Government’s big push for insurance

September 1, 1956, is an important day in the history of Indian life insurance. Today the Indian Life Insurance Corporation begins its career of service. The step which we have taken is unique in the annals of life insurance, for in few countries, if any, is there a corporation managing life insurance on a monopolistic basis. It all the more behoves us to ensure that the consequences of this momentous step are of lasting benefit to the country. This calls for dedicated service on the part of all those connected with the corporation from the highest to the lowest.

On January 19, when the Life Insurance (Emergency Provisions) Ordinance was promulgated, the government assumed temporary management of about 180 insurance companies — life and composite, Indian and foreign, differing widely in size and strength — and of about 70 provident societies. The total business in force was of the order of ₹1,250 crore and the total funds were ₹380 crore.

CUSTODIANS

It thus became our responsibility to ensure efficient administration of all these units. As, in terms of the ordinance, it was only the management which vested in the government and not the ownership, it was necessary to continue the companies as separate entities. For the purpose of efficient management, custodians were appointed to administer them on the government’s behalf. Coordination of the work of these custodians during this period was indeed a difficult task because the varying pattern of internal organization, the widely differing size, strength and standing of the companies made it imperative for individual attention to be paid to their problems.

CORPORATION BILL

Coincidental with the assumption of management of these companies was the necessity to discharge our responsibility to Parliament by seeking endorsement to the government’s proposal to nationalise life insurance. The Life Insurance (Emergency Powers) Ordinance was considered by Parliament which endorsed the step government had taken. Thereafter, Parliament took up consideration of the Life Insurance Corporation Bill. After consideration of the select committee’s report, Parliament passed the Life Insurance Corporation Bill.

IMPLEMENTATION

Our next task after Parliament passed the Bill, was to implement it. The Act provided for the corporation to be brought into being on an “appointed day” to be fixed by the government. It was felt that the government should not retain control over the management of these companies for a day longer than was necessary, and should attempt to set up the Corporation as early as possible, so that it could take in hand the difficult and onerous task ahead. Accordingly, September 1 was settled as the date on which the Life Insurance Corporation would come into being. This decision meant that the time for the preparatory work was only a few weeks. The task was indeed a formidable one, as it had to cover all aspects from the choice of divisional offices to small details like the finalisation of proposal forms.

The Act itself has laid down that there shall be five zones — with the headquarters at Bombay, Calcutta, Madras, Delhi and Kanpur. We devoted considerable thought to the location of divisional offices which will, for all practical purposes, function in the same manner as head offices of the former insurance companies. It was felt that the best compromise between the natural desire to have a large number of divisional offices and the paramount necessity of keeping expenses down would be to begin with 33 divisional offices spread out over the country. Under these divisional offices there would be a network of branches -some 180 in number -- so that policyholders, wherever they might be living, would have some office or the other of the corporation not far from their place of residence. With this network of divisional and branch offices, it is our hope that the Corporation will be able to render prompt and efficient service to policyholders.

EXISTING POLICIES

A difficult problem was the arrangement for servicing the existing policies which number some five million. The working of insurance companies had hitherto been highly centralized. Practically, all work was being done at the head offices, the branches being concerned only with procuration of new business. We, therefore, faced the formidable task of splitting up the records of each of the 250 odd units according to divisions; every account book and every register had to be gone into and new books and records prepared according to the divisional offices in whose territory the policyholder lived.

To avoid a breakdown in service, we thought it best that this task should be spread over a period of months. As fresh registers for a division were got ready, the records would be transferred along with the men attending to that work. Meanwhile the former head offices have been “grouped together into convenient service units”.

PROGRESSIVE OUTLOOK

To the members of the public, I would make a special plea. They are aware that all policies issued by the corporation have the guarantee of the central government with regard to payment. Their interests as regards ultimate payment are thus 100% secure. But while security is undoubtedly an important factor in judging an insurance organisation, I have no doubt the corporation will not rest content with merely offering security but maintain a progressive outlook responsive to the needs of all classes. The realisation of this aim will require, however, a little time. I would plead with the public for a little patience and understanding.

I would in conclusion ask the people to bear in mind that when they take insurance cover with the Corporation, they will, in effect, be contributing to the success of our Five-Year Plans. Here is a lever for purposeful saving in the full knowledge that in helping yourself you are also helping, in building the country. As a nation we have the virtue of thrift ingrained in us. We must, all of us, canalise it into constructive and nation-building channels.

(Excerpts from an article published in HT on September 1, 1956)