option for pension and the issue of confidential 

reports issue also explained by the Secretary 

General. Secretary General gave the gist of 

discussion held with management on 17-07-2008 

and 6 th September 2008 on the above issues. The 

gist of the statement of Accounts was also placed 

for information as part of the report. Before 

concluding the report to the house, newly elected 

and re-elected NEC Members and C.S Members, 

were introduced to the House. 

President requested the members to 

deliberate on Secretary General’s Report. Members 

deliberated on the report in which 46 members 

participated. The following were the matters raised 

for clarifications and as suggestions 

1) Basic membership seeking details about the 

position of special rules, national holidays out 

of costing, C.R for the purpose of promotion 

2) The rationale and logic behind Jeevan Aastha 

which is introduced to achieve the target. 

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3) Work norms are more important than I.B 

and form a strategy to fight out the issue. 

4) Equitable relief for wage arrears 

5) Unscientific recruitment of Development 

Officers without infrastructure was brought 

to the notice of House. 

6) In Mussorie it was informed that 

management was positive and agitation will 

be reviewed within 3 months. 

7) Election duty must be exempted and 

demanded exemption from costing. 

8) Demanded clear cut message to pass on to 

the members and suggest agitation. 

9) Court case on CLIA. 

10) Minutes of previous meeting must be read in 

the house and should be passed 

11) On work norms why we should fight for the 

Development Officers who are not working 

and attracting norms. 

12) The logic for empowerment. CLIA is a threat 

to development officers. The agitations must 

be implemented uniformally. 

13) On 20.11.2008 every body in LIC was on 

strike except Development Officers and now 

take a decision since cabinet cleared 3 bills 

affecting LIC. 

14) We got the legal position on CLIA. Even 

though we are strong, why there is no legal 

action taken. 

15) RCA gap of 4 must be withdrawn and cost 

ration must be 23% only 

16) CLIA was not dealt properly by Federation. 

How can any other person can give agency 

to the spouse of my agent without sitting 

arrangements ADO were posted in SSO. 

17) Management is desperately trying to make 

CLIA successful, Vision 2010 will be very 

easy for the management. 

18) Rumors are being unnecessarily spread by 

members including CS Members against 

Secretary General and leadership. This is 

damaging the organization and demanded 

strong action to stop it. 

19) Problems of CLIA, alternative channels and 

multi level marketing by “Sarath” was 

mentioned. 

20) Try for good wage revision. 

21) Position of attendance of SSO posted 

Development Officers. 

22) We must do our work as Divisional Leaders. 

The Parliament and Yogakshema March are 

the strength of the organization. We must 

inform all issues to the basic membership and 

give call to recruit more agents so that the 

doors will be closed to CLIA 

23) Leadership training demanded. 

24) Management is practicing double standards. 

They say about conventional plans and 

pressurizing for ULIPs. 

25) On special rules go for MOU to reduce the 

damage. On work norms if required we 

should go to court. 50% agency force at the 

beginning for rural credit and CR for 

development officer is bad. There must an 

escape for grading, demand functional 

allowances, CA and good wage revision. 

26) Management has vision to abolish this cadre. 

27) We should focus on conventional Insurance 

business.Let CLIA be scrapped. 

28) What ever we achieved in this adverse 

situation is not small thing and we should 

congratulate for the same. On CLIA don’t 

go to court. 

29) The Orrisa IT department is asking to deposit 

the tax from 1998. 

30) Management has cheated Development 

officers by not paying Big Leap competition? 

Demand salary cut for 5th, 15th and 30th 

only. For car we should ask for change of 

scheme and similar to scheme VI. 

31) In North Central Zone Branch Managers and 

Assistant Branch Managers are interested in 

8


CLIA only, since they are getting money. Let 

us fight,don’t fear and face the situations.The 

IB can be bifurcated into 2% ACA and 

10.5% IB. 

32) What we can inform the members after 

returning to the headquarters. What is the 

position of petitions? We must have vision to 

save this cadre. Recruit agents and sell 

conventional plans. We are not getting news 

bulletin. Don’t go to court on CLIA. Fight 

for special rules and get an MOU and not 

unilateral changes. 

33) Cashless medical scheme demanded. We 

need some Hindi speeches. 

34) We are not getting news bulletin and 

demanded Hindi version also. Let us decide 

priorities and strategy. Decide whether 

management is friend or enemy. 

35) Give direction regarding issue of empowerment 

of Development Officers and removal 

of grading for ULIPs and single premium. 

36) Membership is waiting for quick results and 

leadership is working with petitions. 

37) No place to sit in the branches and new 

developmental officers are posted. SSO 

design must be changed to accommodate all 

developmental officers. 

38) Only revival credit and EOL achieved so far. 

Revival credit is from 2000 or 2004.CLIA 

agents giving agency to spouse by violating 

the existing rules. Growth condition in IB 

scheme must be withdrawn. 

39) Leadership is not able to deliver any thing to 

the cadre. 19 issues placed before 

management. Waiting for some relief in GOIB 

because of growth condition we are loosing 

heavily. 

40) If we don’t get solution by the existing 

petitions on CLIA let us go to court. 

41) EOL of 2004 not condoned. Bifurcation of 

Pune division done without consent and 

consideration of the area. After the resistance 

by 7 branches, management withdrew the 

bifurcation. 

42) Revival credit from 2004 circular came and 

not from 2001. In special rules we must 

discuss all the conditions and go for MOU. 

RCA Cap of 4 agents must be removed. 

43) Secretary’s report is elaborative and covered 

all the issues. The achievement of revival 

credit, tour mileage rates, EOL are not 

simple things in the present situations. 

44) Recruitment of Development Officers and 

heavy amounts are paid to the managers to 

the competitions and our Big Leap is not 

cleared. 

45) We must take a decision about posting of 

development officers and providing table and 

chair, It is not question of money but survival. 

Since it is a scenario of ULIPs demand for 

full credit for ULIPs and single premiums. 

In special rules demand for deletion of 

termination clause and increment cut. 

46) Anomalies in 2 wage revisions is not settled 

even today hence care must be taken for 

the present one. 

47) What is the result of positive attitude. Give 

direction we are prepared to fight. 

48) The CS should give direction to the NEC 

after taking the views of the speakers. In 

last NEC Secretary General informed to 

review the agitation after 3 months. 

49) CLIA is giving agency to spouse and 

diverting the business. Let there be 

continuous negotiations and also negotiate 

on recruitment and single premium credit. 

50) There should not be any debits to those who 

achieved cost. Because of unscientific 

recruitment most of the ADOs are going 

back. 

51) Late Com.Pawan Gaur has small kids and 

nobody to support the family. Let us fix a 

date for contribution. Try for more credit in 

the policies and plan for agitation for 

February and March to speed up solutions. 

52) What is the status of Development Officer 

today. Private companies came and 

9


snatching our agents. 2004 GOIB reduced 

our income, wage revision, equitable relief 

is not guaranteed. Single premium policies 

are the order of the day, so how to get on 

this situation. 

53) The leadership is doing what best they can 

do in this difficult situation. Demand for more 

recruitment and increase the cadre so that 

LIC will depend only on Development 

Officers. 

54) Supreme Court judgment that the 

development officers are work man is useful 

for the future. Right now plan for agitation 

like demonstrations and non co operations. 

55) Let us work for 3% ACA and allotment of 

agents, space for development officers in 

office. 

56) Why suspended agitation was not reviewed 

after 3 months. Congratulated for Bihar 

donations. What can we tell to members 

after returning to headquarters. 

57) Has CS discussed on special rules and the 

outcome. We have not received any 

information on FDI hike which is very 

dangerous. There is no discussion on GOIB 

and grading. 

After all the speakers completed their 

deliberations the President requested the Secretary 

General to give his response to the queries raised 

and clarify matters. . 

Secretary General in his reply thanked all 

the members for excellent deliberations. It was 

clarified that suspension of agitation is based on 

CS decision. In April, 2008 CS discussed and 

decided to take steps for breaking the ice and 

reopen the negotiations. After negotiations started 

on 22 nd May 08 the office bearers decided to 

suspend the agitation to reciprocate and work 

together to create a positive atmosphere. Though 

the resolution was proposed at Mussoorie for 

review after 3months, the NEC had decided to 

review it in the next NEC. We must review and 

take a decision today about whether to restart the 

agitation. The decision of suspension of agitation 

was ratified by the NEC. Let us analyse and think 

with our mind and heart whether we got something 

or not. EOL came after lot of persuasion and we 

have not surrendered the image of the organization. 

Revival credit and Granting of agency to direct 

agents Spouse was the demand of the organization. 

Our philosophy is to resist unilateral changes and 

adversely affecting development officers, fight 

against alternate channels and private companies. 

We are very frequently visiting Central Office, 

following up matters and discussing all the issues 

and it is not possible to publish all the things. 

On special rules our demand is to continue 

the existing work norms. We demand for 

improvements like automatic absorption to class- 

III,100% credit for all policies and removal of 

National holidays,election duty days and maternity 

leave from costing. Across the negotiating table 

we negotiated on all aspects of Special rules. We 

have represented to management and government 

that the existing work norms itself is very harsh and 

that many ADO’s and PDO’s are terminated based 

on special rules 1989. 

We are opposing the proposed bills of FDI 

hike and increase of the capital to 100 crores. The 

amendment to increase the capital is very 

dangerous, as a loophole is being created which 

may lead to issue of IPO’s in future. 

In GOIB we have represented to the 

management and government what we want, and 

we are pursuing for settlement of the GOIB issue. 

The major points of our dispute has already been 

informned to all of us. 

We have demanded for scraping of CLIA 

and called upon members to implement the 

guidelines to protect the interests of our agents and 

development officers. On CLIA let us wait for the 

disposal of the petitions and decide in the next NEC. 

We have placed a number of issues and 

got few issues cleared. We continue to negotiate 

on all the issues. Stop believing rumors. We have 

put all the issues before you today and if you feel it 

10


is negative attitude we are free to review and take 

a decision to restart agitation if felt necessary. 

On recruitment our policy is for continuous 

scientific recruitment and we can demand to post 

DOs in SSOs along with infrastructure and seating 

arrangements. 

On wage revision we submitted charter of 

demands after discussion in NEC at Siliguri. We 

are demanding a good wage revision commensurate 

to the hike for central government employees based 

on sixth pay commission. Our pension is directly 

linked to salary and therefore a good salary is the 

need of the hour. The incentives are not secured. 

We have already represented about exempting 

wage arrears from costing and removal of 

anomalies in the wage revision. Housing loan, 

mediclaim, RMES and other aspects have been 

represented. 

During Parliament and Yogakshema 

March we have raised our protest against FDI hike 

and ammendments to Insurance bills. We sought 

the support of all the political parties and unions. 

We had protested and were not party to the 

decision of 20th August’08 strike and hence our 

decision not to join in 20 th August ’08 strike. 

Now business is going down and all are 

worried. In News bulletin failure to print in bilingual 

(Hindi and English),we will try to print in bilingual. 

In News bulletin we are not advocating any 

ideology but only projecting the social; and national 

issues which is affecting the common man and all 

of us. Printing of only circulars in News bulletin 

was criticised previously hence we are giving only 

information about circulars. We are trying to make 

it a excellent News Bulletin in every aspect. Only 

93 divisions addresses were updated and sent to 

us. We are printing sufficient copies to reach all 

members. If anyone is not getting the News bulletin 

we have directed that “the member should first 

check the address in the list with the divisional 

secretary and then if correct give a complaint to 

the local post office with a copy to secretary 

general”. 

Regarding expenses we are taking all steps 

for need based expenditure. The fund position of 

the organization has to improve. We have to build a 

good base fund so that the interest from it will enable 

the organization to meet various expenses other than 

routine expenses. Today as a organization we cannot 

respond to any demand for emergency relief like 

that in Assam, Bihar, or for our comrades. We are 

not in a well equipped position to fight continuous 

legal battles engaging good advocates or carry out 

rigorous PR activities. We cannot go on collections 

every time we need funds. Even contributions for 

Late Com.Pawan Gaur relief fund is pathetic. Only 

few divisions have contributed. This situation is not 

appreciable. Organisation will have to decide in the 

near future to create a good fund for our organization. 

All divisions were asked to clear the long pending 

dues. We appreciate the members and divisions who 

contributed generously to the Bihar relief fund. 

In tough times we are trying to get the best 

and not surrendering any issue. Subscription is a 

must and there is no other way. Members have to 

be told clearly that subscription is meant for the day 

to day running of the organization. Our organization 

is a must for our protection and to resist all offensive 

decisions of Management and Government. It is 

only because of NFIFWI that we all are continuing 

to go ahead in Life strongly. CS, NEC’s, Council 

meetings are all regular constitutional and 

organizational requirements to conduct the affairs 

of the organisation systematically. Members cannot 

be expecting only benefits after every meeting. 

Benefits will come to members as and when issues 

are settled. The meetings are for reporting, analyzing, 

reviewing matters and deciding on our stand and 

strategies. Leaders should have confidence that we 

are going strong and taking up all the issues and the 

NFIFWI The direction is not to give any 

commitment for any activity except for the 

existing marketing activity. As and when any 

official communication received by us we will discuss 

and decide further. 

On Federal Council members suggested for 

3 days FCM, restriction of veteran Leaders and if 

allowed time limit for speech, appointment of 

11


election officer and printing of ballot papers in 

advance with names after withdrawal, restriction 

to delegates only, announcement of valid 

nominations on the first day of the meeting etc. Even 

one member suggested that ours is trade union and 

need not give so much importance for elections. 

The Secretary General informed the house that all 

suggestions are taken in to consideration and come 

with proposal to the next NEC after discussing the 

same in CS meeting at the time of NEC. 

On constitutional amendments let us 

concretize in the coming NEC and present to FCM 

2010. Some constitutional requirements are lacking 

and hence ammendment is required and requested 

the delegates to send their recommendations so 

that we can concretize in the next NEC. 

On fund position Secretary General 

requested to clear Late Com.Pawan Gour 

contributions immediately before leaving the 

meeting hall. Requested to clear all the dues of 

subscriptions and News bulletin and they can 

deposit directly in the bank also. Zonal level and 

Central level financial support is a must and 

requested to clear all the outstanding dues as per 

the list circulated.Review of agitation is not required 

as on date and if needed the same will be informed. 

In the Organizational matters Secretary General 

directed the Organization not to believe the 

rumors,negative propaganda against the decisions 

of the organization. Informed the House about the 

decision of CS Meeting with due respects to the 

veteran leaders it was decided not to invite such 

people who speak against the organization and 

decisions and NEC accepted the proposal. 

Secretary General directed the divisional Units to 

register under Trade Union act and the information 

is available on our web site. 

Based on the discussions the following 

resolutions were proposed. Com. Sankyan Zonal 

Secretary placed the proposed resolutions for 

approval of NEC 

1. On special rules 1989 

2. On CLIA scheme 

3. On GOIB 2007 

4. On unscientific recruitment 

5. On Big leap competition 

6. Condonation of EOL pending from 2004 

7. Condonation of EOL of Ahmedabad and Delhi 

8. On confidential reports for promotion and 

increment 

The copy of resolutions sent to Chairman 

is enclosed alongwith. 

Com R Venkateswara rao Joint Secretary 

proposed vote of thanks and specially thanking 

Mysore Comrades under the leadership of Com 

Puttaswamy and Nagesh Murthy for excellent 

arrangements and hospitality. 

The President adjourned the meeting after 

National Anthem. 

Comradely Your’s 

R.Jayprakash 

Secretary General 

NFIFWI 

NFIFWI Zindabad……. 

NFIFWI Zindabad…… 

NFIFWI Zindabad…….. 

NEWS BULLETIN thanks 

Com. Himanshu Pandya, 

Com. H. R. Narasimhan, 

Com. Rajiv Gulati, 

for contributing to this issue of NEWS BULLETIN 

12


RESOLUTIONS ADOPTED BY NEC OF NATIONAL FEDERATION 

Ref: Resolutions adopted by National Federation 

of Insurance Field Workers of India at our 

National Executive Meeting held at Mysore on 16 th 

and 17 th of December 2008 

Dear Sir, 

The Federal council meeting held on the 16 th and 

17 th of December 2008 at Mysore had indepth 

deliberations on various matters concerning LIC, 

Insurance sector and Development officers. The 

house expressed it’s unhappiness and anger over 

many issues which are yet to find a solution from 

your end and government. The house discussed , 

moved and adopted the following resolutions. We 

place before you the resolutions for your kind 

consideration and necessary action for favorable 

solutions at the earliest. 

RESOLUTIONS 

This NEC Meet held at Mysore on 16 th and 17 th 

December 2008 unanimously resolved 

1. That, looking into the worldwide Economic Market 

recession, nose diving sensex, stiff competition 

from the private players, hardship of the policy 

holders in running the existing policies and cut 

throat competition prevailing in the insurance 

market, the present service conditions (special 

Rules-1989) itself has become very tough. 

Therefore any negative changes to special rules 

1989 will make matters very difficult for the 

Development officers. We call upon LIC 

management and Government, to not make any 

negative changes in the special rules 1989. This 

will boost the morale of the Dev officers who are 

already disturbed and help them in performance 

of their duties with better efficiency. We also call 

upon the management to suggest for positive 

change or amendment as per the suggestions made 

by the NFIFWI, which should be done through 

bilateral discussions resulting into an MOU. 

2. That, the introduction of CLIA scheme has made 

a dent in the relationship between Dev.Officers 

and agents spoiling the atmosphere of the branch 

offices and reduction in individual business of 

CLIA is not in the interest of LIC. Moreover 

the practice adopted by CLIAs is contrary to the 

Agents Regulation 1972 and IRDA Agents Reg, 

2000. The house is of the firm opinion that 

withdrawal of CLIA scheme is in the larger 

interest of the organization, otherwise the entire 

marketing force will be continued to be disturbed 

and trust amongst the Dev.Officers and agents 

which is existing will be lost forever. The CLIA 

scheme has been destroying the fabric of the 

most successful channel of Development officers 

and Tied agents. 

3. That, the amendments in the GOIBS -2007 should 

be made immediately as per the suggestions 

made by the NF to address the concerns of the 

class of the Dev.Officers and LIC to pave the 

way for aggressive marketing. It is further 

resolved that in the absence of reimbursement 

of Marketing and conveyance expenses it is 

extremely difficult to carry out the marketing 

activities to the desired levels. 

4. That, the hap-hazard and unscientific recruitment 

of ADOs is a financial loss to the corporation 

due to huge termination creating a band of orphan 

and unskilled agents. It is not desired from a 

PSU like LIC to adopt “hire and fire policy”. 

The house suggests that the recruitment of ADOs 

should be based on the socio- economic profile 

of the place and the previous system of 

consultation with the representatives of NF at 

the divisional level to identify the vacant pockets 

as per the guidelines of our former MD 

Sri.Chidambaram. Further, total infrastructure 

needed for a Dev.Officer should be provided in 

all offices of posting. 

5. That, the long pending awards of “Big Leap 

Competitions” should be released immediately. 

This is also to motivate the Dev.Officers to 

participate with full belief in the ongoing and 

future competitions. The NFIFWI sought the 

path of agitation which had absolutely no agenda 

affecting the business performance or 

participation in “BIG Leap Competition” hence 

depriving the qualified Dev.Officer is unjust and 

unfair practice on the part of Management. 

6. That, the condonation of EOL’s pending in the CO 

pertaining to various parts of the country is long 

awaited. The house calls upon the management 

to condone the EOL’s to generate a team spirit 

and set right the anomalies arising out of it. 

7. That, the issue of condonation of unfair EOL’s 

imposed in Ahmedabad and Delhi -1 should be 

sorted out amicably across the table. 

With Best Wishes and Regards, 

Yours Sincerely 

R.Jayprakash 

Secretary General 

13


CAPITALISM, SOCIALISM AND CRISIS 

Prabhat Patnaik 

A COMMON view of the current financial 

crisis of capitalism holds that it is essentially 

an aberration. Some attribute this aberration 

to specific mistakes committed in the past, for 

instance by the US Federal Reserve with 

regard to monetary policy. Some hold the lack 

of adequate regulatory mechanism as being 

responsible for this aberration. Paul Krugman, 

the current year’s Nobel laureate, blames it on 

insufficient supervision of the financial system. 

And even Joseph Stiglitz, the well-known radical 

economist and Nobel laureate, characterises 

it as a “system failure”, a term which makes 

the crisis a phenomenon that in principle could 

have been avoided with impunity. This entire 

perception however is untenable. The crisis is 

a result not of the failure of the system but of 

the system itself; it is a part of the mode of 

operation of contemporary capitalism rather 

than being unrelated or extraneous to it. 

MASSIVE SPECULATION 

In a “free market” regime, asset markets tend 

to be subject to speculation. Speculators buy 

assets not because of the yield on these 

assets but because they expect its price to 

appreciate in the coming days. They have no 

long term interest in the assets and are 

concerned exclusively with capital gains. Since 

buying today to sell tomorrow entails carrying 

the asset during the intervening period for 

which a “carrying cost” has to be incurred, the 

assets most suitable for speculation are those 

whose carrying costs are low; and these are 

typically financial assets which have virtually 

zero carrying costs (requiring only a few taps 

on computer keys to effect all necessary 

transactions). Financial asset markets 

therefore are always subject to massive 

speculation. 

Speculation generates bouts of euphoria or 

“speculative excitement” which have the 

cumulative effect of pushing up asset prices. 

An initial rise in some asset prices, caused no 

matter how, gives rise to expectations of a 

further rise, and hence to an increase in the 

demand for the assets in question which 

actually raises their prices further; and so the 

process feeds upon itself and we have asset 

price “bubbles”. Such “bubbles” typically 

characterise financial assets, which, as already 

mentioned, are particularly prone to speculation; 

but they are not confined to financial assets 

alone (as the housing market “bubble” in the 

United States has just demonstrated). 

Such “bubbles” have an obvious impact on the 

real economy. The rise in asset prices fed by 

speculative euphoria improves for individuals 

who own these assets the estimation of their 

wealth position, and hence causes an increase 

in their consumption expenditure, and thereby 

in employment. Likewise such a rise in asset 

prices, where the assets in question are 

producible, causes an increase in investment 

expenditure on these assets, which leads to 

their larger production, and hence to larger 

employment. In short, speculative euphoria in 

the asset markets makes the boom in the real 

economy, stimulated by whatever had caused 

the initial rise in asset prices, more pronounced 

and prolonged. 

Precisely because of this however if for some 

reason the asset price increase wanes or 

comes to a halt, speculators attempt to get out 

of the assets in question causing a crash in 

the asset prices. This causes a fall in aggregate 

expenditure on goods and services; a collapse 

in the state of credit, as banks face insolvency; 

and a possible collapse even in the inclination 

of depositors for holding bank deposits (since 

they fear banks’ insolvency), as had happened 

during the Great Depression. In short there is a 

collapse of the state of confidence all around, 

and hence a corresponding increase in liquidity 

preference; i.e. there is a disinclination to hold 

any asset other than pure cash, or in extreme 

14


cases only currency, and of course claims 

upon the government, which is considered to 

be the only safe and reliable borrower. Not all 

crises display this severity; but to a greater or 

lesser extent these features mark any crisis. 

Speculation therefore has the effect of making 

the boom more pronounced and prolonged; but 

it has also the effect of precipitating a severe 

crisis, as distinct from a mere cyclical 

downturn. In the absence of speculation the 

boom in the real economy will be a much more 

truncated and tame affair. But precisely 

because it is not a tame affair, it is followed by 

a crisis. 

Two conclusions follow from the above 

analysis. First, since speculation is endemic 

to modern capitalism, where financial markets 

play a major role, speculation-engendered 

euphoria and the consequent pronounced 

booms, together with the crises that invariably 

follow, are also endemic to modern capitalism. 

“Bubbles” constitute in other words the mode 

of operation of the system. “Bubbles”, together 

with the crises that follow their collapse, are 

not a “system-failure”; they are the system. 

Secondly, if “bubbles” are to be eliminated and 

speculation is to be curbed, then it is not enough 

to put in place some regulatory mechanisms; 

an alternative instrument for generating 

pronounced booms in the real economy has 

to be found, for otherwise the economy would 

remain perennially sunk in stagnation and largescale 

mass unemployment. 

The alternative instrument suggested by John 

Maynard Keynes, the well-known English 

economist, was State intervention through fiscal 

measures to ensure that the level of demand 

remained as close to full employment as 

possible. Keynes’ suggestion, made in the 

1930s during the Great Depression, was 

strongly opposed by finance capital, which 

always opposes all State intervention that does 

not promote its own exclusive interest. The 

Keynesian remedy got accepted only in the 

post-war period when the balance of class 

forces had shifted, with the working class, 

which had made immense sacrifices during the 

war, acquiring greater social and political weight, 

and finance capital, experiencing a 

corresponding weakening of its position, forced 

to make concessions. 

Over time however this balance changed once 

again. “Centralisation of capital” and the 

formation of larger and larger blocs of finance 

capital, during the period of Keynesian demand 

management itself, forced open the barriers 

imposed on cross border financial flows. 

Finance capital consequently acquired the 

nature of international finance capital, through 

a process of “globalisation of finance”. Since 

the whims of international finance capital 

necessarily had to triumph over the 

autonomous predilections the nation-State, in 

order to avoid capital flight, Keynesian “demand 

management” was rejected, and neo-liberal 

capitalism emerged triumphant again, bringing 

back the era of speculative financial crises, 

leading to real crises, in the capitalist world. This 

is the phenomenon we are currently 

witnessing, a phenomenon that has been 

compared with the Great Depression of the 

1930s. 

SOCIALIST ECONOMY IMMUNE TO CRISES 

One of the hallmarks of the 1930s Great 

Depression is that the Soviet Union, the only 

socialist economy of the time, had been 

completely unaffected by it. In fact, when 

capitalism had been afflicted by the severe 

crisis, the Soviet Union had experienced such 

unprecedented economic construction that it 

had completely got rid of unemployment. This 

fact, as is well-known, had so impressed a 

whole generation of Indian freedom fighters like 

E M S Namboodiripad that they had embraced 

Communism because of it. 

This contrast arises owing to a fundamental 

difference between the mode of operation of 

the two systems. A socialist economy is 

fundamentally immune not just to speculationinduced 

crises but to all crises arising from a 

deficiency of aggregate demand. This fact is 

15


recognised even by staunch opponents of 

socialism like the Hungarian economist Janos 

Kornai who calls capitalism a “demandconstrained 

system” and socialism a “resourceconstrained 

system” where the available 

resources are fully utilised without being 

constrained by insufficient demand. 

A socialist economy of course has the usual 

fiscal instrument suggested by Keynes for 

overcoming deficiency of aggregate demand, 

unlike a capitalist economy where the use of 

this instrument requires overcoming opposition 

from finance capital, and where, even when the 

instrument is perchance used, there is a limit 

to its use arising from the fact that the system, 

being based on antagonism, needs a 

sufficiently large reserve army of labour to 

prevent inflation and maintain “work discipline”. 

But even apart from this, a socialist economy 

can overcome deficiency of aggregate demand 

in another way which brings out its basic 

character. 

In any economy where in any period the money 

wages are given, the production of a certain 

output requires a certain unit cost of production 

to be incurred. The term “deficiency of 

aggregate demand” or “insufficient demand” 

simply means that the level of demand in the 

economy is such that this output can be sold 

only at a price that falls below this unit cost of 

production plus the customary profit margin. 

When this happens, then in a capitalist economy 

firms cut back on output, so that there is 

unemployment; and this gives rise to a further 

reduction in demand since the workers’ demand 

shrinks owing to unemployment; and this 

causes a further reduction in output and 

employment; and so the process, referred to 

as the “multiplier” effect of the initial output/ 

employment decline, goes on and the economy 

is caught in a crisis. 

In a socialist economy however since firms are 

socially owned, the State can issue a directive 

asking them to lower prices when they initially 

find that the demand for output at the base price, 

i.e. at the price equal to the unit cost plus profit 

margin, is less than the output. While issuing 

this directive it can assure the firms that any 

losses they make will be covered from the State 

budget. In such a case, firms simply lower their 

prices to clear the market, and there is no 

question of any unemployment to start with, and 

hence no question of any “multiplier effect”. 

Putting it differently, in a capitalist economy any 

decrease in demand gives rise to “output 

adjustment” and hence “employment 

adjustment”; in a socialist economy it can give 

rise only to “price adjustment” and keep output 

unchanged. 

Why does this difference arise? When price 

adjusts downwards, since the money wage rate 

is given, there is an increase in the real wage 

rate. So, a socialist economy, faced with a 

decline in aggregate demand, gets rid of it by 

raising real wages of workers, i.e. by raising the 

demand of the workers. But a capitalist 

economy, precisely because it is based on class 

antagonism, where the slightest increase in the 

wage rate is bitterly opposed by capitalists, will 

never raise real wages to get rid of demand 

deficiency. This is why any such deficiency gives 

rise to output adjustment, and hence mass 

unemployment. 

But now we come to the real crux of the matter. 

It was mentioned above that the socialist State, 

while directing firms to reduce prices to clear 

markets, would assure them that any losses 

they incur would be covered by the State budget, 

i.e. that they would get a State subsidy to cover 

their losses. The question may be asked: how 

does the State finance these losses? And the 

answer interestingly is that for all the firms taken 

together there will be no losses. In other words, 

while the State issues this directive it will never 

be actually called upon to make any additional 

budgetary provisions for subsidies. True, firms 

in the aggregate will make less profits after price 

adjustment than they otherwise would have done 

in the absence of the original deficiency of 

aggregate demand; but they will make profits in 

the aggregate all the same. The State may at 

the most have to divert the profits of some firms 

to cover the losses of others, but it will have to 

16


make no additional provisions. This follows from 

the fact that since profits in any period in a 

socialist economy are more or less 

synonymous with the savings of the economy, 

and since (ignoring external borrowing/lending), 

investment in any period must equal savings, 

as long as investment remains positive, profits 

in the aggregate must remain positive no 

matter what the level of aggregate demand. 

A socialist economy, being both free of 

antagonism (so that real wages can be raised) 

and free of anarchy (so that some firms’ profits 

can be diverted to cover others’ losses), has 

thus a mode of functioning that makes it in 

principle immune to crises, caused by the 

deficiency of aggregate demand, which afflict 

capitalism. 

IN THE PRESENT CONTEXT 

So far we have discussed the inner workings 

of a socialist economy that is unconnected 

with world capitalism through trade and 

financial relations. Since the Soviet Union in the 

1930s was unconnected with world capitalism, 

and even later had only tenuous links, it 

remained actually immune to crises of 

aggregate demand. But what can be said of a 

socialist economy that is closely linked to the 

capitalist world through trade and financial 

relationships? Does such an economy 

continue to remain immune to crises of 

aggregate demand, especially those emanating 

from the capitalist world? 

In an economy where all important means of 

production are socially owned, the answer in 

principle should still be “yes”. When exports of 

such an economy decline, it is always open to 

it to raise domestic demand, either through the 

fiscal route suggested to capitalism by Keynes, 

i.e. through larger State expenditure, or through 

larger workers’ consumption via a rise in the 

real wage rate, caused by the lowering of prices 

for a given money wage rate, as discussed 

above. Since the rationale of the socialist 

economy’s participation in the world market is 

that it has generally lower prices than the 

capitalist world (at the prevailing exchange rate), 

which after all is why it is able to out-compete 

the capitalist countries and have burgeoning 

trade with them, any further lowering of its 

domestic prices in response to the reduced 

demand owing to world recession, should 

cause no “leakages” in the form of larger 

imports. Such reduction in other words should 

boost its own domestic demand, and, if 

anything, even help somewhat in countering 

export decline. Likewise, if it provided a larger 

fiscal stimulus, as China has announced it 

would, then the main impact of such a stimulus 

should be on its own domestic demand. In short 

the socialist weapons against crises mentioned 

earlier remain intact even when the socialist 

country has trade relations with the capitalist 

world. 

Of course switching from export production to 

production for the home market may take some 

time, during which there may be transitional 

unemployment, but this is very different from 

the unemployment encountered in capitalist 

countries during a crisis. 

The problem however may arise from a different 

source, namely when in the process of entering 

into relations with capitalist countries, the 

socialist economy has also accommodated 

within its midst a large private sector, owned 

by powerful capitalists from home and abroad. 

There would be resistance from them to the 

use of the standard socialist weapons against 

crises, just as there is resistance from 

capitalists in capitalist countries to the use of 

similar weapons, and indeed for the very same 

reasons. It follows in such a case that the 

capacity of the socialist economy to thwart a 

crisis arising from the deficiency of aggregate 

demand, depends upon the strength of the 

socialist State in confronting the opposition of 

the internal capitalists to the socialist measures 

against the crisis. 

[The author is a noted economist and 

Deputy Chairman of the Kerala State 

Planning Commission] 

17


MEDIA WATCH 

Life cos should focus on traditional biz for 

stability -Shri. T.S. Vijayan LIC Chairman. 

The Economic Times ;23 Feb 2009, 

When India Inc faced credit crunch, the only 

institution that had the money to invest was Life 

Insurance Corporation of India (LIC). 

With expected total premium income of over Rs 

1,70,000 crore for the current fiscal (FY09), the 

corporation is the country’s largest institutional 

investor. 

Recently, LIC helped bridge the gap between 

investors looking for guaranteed returns and 

corporates trying to raise long-term funds by 

launching Jeevan Aastha, a single-premium 

guaranteed returns policy, which mopped nearly 

Rs 10,000 crore. 

In an interview with Mayur Shetty, LIC 

chairman TS Vijayan explains why traditional 

policies are here to stay. 

LIC’s Jeevan Aastha has taken the market by 

surprise. What made you launch a guaranteed 

traditional product? 

We launched Jeevan Aastha when interest rates 

were falling. We were sure that rates prevailing then 

would be unsustainable. That’s why we decided on 

a single-premium product. 

There was also a tendency, among insurers, to bring 

out a capital-guaranteed product on the unit-linked 

platform. We thought that Jeevan Aastha would be 

a better alternative to capital guarantee because the 

product guarantees capital as well as returns. 

The option was to either design it on a unit-linked 

platform or a non-unit-linked platform. Because of 

the guaranteed returns, we thought it was better to 

launch it on the traditional platform (where 

investments are directed by the regulator and 

invested largely in debt). Since the rates prevailing 

then were not sustainable, we thought of keeping it 

open only for a short period. 

Has the launch helped in regaining market 

share? 

IRDA is still to come out with business figures for 

January. But I expect that our market share should 

cross 60% with Jeevan Aastha. Year-on-year, there 

may not be any growth in new business premium, 

but our total premium (new business and renewals) 

growth is very robust. 

Till January 2009, we have grown 13% with a total 

premium of Rs 1,09,000 crore. This shows that our 

conservation ratio is very high. I am not sure what 

these figures are for the industry since other life 

companies do not publish their renewal premia. 

Do you see the market reverting to traditional 

endowment policies? 

We have brought out another guaranteed-returns 

product - Jeevan Varsha - on the traditional platform. 

We do have our Ulip product, but it’s not doing as 

well as last year because of the current market 

condition. But there is a huge market for non-unitlinked 

traditional products that was vacated by 

private players, either for capital constraints or for 

some other reasons. 

However, I believe that a life company, which looks 

for stability, has to look at traditional business — 

both for profitability of the business and strength of 

the business. Once private players start making 

profits, I think they will also seriously promote 

traditional products. 

Internationally, the share of traditional and nontraditional 

is 50:50. In India, pension is just picking 

up. But in other countries, insurance companies have 

a large annuity basket for which you have to look 

for a large portion of fixed income. If companies do 

not do that, they can see wild swings, which is 

happening to companies, globally. 

But investment guidelines on traditional products 

would reduce your flexibility to invest... It will only 

help. What companies are looking for today is largely 

debt. There are no fresh equity issuances. Debt is 

what companies need today and traditional policies 

are able to support that. 

For instance, if an infrastructure company has an 

outlook for 15-20 years, it cannot be supported by 

equity, it needs long-term debt. As of today, we have 

enough headroom. There is also ample supply of 

paper. In addition to corporates, public sector banks, 

which are growing their business, are now issuing 

tier-II bonds to raise their capital adequacy. 

18


Satyam has stunned institutional investors. 

What are you doing to protect your investment 

and other exposures? 

With agencies working in tandem to revive the 

company, we are confident. Satyam is a fraud that 

has happened. There are two things that need to 

be done. First, we have to look at how to review 

the company and take care of investors and 

employees. 

Secondly, we also have to look at what has 

contributed to this and what are the early warning 

signals that can be caught by institutions and 

regulators. This is a big lesson for both. There must 

be some early warning signals that must be caught 

so that such frauds cannot be perpetrated again. 

What is the size of investments LIC is looking 

at in the current fiscal? 

We are targeting Rs 1,75,000 crore of total premium 

income for this fiscal. The figure may be slightly 

lower because of the slowdown. We will have 

around Rs 30,000-40,000 crore of investment 

income. Against this, there will be an outgo towards 

death and maturity claims. Last year, the outgo was 

around Rs 35,000 crore. This year, the figure will 

be higher. There will be some outgo towards pension 

annuities. 

But our investment income should balance the 

outgo. Of our investments, 25% has to be invested 

in G-secs, another 25% in state government bonds, 

15% has to go to infrastructure and the remaining 

35% is for other corporate investments. This would 

include investments in banks, etc. Equity 

investments may absorb around Rs 30,000 crore 

and we may invest more than 50% of our funds in 

G-secs. 

Our assets under management may cross around 

Rs 9,50,000 crore by the year end and Rs 14,00,000 

crore in three years. 

Outraged Obama goes after AIG bonus 

payment 

WASHINGTON (Reuters) - President Barack 

Obama sought to claw back bonuses paid to 

employees of insurer AIG on Monday, expressing 

outrage that taxpayer money was used to reward 

executives at the bailed-out firm. 

Though the insurance giant is being kept alive on a 

government bailout of up to $180 billion, it is now 

paying out $165 million in bonuses. 

“This is a corporation that finds itself in financial 

distress due to recklessness and greed,” Obama said. 

“Under these circumstances, it’s hard to understand 

how derivative traders at AIG warranted any 

bonuses, much less $165 million in extra pay,” he 

said at the White House. 

“How do they justify this outrage to the taxpayers 

who are keeping the company afloat?” 

Obama said he had ordered Treasury Secretary 

Timothy Geithner to pursue “every single legal 

avenue” to cancel the bonuses and a Treasury official 

said later it would modify a planned $30 billion capital 

infusion for American International Group to try to 

recoup the bonuses. 

White House spokesman Robert Gibbs said the 

Treasury could impose rules on the $30 billion loan 

facility for AIG but declined to go into specifics or 

spell out ways the legal avenues available to the 

administration to block the payments. 

Obama said Geithner was working on the problem. 

“I want everybody to be clear that Secretary 

Geithner’s been on the case. He’s working to resolve 

this matter with the new CEO, Edward Liddy, who, 

by the way, everybody needs to understand, came 

on board after the contracts that led to these bonuses 

were agreed to last year,” Obama said. 

Liddy told Geithner in a letter the insurer was legally 

obliged to fulfill 2008 employee retention payments 

but had agreed to revamp its system for future 

bonuses. 

Obama said overall financial regulatory reform was 

vital to ensure this did not occur again. 

He said the government needed “some form of 

resolution mechanism in dealing with troubled 

financial institutions, so that we’ve got greater 

authority to protect American taxpayers and our 

financial system in cases such as this.” 

Pausing to cough, Obama said he was “choked up 

with anger.” 

“We don’t have all the ... Regulatory power that we 

need. And this is something that I expect to work 

with Congress to deal with in the weeks and months 

to come.” 

19


LIC raises State Bank stake to 9.16% 

Friday, 13 March , 2009 

Mumbai: State-run Life Insurance Corp of 

India has raised its stake in top bank State Bank 

of India by 2.12 per cent to 9.16 per cent 

through market purchases, the state-run 

lender said in a stock exchange filing. LIC 

bought 13.46 million shares between mid 

November and early March, the filing showed. 

Last month, India’s second largest bank, ICICI 

Bank, said LIC had increased its stake in the 

private lender to 9.38 per cent. 

LIC hikes stake in Gail India to 9.98 pct 

Mumbai: Life Insurance Corporation of India has 

hiked its stake to 9.98 per cent in state-run Gail 

through open-market transaction as well as bonus 

allotment. 

In a disclosure on the Bombay Stock Exchange, Gail 

India said LIC has purchased over 5.92 crore shares 

representing two per cent stake in the company 

between March 21, 2007, and February 13 this year. 

LIC bought 7.38 crore shares worth Rs 1,132.97 

crore and sold 1.46 crore shares for Rs 546.77 crore, 

resulting in a net acquisition of 5.92 crore shares (2 

per cent), the filing added. 

Out of the 5.92 crore shares, over 3.88 crore were 

bonus shares, Gail added. 

Prior to the transactions, LIC held 7.98 per cent 

stake, which has increased to 9.98 per cent 

representing over 12.66 crore shares in Gail India. 

Shares of Gail India were trading at Rs 196.65, down 

1.75 per cent on the BSE. 

LIC hikes stake in IOB to 9.96 pct 

Mar 16, 2009 

Mumbai: The country’s biggest insurance service 

provider, LIC, has hiked its stake in Indian Overseas 

Bank (IOB) to 9.96 per cent after purchasing 

additional shares worth Rs 57.65 crore through openmarket 

transaction. 

Life Insurance Corp has purchased over 1.56 crore 

additional shares representing 2.86 per cent stake in 

the bank between February 19 and March 3, 2009, 

IOB said in a disclosure to the Bombay Stock 

Exchange. 

Prior to the aforesaid purchase, LIC held 7.09 per 

cent stake and now it holds over 5.4 crore shares 

representing 9.96 per cent stake in IOB. 

Shares of IOB were trading at Rs 44.10, up 1.85 

per cent on the BSE. 

Insurance regulator plans steps to check 

malpractices 

11 March , 2009 

Chennai: India’s insurance regulator now appears 

to be following the corporate sector’s credo - tough 

times are the right time to take difficult decisions. 

The Insurance Regulatory and Development 

Authority (IRDA) is drawing up plans to strictly 

monitor insurers’ expenses and premium charged 

for group and guaranteed return policies. “We are 

contemplating making insurers get all the payments 

made to a company over a threshold limit certified 

by an external auditor,” R. Kannan, member 

(actuary) of IRDA, told IANS on phone from 

Hyderabad. The certificate should also specify the 

kind of services insurers receive from the 

intermediaries for the payment they make. 

Now the insurers are paying huge sums to corporate 

agents and bancassurance partners - banks that sell 

insurance policies - apart from the agents’ 

commission for selling their policies. In the past, there 

were cases when the insurers had to pay up to Rs 

60 crore as joining premium to banks and Rs 10 crore 

to corporate agents. 

This, according to IRDA officials, is a dangerous 

practice as insurers are forced to set aside huge 

sums only to save their partnership agreements in a 

highly competitive atmosphere. Though the expense 

certification regulation is expected to check this 

practice, Kannan did not set any time frame for the 

implementation of the proposal. He, however, added 

that the IRDA was also looking closely at the pricing 

of group insurance and guaranteed insurance policies 

as the premium of several such policies is too low. 

“Some of the rates quoted for software companies 

are mind- boggling. The rates are not even sufficient 

to cover the stamp duty payable on the policies,” 

said Kannan. He added: “We will study carefully 

the adequacy the policy charges and the premium 

levied by the life insurers in their policies that 

guarantee returns.” After the stock market’s recent 

fall, consumers have become wary of buying unitlinked 

insurance policies (ULIP), where the 

20


investment risk is borne by the policyholders. Many 

companies are now launching policies that guarantee 

payment of highest net asset value during the policy 

term or at the time of maturity. Industry officials said 

promoting such capital-intensive policies, where 

companies have to provide higher sum for solvency, 

is a bad business practice and would have disastrous 

consequences. “It will be difficult for the companies 

to survive with such products if the stock market 

indices go up the sky and crash to the earth once 

again as has happened now,” an official told IANS. 

He added that there was a lot of mis-selling going on 

in the guaranteed policy market. “Policyholders think 

there is whole lot of stock market investment activity 

being done on their behalf and they would immensely 

benefit. Actually it is not so. Life insurers will largely 

invest in debt and liquid securities and a very low 

percentage in equity,” the official said. 

Insurance cos not taking Ombudsman 

seriously’ 

12 March , 2009 

Hyderabad: Insurance companies it seems are yet 

to take the institution of Ombudsman seriously in 

dispute resolution with the customers as well as 

execution of awards. 

This was the opinion expressed by a majority of the 

12 insurance Ombudsmen in the country in the 

operational reports for the last five years, submitted 

to the Insurance Regulatory and Development 

Authority (IRDA). 

The lack of seriousness on the part of insurers is 

quite apparent. 

“There are all shades of negligence. Delay in 

response, speedy response without substance, 

delayed as well as non-substantial response and so 

on,” points out a report from the Ombudsman Centre, 

Ahmedabad. It is also generally found that most of 

the documents lie in the hands of the insurance 

companies at the complaint stage, making disposal 

of complaints extremely difficult, observed the 

Ombudsman, Bhopal. “In few cases, the replies were 

not received at all,” the report adds. 

The Ombudsmen also pointed out that officials 

representing the case for insurance companies need 

to be well-versed with the contents of the file. 

In many cases, the officer representing on behalf of 

the insurers are not pleading the case properly. 

“All this would mean a serious loss for a policy-holder 

at a time when mis-selling of policies, especially in 

the unit-linked products is very alarming,” an 

insurance Ombudsman who did not want to be 

identified told Business Line. 

Not only private insurers, but even the State insurers 

are not spared in this regard. “In spite of clear 

instructions issued by Life Insurance Corporation of 

India for representing the cases properly, the office 

concerned with a specific complaint is not presenting 

the case properly,” said a review report from the 

Insurance Ombudsman, Bhopal. 

“There needs to be a stricter mechanism to ensure 

implementation of awards given by the Ombudsman 

in a specific timeframe. However, as the awareness 

about Ombudsmen is growing, things would 

improve,”R. Rangabhashyam, Insurance Ombudsman, 

Kolkata, said. When contacted, J. Hari Narayan, 

Chairman, IRDA, said: “In all probability, it will be 

brought under IRDA’s jurisdiction. Then, something 

more can be done,” he said. “The insurers should 

be more responsible in working for customers’ 

benefit while dealing with complaints launched with 

Ombudsman,” he added. 

LIC leads the pack in fresh premium collection 

in Jan 2009 

MUMBAI: Public-sector Life Insurance Corporation 

of India (LIC) has clocked a robust 72.53% jump in 

fresh premium collection in January 2009, leaving 

behind major private-sector players, most of whom 

have posted a negative growth in the month. 

According to data released by insurance sector 

regulator IRDA, the first-year premium collected by 

private life insurers in January 2009 has seen a 

negative growth of 24.99% as compared to the same 

period last year. 

LIC, the country’s biggest life insurer, has, however, 

witnessed a growth of 72.53 per cent in fresh 

premium collected during the month. 

Leading private sector players such as Bajaj Allianz, 

ICICI Prudential Life, SBI Life, Aviva and HDFC 

Standard Life have posted a negative growth in the 

first month of 2009 as compared to last year, the 

regulator said. 

“Private insurers that garnered a total fresh premium 

of Rs 2,642.58 crore experienced a decline of 24.99 

per cent in January 2009 as against Rs 3,522.96 crore 

21


in January last year,” the Insurance Regulatory and 

Development Authority (IRDA) said in its monthly 

data. 

SCSL loses LIC contract 

HYDERABAD: What pushed out Satyam 

Computer Services Ltd. (SCSL) from the ‘front 

office modernisation plan’ of all branches of Life 

Insurance Corporation (LIC) of India? Sources in 

the insurance giant said that LIC had laid a condition 

that anybody to be considered for giving the proof 

of concept explaining their competency to take up 

the project should have “clean balance sheet” for 

three consecutive years. 

Fidelity raises stake 

With former chairman B. Ramalinga Raju himself 

declaring that the accounts were fudged in his 

confession statement, Satyam obviously lost out in 

the race. Interestingly, LIC, which owned about four 

per cent stake in Satyam, preferred L&T Infotech 

to be in the race along with Indian IT giants TCS, 

Infosys and Wipro. 

In an interesting development, Fidelity Management 

and Research LLC increased its stake in Satyam 

to 10.17 per cent by purchasing 18.27 lakh shares, 

emerging as the second largest stakeholder in the 

company after L&T. 

Meanwhile, half the employees who were on the 

project of State Farm Insurance, which terminated 

its contract with Satyam, had already left to join the 

competing vendors (IT companies) who are also 

working on the project. 

While all the 180 associates having H1-B visas 

working in the U.S. had moved over to other 

vendors, 40 out of the remaining 220 on-site 

associates with L1 visas have agreed to return to 

Satyam in India (offshore). 

The 180 staffers have resigned and joined other 

vendors like HTC and Patni Computers back home, 

for they cannot get L1 visa until they completed 

one year in offshore assignments. 

Irda seeks more disclosures 

March 10, 2009, 

In order to provide greater transparency and enable 

policyholders to take more informed decisions, the 

Insurance Regulatory and Development Authority 

(Irda) is asking insurance companies to disclose 

solvency margin, claim settlement record and loss 

ratio on a quarterly basis. 

The changes in the disclosure norms, along with 

the track record on dealing with customer 

grievances, are proposed to be effective from June 

this year. 

“Claim settlement will give an idea of the number 

of claims settled and the numbers pending with the 

insurer, while other figures will provide a picture on 

an insurer’s underwriting capacity. For 

policyholders, it is necessary to know the strength 

of the company he or she is dealing with,” said a 

senior Irda official. While there will be more 

disclosures for life and general insurance 

companies, the nature of data to be made public 

will be different, the source added. 

At present, the insurers disclose the audited annual 

numbers to the regulator and Irda publishes the data 

in its annual report. 

The insurance companies only disclose the new 

business income on a monthly basis. Since none of 

them are listed, flow of information is limited. This 

has prompted Irda to initiate steps to strengthen the 

disclosure system as part of a drive to improve 

corporate governance standards. 

LIC gets breather on 10% stake ceiling 

February 24, 2009 

The Insurance Regulatory & Development Authority 

(Irda) has allowed Life Insurance Corporation of 

India (LIC), the country’s largest institutional 

investor, to hold more than the mandated 10 per 

cent stake in at least 47 companies. 

The relief – termed temporary by the regulator – 

came six months after Irda decided to cap a life 

insurer’s holding in a company at 10 per cent of the 

paid-up capital.”In a downturn, policyholders will 

be at a loss if LIC sells its stake as 95 per cent of 

the money in equity belongs to policyholders,” a 

senior Irda official told Business Standard over the 

phone.While LIC would not have to pare its holdings 

immediately in the companies where it holds over 

10 per cent, the special dispensation came with the 

rider that in companies where it held less than the 

prescribed ceiling, it would not be allowed to breach 

the cap. 

22

news bulletin - NFIFWI

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