New Delhi: Life Insurance Corporation (LIC) employees will go on a one-day nationwide strike the day the initial public offering (IPO) of the corporation paving the way for a 5% government stake sale in the country’s largest insurer hits the market in March.
As per the Draft Red Herring Prospectus filed by LIC with the market regulator Securities and Exchange Board of India (SEBI) on Sunday, 31.6 crore equity shares at the face value of Rs 10 each would be sold, which is expected to fetch Rs 60,000 crore-Rs 75,000 crore.
The All India Insurance Employees Association (AIIEA) believes that the nation’s largest-ever IPO is the “first step towards privatisation” of LIC and will “compromise with the interests of the policyholders”.
In protest, LIC employees will participate in a two-day nationwide strike called by the 10 Central trade unions on March 28 and 29 against the new Labour Codes and the privatisation spree and also boycott work the day the IPO opens for subscription, AK Bhatnagar, vice-president, AIIEA, informed Newsclick over the phone.
According to media reports, SEBI is expected to give its nod for the IPO in three weeks. LIC’s embedded value—a measure of the consolidated shareholders’ value in an insurance company—is estimated at Rs 5.39 lakh crore. According to Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management, the IPO is a 100% offer for sale by the government and no fresh issue of shares.
However, Bhatnagar said that the IPO is the “first step towards the privatisation of LIC and will compromise with the interests of the policyholders and mainly focus on delivering profit to the shareholders”. Insurance employees staged a nationwide demonstration on Monday at AIIEA’s call, he informed.
LIC, which has more than one lakh employees along with around 13 lakh agents, was created in 1956 when the Jawaharlal Nehru government decided to nationalise the life insurance business by taking over some 245-odd foreign and domestic companies. The government aimed to provide security to policyholders and mobilise their small savings and convert them into capital for long-term investment.
LIC fulfilled its objectives “admirably well”, Bhatnagar said. According to AIIEA estimates, LIC invested more the Rs 30 lakh crore, mainly in government securities, over the years.
During this period, LIC also emerged as the largest life insurance company in the world with around 300 million individual policies and another 120 million people covered under its group insurance schemes.
However, after the IPO is launched, “LIC, like private companies, will focus on the elite by charging high premiums rather than increasing the number of policies”, Bhatnagar claimed. “Consequently, the poor and social insurance will suffer. The average premium size of LIC is Rs 11,000 as against Rs 50,000 in the private sector, which targets the creamy layer.
There will be an increasing tendency to sell policies where the risk of savings will be borne by policyholders, not the insurer. This means that the focus will be more on unit-linked policies rather than traditional endowment policies. It will impact resource mobilisation for investment in infrastructure and social development.”
Amid these fears, the Narendra Modi government is eyeing to meet the lowered revenue estimates of Rs 78,000 crore—from the initial target of Rs 1.75 lakh crore—from disinvestment proceeds for the current fiscal.
