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Pvt insurance cos find the going tough -- Ex-PSU staff find the grass isn't greener

C. Shivkumar

BANGALORE, July 27

EVEN before private sector insurance companies have begun full-fledged operations, the shakeout in the sector is slowly beginning.

Industry sources indicated that all the major private sector insurance companies have begun rationalisation and downsizing manpower. But no names are being mentioned, though these sources said that almost all the big private sector names have resorted to these kinds of measures.

The rationalisation measures are being implemented at two levels. One is through reduction in the employee perks and salaries. The other is through shedding manpower and closure of some of the branches where competition is intense. In most cases, people are just being asked to leave, the sources said.

The uncertainty in the industry has led to highly-skilled public sector employees, who had joined the private sector at lucrative salaries, now expressing intentions to return to the public sector.

Among the employees who have expressed the desire to return include some of the former employees of the public sector Oriental Insurance Company Ltd (OICL).

The OICL Chairman and Managing Director, Mr B.D. Bannerjee, confirmed that some of the former employees had indeed expressed such a desire. ``Even if we wish to take these people back, it is extremely difficult,'' he said. Other public sector general com panies have also received such requests from former employees. Ironically, it is only about a year go that the public sector companies were faced with a virtual exodus of some of the highly-skilled hands to the private sector.

This shakeout in the private sector insurance companies has been influenced by the lower-than-expected growth in business volumes. Initially, the expectations were that an incremental annual business volume of at least Rs 20,000 crore per year would be g enerated by the private sector companies. However, none of the private sector companies have so for reached anywhere close to this figure.

Besides, the industry sources said that in making these projections, the private sector had failed to take into account the elasticity of premium incomes to industrial growth.

Among the sectors that the private sector had targeted included personal lines of insurance of software companies and project insurance. Personal lines included home insurance packages and for air passengers. The infotech industry bust has killed all the se business volumes, the sources said. Air travel has considerably reduced. Other lines targeted included motor insurance. But motor vehicle sales have also slumped leading to shortfalls in targeted premium incomes.

Besides, public sector companies have fiercely responded to private sector attempts to attack their renewal business. The public sector has begun using similar strategies as the private sector of undercutting and offering higher discounts to retain busin ess. Since public sector insurance companies have a much larger capital base and diversified income base, most large corporates have preferred to remain with them. Part of this is also due to the past claims experience. Public sector insurance companies, despite being lumbering behemoths, have seldom balked at meeting claims.