The Rediff Special / Gurudas Dasgupta

'By opening up the insurance sector, we are making our economy vulnerable to the insurance agents of the world'

The Communist Party of India has been in the forefront of the national campaign to prevent the opening up of the insurance sector to private and foreign companies. In this extract from a recent speech in Parliament, CPI MP Gurudas Dasgupta explains why his party is opposed to reforms in the insurance business:

The question that arises is: Under whose authority and whose instruction has there been a systematic move to clear the decks for induction of private Indian and foreign companies into the insurance business? The insurance sector was nationalised by an Act of Parliament by successive doses of legislation, as in 1956 and as in 1971. Insurance sector is not a mixed sector. It came under the domain of nationalised companies because it was so decided by the parliament and the government.

Now, the point is that this Act of Parliament which puts insurance business under the domain of the nationalised sector is sought to be devalued by the repeated pronouncements of the finance minister with regard to giving permission for the opening up of offices of foreign insurance companies and the public sector entering into an arrangement with the foreign insurance companies.

Under whose authority is this Act of Parliament sought to be devalued? If it is not a question of chaining the decision of Parliament, it is, at least, a question of acting over the head of Parliament because it is Parliament alone which can modify its earlier decisions, which can change its earlier decisions. It can correct the wrong that might have been done in 1956.

If Parliament had done any wrong by nationalising the entire insurance sector in 1956, that wrong can be rectified only by Parliament through another Act. Therefore, it seems as if this move has been set in by people who are at the helm of the ministry of finance. They have not been authorised by Parliament.

Let us not take protection under the cover of Common Minimum Programme. When the CMP was signed -- let it be known once and for all -- a number of political parties, including the party to which I belong and including some of the political parties, could not agree with it.

It was made very clear in the same meeting and subsequently the same opinion was conveyed to the prime minister that we do not want to forego our right to openly oppose or even take recourse to vote against if a move is made to hand over, even partially, the nationalised public sector to the multinationals.

The question, therefore, is: Why is the insurance sector being thrown open? What is the reason behind it? Is it for money? Is it for foreign exchange? Is it to get better technology? Or is it to build up a competitive environment in the insurance sector? If it is for money, how much of money have they already promised the finance minister to put in?

How much of money? Is it several billions or several thousands of millions? Whatever they might have promised, whatever funds they may have decided to bring in, I would say, by opening up the insurance sector, we are allowing them to have a free access to larger investible funds and we are making our economy vulnerable to the insurance agents of the world.

Secondly, if it is a question of technology, it is the computer technology that is needed. If you do not have the required standard of computers, then let us purchase them from the world market though at a higher rate.

If it is a question of building up competitive environment in the insurance sector, may I submit that the competition may lead to cut-throat competition. It has happened in many parts of the world. It may lead to colossal loss on the one hand and, on the other, it may lead to unholy tie-ups between insurance companies resulting in high cost insurance for a poor country like India.

Excessive competition in the insurance market, in different parts of the world, especially, in the developed countries, has resulted in erosion of commercial feasibility.

There has been an erosion in commercial feasibility in the insurance market in most of the leading, advanced, capitalist countries of the world. Because of the cut-throat competition, people look for higher returns. Because of the higher returns, there has been a move for high-risk investment. As a result of this, a large number of insurance companies have slipped into insolvency.

Let us look at our own market. Let us look at marine insurance. In marine insurance, our General Insurance Company has lost Rs 2 billion of premium collection because there was a reduction in premium.

Marine insurance in the country has lost Rs 2 billion of premium collection within seven days. This was because there was a reduction in the payment of premium from 17 paise per hundred rupees assured to one paise per hundred rupees assured.