People against CAPITALISTSnfifwi.com/magazine/2011.010.pdf · underperformance. His focus will be...

October 2011VOL XXVIII Issue No.10 Annual subscription Rs. 90/-

People against CAPITALISTS

Anti-Wallstreet protest in US

EDITORIAL

The need of a good incentive scheme

Marketing organizations, the world over offer incentives to their marketing personnel in many ways.

Promotion, cash, holidays, leave, prizes or whatever way they give it, management experts across

the globe agree without dispute that incentives are the life line to any marketing organization. It is

also without argument that the highest incentives are paid in marketing field. This is the extra bit that

the management offers to motivate the field personnel to perform at higher levels. Every

management knows that it is this extra performance that makes a difference to the organization. The

wages or salary is paid to every employee by a general yardstick. The underperformance and

overperformance are not criteria for wages. Everyone gets it irrespective of his output.

But here too the Development Officers are a rare class of employees in LIC and perhaps anywhere

else. We are the only class that can justify our existence as employees, because for every penny that

we are paid, we have to bring 6 times as premium. There is a system to penalize those who perform

below that. If there is punishment for underperformance, definitely there should be reward for better

performance also. That is incentives. It is because individual performances differ. The ultimate aim

of every marketing organization should be to extract the best out of each employee for the growth of

the organization. Every employee should be motivated to contribute that extra bit. The high

performers must be inspired to move higher and better.

An ideal incentive scheme should have something for everyone, be it high or average performers. If

the incentives offered do not motivate a good performer, it is natural that he will slip to

underperformance. His focus will be shifted and energy diverted. The organization not utilizing the

full potential of its employee is a real crime. On the other side the average performers feel that the

rewards are much above their head and don't even make an attempt to reach for it. The result is that

the organization fails to capitalize on the golden opportunity in its hands.

This can be seen in the history of LIC also. LIC started its extraordinary surge forward with the

introduction of incentive scheme to Development Officers. It doubled and tripled every year. Even

when privatization came, LIC marketing team proved their mettle in both recruitment and business.

But the introduction of GOIBS started the downward slide. The incentives were reduced, even in

that the penalties outweigh the rewards, actual marketing expenses were denied. In the name of

rewarding good performance, the management made the good performers to collect cash, print

receipts and do more office work A wise management would have rewarded him to perform even

higher and at a lower cost. But in LIC his focus was diverted for other clerical jobs. The result is that

LIC's marketing team became a demotivated lot.

The management thinks like it's a crime to reward the Development Officers with good incentives.

This attitude is very much evident in the recent IB proposal given by the management. It is really a

strange thing that LIC managements fails to understand what the world accepts. A good incentive

scheme is absolutely essential for the growth of any marketing organization in today's competitive

environment. There is no stronger army than a class of motivated and satisfied employees. It will

only take the organization to greater heights.

OF INSURANCE FIELD WORKERS

Vol XXVIII Book No 10 October, 2011

NEWS BULLETIN

Chief EditorR. Jayprakash

Associate EditorsK. VenkateshS. Sreekumar

EditorsJ. BaburajanM. B. Vinod

Editorial BoardV. ShibuB. ShibuHari T. Pillai

Please send yoursuggestions, articlesand contribution to

The EditorNews BulletinKalvit BhavanCapital HeightsPlamoodu, PattomTrivandrum - 4ormail [email protected]

The views &

opinion expressed

in the articles need

not necessarily be

that of NFIFWI

CONTENTS Page No

1. EDITORIAL

2. COVER STORY 2Taking the Bull by Horn

3. MEDIA WATCH 5

4. ORGANISATIONAL COMMUNICATIONS 12

5. ARTICLE 13How little can a person live on today

6. IRDA GUIDELINES FOR CASH ACCEPTANCE 16

7. PERSPECTIVE 17

NEWS BULLETIN WISHESALL COMRADES

a Happy & Joyful

Diwali

2

News Bulletin October 2011

COVER STORY

Taking the Bull by Horn

Main Street Occupies W all Street

“We are unions, students, teachers, veterans, first

responders, families, the unemployed and

underemployed. We are all races, sexes and

creeds. We are the majority. We are the 99 percent.

And we will no longer be silent. As members of the

99 percent, we occupy Wall Street as a symbolic

gesture of our discontent with the current economic

and political climate and as an example of a better

world to come. Therefore we invite the public, our

fellow 99 percent, to join us...”

It is since September 17, more than two weeks

now that people in the US are occupying Wall

Street, New York. Inspired by the ‘Arab

Revolutions’ and appalled by the state of affairs in

their own country, they decided to express their

indignation by occupying Wall Street. This is not a

spontaneous protest but a planned protest, whose

preparations started from the month of July. An

appeal was issued “for every teacher, home health

aid, parent, student, tenant, librarian, city/state

employee, childcare provider, nurse, patient,

employed or unemployed worker or recipient of

Social Security or any type of public assistance” to

come and join the General Assembly that was

organised on the 2 August to plan the details for

the occupation. The appeal was an open invitation

calling upon everyone: “The current depression-

level crisis is not due to lack of revenue. It’s due to

theft. The trillions that the banks are sitting on right

now? That’s our money. Whether through taxes;

the looting of pension and social security

contributions; or the wealth we created from our

labour – all of that belongs to us. Come to Wall

Street August 2 and strategise – on how to get that

back”!

The tactics of the movement were also well thought

out. In one of the posts on their website, explaining

the tactics that need to be followed, they write,

“Strategically speaking, there is a very real danger

that if we naively put our cards on the table and

rally around the ‘overthrow of capitalism’ or some

equally outworn utopian slogan, then our Tahrir

moment will quickly fizzle into another

inconsequential ultra-lefty spectacle soon forgotten.

But if we have the cunning to come up with a

deceptively simple Trojan Horse demand…

something profound, yet so specific and doable

that it is impossible for President Obama to

ignore…something that spotlights Wall Street’s

financial capture of the US political system and

confronts it with a pragmatic solution…like the

reinstatement of the Glass-Steagall Act…or a one

percent tax on financial transactions…or an

independent investigation by the US Department

of Justice into the corporate corruption of our

representatives in Washington…or another equally

creative but downright practical demand that will

emerge from the people’s assemblies held during

the occupation…and hang in there day after day,

week after week, until a large swath of Americans

start rooting for us and President Obama is forced

to respond…then we just might have a crack at

creating a decisive moment of truth for America, a

first concrete step towards achieving the radical

changes we all dream about unencumbered by

commitments to existing power structures”. Many

such tactics and organisational principles were

discussed in the general assemblies. These general

assemblies were open to all and more and more

people are invited to join them.

Explaining the reasons for deciding on this course

of action they state that “contemporary society is

commodified society, where the economic

transaction has become the dominant way of

relating” and that “the mere act of being alive has a

price tag”. Continuing, “Some pay it easily. Others

pay for it with their submission. Others still can’t

pay it at all...This is the natural consequence of a

society built around entities whose purpose it is to

3


always, always minimise costs and maximise profits.

It is the philosophy of growth for the sake of growth,

the same ideology that drives a cancer cell”. Saying

that the world need not be in this way, “A society

of ruthlessness and isolation can be confronted and

replaced with a society of cooperation and

community...The people coming to Wall Street on

September 17 come for a variety of reasons, but

what unites them all is the opposition to the principle

that has come to dominate not only our economic

lives but our entire lives: profit over and above all

else”.

Many people responded positively to these appeals

and had joined the ‘Occupy Wall Street’ movement.

Though the initial targets of mobilising 20,000

people was not met, the few hundreds who had

gathered did not lose heart. They showed

remarkable resoluteness to carry on with the

occupation, slowly attracting hundreds more. The

movement today had spread to more than 52 cities

in the country. Important cities

like Chicago, Boston, San Francisco and Los

Angeles were all now occupied. Many people are

openly expressing their sympathies with the

protesters and are donating to the cause and

volunteering in the organisation of the occupation.

As many as 37 trade unions including the AFL-

CIO, the major trade union in the US, have

expressed their solidarity. Intellectuals like Noam

Chomsky and film director Michael Moore too

pledged support. In the periodic marches that they

are organising during the course of their occupation,

thousands have participated at times.

The police initially tried to scare the protesters away.

They tried arresting few of them, beating some of

them would frighten the protesters and weaken their

resolve. This had boomeranged on the police and

in fact had succeeded in attracting wider attention

to these protesters. Instead of getting provoked

by the police action, the protesters had shown great

maturity and restraint. They advocated peaceful

protests in spite of police provocations. Reacting

to the police high handedness, they issued another

appeal: “We condemn the actions of unprofessional

police who used excessive force in subduing a

peaceful march. But we are foremost here to

oppose the growing power of the ruling class. Let

us also be clear that, when approached as

individuals, members of the NYPD have expressed

solidarity with our cause...Over these thirteen days,

we have learned that no one supports corporations’

disproportionate influence in the political sphere.

We have learned that no one is in favour of evicting

struggling families to the street while banks continue

to profit. No one, that is, except the corporations

and banks. We urge members of the NYPD to

remain in solidarity with our cause. These men and

women could lose their pensions and benefits

during the next round of budget cuts. We ask that

members of the NYPD treat all peaceful human

beings with respect and care. This will be a great

step towards reclaiming power for the working

class. Those who profit off the suffering of others

will held accountable. We are the 99 percent, and

we are too big to fail”.

The background for the protests is the worsening

economic situation in the US. People are

increasingly perceiving Obama to be a failure,

unable to live up to the promises he had made

during his election campaign. The wealth gap

between whites and minorities has risen to a historic

high, according to new census data analysed by

the Pew Research Centre. In 2008, the last year

for which data are available, for example, the top

0.1 percent of earners took in more than 10 percent

of the personal income in the United States,

including capital gains, and the top 1 percent took

in more than 20 percent. Officially, unemployment

is orbiting around the high of 10 percent mark, while

unofficial estimates state that it would be anywhere

between 15-20 percent.

The failure of the Obama administration to address

these basic concerns of the common people and

the obstructionist role played by the Republican

party are further alienating people from these two

big political forces in the country. In a recent survey

conducted by the CNN, the combined

4


unfavourable score for both parties – 104 percent

– is a record, and represents the first time that the

figure has been above 100. In this scenario, extreme

right-wing forces represented by the Tea Party

movement are trying hard to use this content among

the people to further their divisive agenda. More

than that the economic policies of the Tea Party

movement advocate further reduction of

government and increasing the say of finance capital

over the economy. The occupation of Wall Street

movement, located in this political background

assumes all the more importance in shaping today’s

political discourse in the US.

The occupy Wall Street movement in spite of the

many positives as can be understood from the

extensive quotes taken from their statements has

some inherent limitations. While their concern to

concentrate on one particular ‘doable’ demand can

be understood their abhorrence for political parties

cannot be accepted. That apart, the coming out on

to the streets of the US and deciding to take the

‘bull by the horns’ in the heartland of imperialism is

in itself a inspiring act. According to reports, many

people inspired by these protests are coming out in

many advanced capitalist countries that are till now

relatively free from widespread protests,

like Canadaand Sweden. Let us hope that in this

crucial election year in the US, these protests really

fire up “a permanent democratic awakening” in the

country.

Let us end hoping that these protests realise their

optimism: “The world does not have to be this way.

A society of ruthlessness and isolation can be

confronted and replaced with a society of

cooperation and community. Cynics will tell us this

world is not possible. That the forces arrayed

against us have won and will always win and,

perhaps, should always win. But they are not gods.

They are human beings, just like us. They are a

product of a society that rewards the behavior that

has led us to where we are today. They can be

confronted. What’s more, they can be reached.

They just need to see us. See beyond the price

tags we carry. And if they are gods? Then we shall

be Prometheus. And we shall laugh as we are lashed

to the stone to await the eagle”.

Life Insurance Council

4th floor, Jeevan Seva Annexe Building, S.V.Road, Santacruz (West),

On behalf of life Insurance companies, Mumbai 400 054.

PUBLIC NOTICE

We wish to intimate all the policyholders that pursuant to the Insurance Regulatory and

DevelopmentAuthority circular dated 29th July 2011 the formula for computation of the Net Asset

Value Per Unit (NAV) for Unit Linked funds stands modified as under:

(Market Value of Investments held by the fund + Value of Any Current Assets - Value of any

Current Liabilities & Provisions, if any) Divided by the number of units existing at valuation

date (before creation / redemption of Units)

Please note that the above change is effective 18th August 2011 and all the policy contracts

issued by life insurance companies (linked funds) stands modified to the above extent.

This is to confirm that there is no change to the number of units to the credit of any policyholder

on account of this change.

Sd/-

Secretary General, Life Insurance Council

5


LIC’s ONLINE TERM POLICY SOON

Here is some good news for all those who would

either like to take up a term plan or who are looking

to upgrade (increase) their life insurance cover! It

is recently disclosed by LIC that Term Plans will

be sold online and offline and the premiums will be

cheaper than the current rates offered.I personally

never thought that LIC would come up with online

term plan because of its dependence on agents’

network for selling its products. But this is a good

move from LIC as their share of term plan market

is eaten away by private insurers from last few

years. At the moment, a person has to pay a very

high premium for term plan through LIC. For

example, the premium for 25 lacs cover with LIC

term plan at the moment is around 7,000 – 8,000,

whereas it’s around 3,000-3,500 in companies like

ICICI iProtect & Kotak e-preferred.

“We are in the process of designing a pure term

product which would be sold through both online

and through agents,” LIC’s ED- marketing S Roy

Chowdhury. “The rates will be lower than what is

charged at the moment,” he added.

LIC uses mortality table 1994-96 at the moment

Do you know why LIC premiums are higher? One

of the reasons is that they follow old mortality tables

which has older death experience ratio. A lot has

changed in last 10-15 yrs and we have much better

access to health care and lifestyle, which has

changed the number of death. Most of the new

companies in Life insurance use the latest mortality

data but LIC is still using old data and that’s pushing

their premiums. Now LIC is planning to revise the

mortality rates based on the last 10-15 yrs of

experience and hence the premiums would drop

down from its current level.

Note that mortality experience are different for

different age groups and classes, so it’s not

necessary that mortality rates will go down it might

MEDIAWATCH

happen that mortality rates for age group 25-35

goes up because of the bad lifestyle and new age

ailments (stress, junk food, etc). So keep that point

in mind.

How cheap will be LIC online term plan ?

LIC online term plan will be cheaper than the current

term plan they offer but expect it to be 15%-25%

lower than current premiums. Do not expect a very

steep decrease like 50%-60%, because LIC is a

very different ball game than other life insurance

companies. LIC has accessed in each corner of

India and the new online term plan they will launch

will be targeted at a very big group and scattered

across various cities. It will be offered online and

also offline (through agents).

How will this impact Insurance Industry ?

With whatever little I know I can see that urban

class will welcome this move with open heart and a

lot of people who trusts LIC like anything and even

a lot of people who are not big fan of LIC will wait

and watch for this online term plan from LIC and

would like to go for it only. This move will lead to

more sales of LIC term plans in bigger cities and

reduce the term plan selling of different other

companies (to some extent).

What do you think about LIC online term plan .

Are you going for it ? Are you waiting for it ?

IRDA eases norms for agents

Sep 21, 2011. CNBC

Insurance Regulator- IRDA has put forth several

regulations to get insurance agents back in business.

CNBC-TV18’s Kritika Saxena and Mitra Joshi

find out if these changes can ensure healthier times

for the insurance sector.

The insurance industry has not been keeping well

as growth has been slow with the sector witnessing

mass exodus of agents since the last two years.

6


Industry experts claim that out of 30 lakh insurance

agents, only 5 lakh agents are active, the other

agents are merely active on paper. Not only agents,

the penetration of insurance products in the country

is also low. Life Insurance products have a

penetration of 2.4%. Non-life Insurance products

have a penetration of 0.7%. The industry blames

the poor remuneration system for this.

P Nandagopal, MD and CEO, IndiaFirst Life

Insurance says, “The average agency remuneration

is less than maybe Rs 5000 and that will not attract

the best of talent.”

Now the insurance regulator has stepped into

damage control mode. The IRDA chairman has just

relaxed the persistency norms to 50% from 75%

for insurance agents. Persistency ratio refers to the

quantum of active policyholders. The reduction

means it will be easier for agents to retain their

licenses and is a step towards keeping them in the

industry.

To boost participation, the chairman has also

proposed long-term agents can be promoted to

the advisory level.

R Kannan, Former Member, IRDA adds, “If the

agents also graduate to the higher platform, say Tier

I and II. From Tier II he will come to Tier I, then he

will be in a position to sell this kind of a

sophisticated product. Finally what is it, we are

looking for, we are looking for reducing the mis-

selling.”

The insurance industry is definitely going through

tough times. But with new regulatory reforms in

the pipeline, the sector is hoping to attract a lot of

agents back in the business.

LIC agents told to keep pace with changing

market Sep 23,2011. Coimbatore

“Life Insurance Corporation (LIC) of India as abrand is strong, but is in a state of flux in an emergingenvironment,’ observed its Executive Director(Marketing) Mr Roy Choudhury.

Delivering the inaugural address at the 9{+t}{+h}LUGI (Life Underwriters Guild of India)Convention, scheduled between September 23 and

25 at the Codissia Trade Fair Complex here, MrChoudhury called upon the delegates to keep pacewith the changes. ‘If agents are not suitably

equipped with knowledge, there cannot be anystandard in this industry,’ he said.

Hailing the dynamic agent force and the Insurance

Regulator’s role in ushering in new concepts in theIC 33 model, he said ‘such education andawareness would help advice clients better.’

He however conceded that as an organisation, theCorporation would need to look out and beyond.

“Lot of Corporate democracy is required in ourorganisation,’ he said without dwelling much on this.

Emphasising the importance of garnering the talent

pool to emerge stronger, Mr Choudhury said ‘thereis a need for managerial intervention to harness thetalent. There could be hiccups en route, but we need

to overcome this and influence the environment. Wewill have to move fast as there has been a totaldegrowth in the life insurance business. Though the

Corporation still holds a 72 per cent market share,we have lost some business to our competitors.Agents will have to trained strongly,’ he added.

The Corporation is proposing a national roll outtowards segmentation of the agency force fromOctober he said and explained that there were four

groups of agents such as Life Mitra to Life Adviser,Financial Adviser and Wealth Manager.

‘Today, chartered accountants, engineers and otherprofessionals are our agents and a good number ofthem are doing great job. It is therefore necessary

for us to redefine ourselves when we look at this.Confidence building is necessary for there is lackof confidence in our organisation,’ he said and urged

the participants to sell the products ethically, andwork towards strengthening the reputation of theCorporation and not ‘for image’.

‘Don’t misguide the policy holder,’ he said and urgedthem to work efficiently, effectively to ensure strongrelationship and emerge stronger

7


Critical illness cover to take care of home loan

repayment: The Insurance Regulatory and

DevelopmentAuthority

27 SEP 2011, ET Bureau

MUMBAI: The insurance regulator has asked

companies selling home insurance packages to

extend the scope of critical illness cover to include

home loan repayment benefit as well. A home

insurance package covers critical illnesses,

permanent total disability, loss of job and fire and

burglary.

The Insurance Regulatory and Development

Authority (Irda) asked insurance companies to add

the loan repayment benefit to critical illness cover

to make the home insurance product complete

collateral. The insurance regulator had recently

rejected home insurance packages filed by two

insurers on this ground.

“Irda has said the product should be designed in a

way that it is a collateral. The regulator’s concern

is that in case of critical illness only the cost of

treatment is paid while there are chances of loan

default,” said a senior executive of a large general

insurance company. At present, two

companies, ICICI Lombard and HDFC Ergo, offer

comprehensive home insurance packages that

insure the home, pay off the EMIs in case of a job

loss and provide cover for critical illnesses.

But the critical illness cover does not address paying

off the EMIs. “In case of permanent total disability,

which would be loss of two arms or legs, the loan

will be paid by the company,” said Amit Bhandari

vice-president-health underwriting and products,

ICICI Lombard.

There are certain illnesses such as cancer, heart

attack, stroke, paralysis, heart valve replacement

surgery and kidney failure, which are not part of an

individual’s health insurance policy and are covered

under a critical illness policy. The home insurance

part of the policy covers the loss to the structure

and goods at home. The jobloss policy ensures that

the loan EMIs are paid off.

Also, the total sum insured is paid to the insured in

case of death or permanent disability caused by an

accident. “We want any benefit of an insurance

product to go to insured and not to the financial

institution. Banks and other financial institutions have

their own surplus. Any nomination should not go to

FIs and there should be other ways of

securitisation,” said a senior Irda official.

CVC allows finance ministry to select LIC

chairman

Sep 30, NEW DELHI: Life Insurance

Corporation (LIC), the country’s largest investment

institution, may finally get to see a new chairman as

the Central Vigilance Commission (CVC) has

allowed the finance ministry to go ahead with the

selection process.

The ministry had put the selection on hold pending

a report from the CVC, which is investigating

corruption charges against two contenders for the

top post.

The CVC has told the selection panel headed by

the Finance Secretary RS Gujral that it would take

some time to complete its inquiry against former

chairman TS Vijayan and managing director Thomas

Mathew T. It has said that the ministry in the

meanwhile can seek clearance from the LIC’s central

vigilance officer on all the potential candidates and

proceed with the selection process.

“CVC has not cited any time frame and has asked

the selection committee to finalise a candidate and

then seek its clearance,” a member of the selection

committee said requesting anonymity.

LIC has been without a chairman since May when

the government refused to grant an extension to

Vijayan.

Vijayan and Mathew had come under a cloud in

the bribe-for-loan scandal involving LIC Housing

Finance. Separately, an internal panel appointed by

the finance ministry had found irregularities in

investments made by LIC in 2008 and 2009.

8


The selection committee, which has met twice so

far, will take a final decision next month. The

committee includes J Hari Narayan and CS Rao,

the current and former chiefs of Insurance

Regulatory and Development Authority.

CVC had recommended a probe by the CBI into

the investments made by LIC.

In July, the CBI cleared both Vijayan’s and

Mathew’s names in the LIC Housing Finance

scam.

CVC’s go ahead could put Vijayan and Mathew

back in the race for the top post, but officials say

they are unlikely to find support in the selection

committee.

“The internal committee set up by the finance

ministry had found some irregularities with the

investments made by the insurer. Considering this,

it is highly unlikely that the two (Vijayan and

Mathew) will get any support,” said a member of

the selection panel.

The other LIC officials in the fray are acting

chairman DK Mehrotra, executive director in-

charge of international operations Sushobhan

Sarkar and executive director (underwriting and

re-insurance) TT Mathew.

“Since there was no chargesheet filed by the CBI,

it was to ensure that every candidate is on an equal

footing,” a government official said.

Both the CBI and the CVC had not replied to ET’s

emails on the issue till the time of filing this report,

but two government officials confirmed the CBI

has said that it can’t fast-forward the selection

process.

CBI files charges in loans scam news

05 October 2011

The Central Bureau of Investigation (CBI) has filed

charge-sheets in the cash-for-loan scam against top

officials of state-owned banks and financial

institutions for having taken bribes amounting to

Rs1 crore to sanction loans.

The CBI charged Ramchandran Nair, former CEO

of LIC Housing Finance of having taken a bribe of

Rs16 lakh. Two other bankers, R N Tayal, former

general manager, Bank of India, and Venkoba

Gujjal, former deputy general manager of Punjab

National Bank, were also charged of having taken

bribes of Rs.45 lakh and Rs.25 lakh respectively.

Charge-sheets were also filed against employees

of Money Matters Financial Services (MMFS)

including Rajesh Sharma, chairman and managing

director, along with Sanjay Sharma and Suresh

Gattani, for having bribed the public sector bank

employees. Others who have been charged in the

case include Maninder Singh Johar, director,

Central Bank of India, and Naresh Chopra,

secretary, investments, Life Insurance Corporation.

According to the charge-sheet, the bank executives

sanctioned large loans to private companies,

including developers, ignoring mandatory conditions

for granting approvals, in collusion with the

employees of MMFS.

The CBI arrested the eight accused in November

2010, but all were released on bail. According to

the investigative agency, the executives of Money

Matters were acting as mediators and facilitators

for corporate loans and other facilities from financial

institutions.

Money Matters had hired as ‘independent directors’

retired top bankers and officials of LIC and LIC

Housing Finance. According to the CBI, Money

Matters facilitated loans from banks and financial

institutions to several private companies including

Suzlon, Adani, JSW Power, Pantaloon, Lavasa, DB

Realty, mantra Realty and JP group.

All the banks and LIC Housing Finance denied any

wrong-doing and said the loans were approved in

compliance with the relevant regulatory norms.

But the CBI probe revealed that there were

financial irregularities in most of the loans given

through Money Matters.

9


In some cases, loans were disbursed even though

the borrowers had surplus cash, in other cases,

interest rates were lowered. In a few cases, the

banks and other institutions extended loans even

without asking for the requisite security.

IRDA slaps Rs 5 lakh fine on HDFC Standard Life

Press Trust Of India

New Delhi, October 05, 2011

Insurance regulator IRDA on Wednesday

imposed a penalty of Rs 5 lakh on HDFC Standard

Life for delaying settlement of claim and has asked

the insurer to streamline its processes.

“Considering the nature of the violation, the

Authority has come to the conclusion that it is just

and proper to impose a penalty of Rs 5 lakh on

HDFC Standard Life Insurance,” the IRDA said

in its order.

It has also directed the private life insurer “to put

in place (within 15 days) effective claim settlement

procedures and take all such measures that deem

fit for both pro-active and timely settlement of all

types of claims.”

The order was issued on a complaint filed with

Insurance Regulatory and Development Authority

(IRDA) in April 2009 for delay in settlement of

death claims by HDFC Standard Life.

Upon investigation the insurance regulator found

that HDFC Standard Life did not have the effective

mechanism to comply with the IRDA regulation

for settlement of claims.

“On examining the documents and submissions of

the Life Insurer it is observed that the Insurer did

not have in place effective procedures to comply

with the above regulation,” IRDA observed.

Govt to decide on LIC chairman next week

Mumbai October 8, 2011

The impasse over the top job at the country’s

largest life insurer, Life Insurance Corporation

(LIC) of India, is set to end next week. The search

committee, headed by R Gopalan, secretary,

department of economic affairs, is expected to

interview the shortlisted candidates this Wednesday.

According to sources, the shortlisted candidates for

the chairman’s post include acting chairman, D KMehrotra, and four executive directors, SushobhanSarkar, A K Sahoo, T T Mathew and K B Saha.

The three managing directors, Thomas Mathew, AK Dasgupta and T S Vijayan, are not in contentionfor the top post.

The uncertainty surrounding the chairman’s post hashit the performance of the life insurer. Its first-yearpremium collection dived 28 per cent during the

first three months of the current financial year.

In 2010-11, of the Rs 125,826 crore collected by

the entire industry by selling new policies, LICcollected Rs 86,445 crore. LIC is also the largestinstitutional investor in the country and manages

assets worth Rs 12 lakh crore.

When contacted, an LIC official said there was noofficial intimation from the government on the next

chairman. Though there are no clear favourites,sources said Mehrotra, the most senior of the

shortlisted candidates, was leading the race. The

Central Bureau of investigation (CBI) is still

enquiring into investments made by the corporation

in 2008 and 2009. “T S Vijayan, former chairman,

and Thomas Mathew, one of the current managing

directors, have lost out,” said a source familiar with

the developments. Dasgupta is not in the running

for the post, since he is due to retire in January

2012.

Both Mehrotra and Sarkar joined LIC as direct

recruits in 1977, and have a little more than two

years of service remaining.

If Sarkar or any other executive director is

appointed the chairman, it would be for the second

time that an executive director would be directly

elevated to the position of chairman. The first

instance was when G N Bajpai was appointed

chairman of LIC in September 2000.

10


The uncertainty over the insurance behemoth’s top

position started after

T S Vijayan was denied an extension and appointed

a managing director, after his term came to an end

on May 2. Subsequently, Vijayan went on leave

and is yet to resume his duties.

As an interim measure, R K Singh, additional

secretary in the finance ministry, was given the

additional charge of LIC chairman, before D K

Mehrotra was appointed as interim chairman, first

for a three-month period on

May 27, and then again on August 26 for another

three months.

The primary reason behind the delay in the selection

process was the absence of clearances from the

Central Vigilance Commission, a prerequisite for

the appointment.

You can be jailed for default in fund transfer

via ECS BUSINESSLINE

HYDERABAD, OCT. 8:

If you pay your loans through the electronic clearing

service, you better ensure there is sufficient fund in

your account.

Else, you can land up in jail, according to a latest

circular from the Reserve Bank of India.

Increasingly, people are opting to repay loans or

other financial commitments electronically by giving

a mandate to banks for monthly deduction from

their accounts on a specified date instead of giving

post-dated cheques. But many of these

commitments are apparently not being honoured

as there is no clarity on the punishment.

However, in a circular sent to banks a couple of

weeks ago, the apex bank communicated that the

same set of rules against dishonour of cheques,

according to Section 138 of the Negotiable

Instruments Act, 1881, would apply for dishonour

of electronic fund transfer instruction.

“Section 25 of the Payment and Settlement Systems

Act, 2007 accords the same rights and remedies

to the payee (beneficiary) against the dishonour of

electronic funds transfer instruction as are available

to the payee under the Negotiable Instruments

Act,’’ the RBI said.

IMPLICATIONS

The implications of this circular for individuals and

banks are significant.

“This is a welcome clarification as it brings parity

between cheque-based payments and electronic

fund transfers,’’ Mr Nagesh Pydah, Chairman and

Managing Director, Oriental Bank of Commence,

toldBusiness Line.

According to a senior official of Andhra Bank, many

loan repayments through ECS mandate submitted

to a bank are regularly dishonoured while maximum

care is taken to honour post-dated cheques.

Most of these commitments are not being honoured

as there is no clarity on punishments prescribed

legally till now while remedies are available for

dishonour of cheques.

“As a result, banks are also collecting a few post-

dated cheques even for electronic funds transfer

commitments,’’ said an HDFC Bank functionary.

MORE TEETH TO BANKS

“The RBI’s circular will give banks more teeth to

ensure that the repayments through electronic mode

would be more regular,’’ he added.

Bombay high court asks IRDA to frame

guidelines for settling claims Oct 7,2011

The Bombay high court yesterday asked the

Insurance Regulation and Development Authority

(IRDA) when guidelines would be framed for

settling insurance claims.

A division bench of chief justice Mohit Shah and

justice Roshan Dalvi directed the insurance

regulator, while hearing a public interest litigation

11


(PIL) filed by social worker Gaurang Damani

highlighting the hardship faced by 5.50 crore

consumers of medical insurance - especially, after

Third Party Administrators (TPAs) stopped offering

cashless mediclaim benefits.

According to Damani there were no standard

guidelines for settling insurance claims and it was

largely left to the TPA.

Damani argued that TPA was not entitled to settle

claims, but had been doing so in several cases as it

received financial incentives. He added there was

an element of discrimination in settling claims of

individuals and of corporate clients.

The PIL contends that problems started with the

sudden stoppage of cashless mediclaim benefits to

consumers by public sector insurance companies

acting through TPAs.

According to government data, insurance

companies on an average, collect Rs11,000 crore

as premium, annually, whereas the policies are

worth over Rs26,000 crore.

‘’The IRDA will soon come out with substantial

regulations specifically for health insurance sector,’’

Paritosh Jaiswal, counsel for the regulatory authority

informed the division bench. The counsel said he

would inform the judges on 17 October, when theseregulations would be ready.

In his PIL, Damani contended that till date healthinsurance had not even been classified as a lifeinsurance or non-life insurance.

According to Damani, there were absolutely norules stating how and in how much time shouldclaims be cleared. He added that no guidelines hadbeen framed by the IRDA.

Damani said third party administrators (TPAs) wereenjoying discretionary powers in settling claims andthey sought to reduce the claim to the minimum asthey were given financial incentives for reducingclaims, which hurt ordinary consumers.

He said the TPAs had virtually become de-factoarbitrators in settling the claims.

Jaiswal denied allegations that cashless facility waswithdrawn in July 2010, saying the facility wasnever withdrawn and 170 nursing homes andhospitals continued to offer the facility in the city.

Damani, however, said the number was negligiblewhen compared to 1,500 nursing homes andhospitals, which had withdrawn the cashless facilityto insured patients.

The PIL will now be heard further on 17 October.

Please send photos and matter for publishing to our

e-mail id : [email protected]

This will ensure prompt attention

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12


Organisational CommunicationsText of SMS send by Secretary General

11.10.11 : LIC Board clears PLLI of minimum 2% at Corporation level performance. For all offices with

performance less than Corporation level, PLLI minimum 1%. If performance is better than

Corporation level, then PLLI more than 2%.

06.10.11 : Wishing you and your family a very Happy Dussehra

04.10.11 : Tirunelveli Divisional EC which was held yesterday co-opted Com.P.Sugumar (Ph.9487877877)

and Com.K.Prasad as President and General Secretary respectively. NF wishes them the

very best in their assignments.

30.09.11 : The discussions were held on 29th Sept at Central Office on GOIB review. The concerns for

improvement of business was placed by Managemnt and has offered some minor changes. We

have informed that our concerns are not addressed and far away from our requirements. We

have called upon the Managemnt to examine our reasonable demands and settle the review of

GOIB favourably. Today the team met CNC on the issue and impressed the need to address

the concerns placed by NFIFWI. The CS meeting was held, analysed the proposal and

consolidated our stand, direction for a favourable IB scheme. We have decided to press for

urgent solution on some of the pinching issues of Meal coupon, car norms, Table-chair for all

D.Os. Await for details.

24.09.11 : Management has invited NFIFWI for discussions on 29th of Sept 2011. Kindly await further

information.

23.09.11 : We agree and understand the anger and reaction on the IB proposal. Kindly wait for the next

meeting expected on 29th/30th Sept. We have placed our views very reasonably and strongly.

CS members are requested to be ready for CS meeting on 30th tentatively.

20.09.11 : We regret to inform the sad demise of father of Com.Gyanendra Pratap, Div Sec. Lucknow.

He has passed away today after a prolonged illness. We express our deepest condolences to

the bereaved family. We share the grief and pray to God to rest his soul in peace and give

strength to the family to bear this irreparable loss.

17.09.11 : Management has given the IB proposal with no major changes but only minor changes in

additional incentive points and a 50% growth condition to reduce gradation. The proposal has

not redressed our concerns in any aspects. We have informed that this proposal is not acceptable

to NF and hence demanded to review the proposal. We have discussed all the points in detail

and called upon the Management to consider our points and give us a reasonably improved IB

proposal. Our major concerns of Graded credit, Growth, Expenses in the form of expenses,

Eligibility, removal of “No Man’s land” in all conditions, increased quantum needs to be adressed

.Management has proposed to meet again on 29th or 30th of Sept. Kindly await details.

16.09.11 : Management has issued circular for Unit meeting for Dev Officers from 20th September to

20th October. Conditions are same as last year.

13


THE Planning Commission’s recent affidavit to the

Supreme Court stating that a person is to be

considered ‘poor’ only if his or her monthly

spending is below Rs 781 (Rs 26 per day) in rural

areas and Rs 965 (Rs 32 per day) in urban areas,

has exposed how unrealistic ‘poverty lines’ are.

Some television channels assumed that these figures

covered food costs alone and showed how they

could not meet even minimal nutrition needs at

today’s prices. These paltry sums, however, are

supposed to cover not only food butall non-food

essentials including clothing and footwear, fuel for

cooking and lighting, transport, education, medical

costs and house rent. The total is divided Rs 18/Rs

14 for food and non-food items in towns and

similarly Rs 16/Rs 10 in rural areas, and includes

the value of food that farmers produce and

consume themselves.

EXERCISE IN PREVARICATION

Even a school child knows that working health

cannot be maintained, nor necessities obtained, by

spending so little. Amazingly, however, 450 million

Indians subsist below these levels. One cannot say

that they ‘live’ in any true sense: their energy and

protein intake is far below normal; they are

underweight, stunted, subject to a high sickness

load but without the means to obtain adequate food

or medical treatment. The majority belong to the

scheduled castes and scheduled tribes. The official

poverty lines do not measure poverty any more;

they measure destitution. The present outcry

against calling these destitution lines ‘poverty lines’

is justified, for true poverty lines are much higher

than these, and show 75 per cent of all persons to

be poor. Per head energy and protein intake has

been falling for the last two decades as the majority

of the population is unable to afford enough food.

With 60 million tonnes of public food stocks, far in

How Little can a Person Live on Today?

Utsa Patnaik

excess of buffer norms, piled up by mid-year, the

sensible policy is to do away with targeting and revert

to a universal public distribution system, combining

it with an urban employment guarantee scheme.

Unfortunately the neo-liberal policy makers today

ask the wrong question: How can we reduce the

food subsidy?, and not the right question: How can

we lift the masses of India from the current level of

the lowest food consumption in the world, even

lower than the least developed countries?

On Tuesday, October 5, the Planning Commission

members met the press to answer searching

questions on its very low poverty lines. It turned

out to be an exercise in prevarication, in misleading

the public. To questions on what exactly was the

income or spending cut-off above which benefits

from various schemes would not be available, the

answer was that benefits were not linked to the

official poverty line; one member said that far larger

numbers actually had BPL cards than the numbers

below the Commission’s poverty line. He did not

clarify the true state of affairs, that the central

government determines not only food allocation

from the central pool to the states on the basis of

the Commission’s grossly underestimated state

poverty lines and BPL percentages but financial

allocations for all other schemes like RSBY

(Rashtriya Swasthya Bima Yojana) as well. It is a

totally different matter that individual state

governments, finding the central government figures

of poverty absurdly low, have squeezed funds out

of state budgets to extend these schemes to cover

larger numbers of the actually poor. Had they not

done so there could be starvation and even greater

distress in many states by now. So it is no thanks to

either the Planning Commission’s ridiculous poverty

percentages or the central government which

accepts them, that these welfare schemes actually

reach some more people.

14


MISTAKE OF METHOD

Members of the Planning Commission and the

Tendulkar Committee are experts, so how have

such laughable figures of the minimum cost of living

emerged from their statistical labours? The fact is

that over thirty years ago the then Planning

Commission made a mistake of method, and the

present Commission stubbornly continues to cling

to that mistake despite its being repeatedly pointed

out by many, including this author (The Republic

of Hunger, 2004). The mistake was to change the

definition of poverty line and delink it from nutrition

standards.

The original definition of ‘poverty line’ was a

sensible one, based on an Expert Committee

recommendation in 1979. The National Sample

Survey data on consumption spending give 12

groups of persons ranging from the poorest, smallest

spenders to the richest, highest spenders. The

definition was that particular observed level of

total monthly spending per person is to be called

the ‘poverty line,’ whose food spending part

allowed a person to obtain 2400 kilocalories

energy per day in rural and 2100 kilocalories

energy per day in urban areas. Later the rural

figure was scaled down to 2200 calories. Both

nutrition norms are modest. The Commission

accepted the Expert Committee’s nutrition based

definition but applied it only once, to the 1973-74

data, to obtain correct monthly rural/urban poverty

lines of Rs 49/Rs 56 at which 2200/2100

kilocalories were accessible, and found that 56 per

cent of rural and 49 per cent of urban persons spent

less than this, and so were poor.

Then the Commission, for reasons unknown,

changed the definition in practice, and never again

directly looked at the total monthly spending which

permitted nutrition ‘norms’ to be maintained, even

though every five years the required information on

this for every spending level was available – the

physical quantities of food intake, and the

corresponding daily average energy, protein and fat.

The definition the Commission actually adopted was

that the 1973-74 poverty lines were to be adjusted

for inflation using a price-index, regardless of whether

the lines so obtained still allowed nutritional

standards to be met. The 1993 Expert Committee

opted to continue with this mistaken method. Price

index adjustment is being followed for the last more

than thirty years (including after the minor

modifications to the rural poverty line suggested by

the Tendulkar Committee) and has produced the

present absurdity of Rs26/32 as rural/urban daily

poverty lines.

UNREALISTIC ESTIMATES

Why these economists should have such faith in the

ability of price indices to capture the rise in the cost

of living is not clear. Price indices are needed for

short period adjustment and are used for dearness

allowance calculation, but they do not reflect the

actual rise in the cost of living over longer periods of

time. This fact is of great importance for all labour

unions and occupational associations. As an example

from personal experience, the starting gross monthly

salary of an associate professor in a central university

in 1973 was Rs 1,000 which was quite adequate,

since ration cards could be used; on this income one

could even run a car. Applying the Consumer Price

Index for Urban Non-Manual Employees which has

risen 17-fold by 2011, the equivalent monthly salary

for an associate professor joining now should be Rs

17,000 on the Planning Commission’s logic. But this

would not support the most modest middle-class

life-style of four decades earlier. The newly appointed

associate professor’s actual salary today is three

times higher, thanks to the Pay Commissions which,

every ten years, have hiked salary grades.

15


Yet denying all experience and evidence, these

economists assert that mere price index adjustment

is enough to obtain current poverty lines from those

of 40 years ago. No wonder they have created

such a mess with their unrealistic estimates. An

expressive rustic Bengali phrase is ‘lyaje-gobare’

or a ‘cow’s tail smeared with dung,’ and this

describes well the official estimates. As time passed,

the actual spending at which minimal nutrition could

be accessed, the original definition accepted by the

Commission, cumulatively diverged upwards from

the Commission’s calculations based on its

changed definition. By 2005 a rural person needed

Rs 19 per day spending on all items to access 2200

calories from its food spending part, while at the

official Rs 12 per day poverty line, she could obtain

only 1800 calories. (The Tendulkar Committee

merely tinkered with the problem, raising the Rs

12 to Rs 13.80.) An urban consumer needed Rs

33 per day in 2005 to meet 2100 calories whereas

the official Rs 18 permitted less than 1800 calories.

Today at the current official poverty lines of Rs 26/

32 rural/urban, the minimal cost of living is even

more seriously understated: the consumer can

access even less food. State poverty lines vary and

in a number of states the energy intake the official

poverty line can command, is below 1500 calories

per day.

FALSE CLAIM

The claim that poverty has declined is false because

the method of indexation actually used has not kept

constant the nutritional standard against which

poverty is measured, but has lowered it continuously

and, by now, substantially. We cannot accept a

claim by a school that the percentage of students

failing has fallen over time if we discover that the

pass mark has been lowered substantially, and at

the original pass mark more people have actually

failed. For any valid comparison the standard has to

be held unchanged. The Deputy Chairman of the

Planning Commission, in the October 5 press

conference, referred to the calculation by a member

using the ‘Tendulkar Committee methodology’ which

showed decline in the poverty percentage between

2004-05 and 2009-10. This claim of decline in

poverty over the last five years is as false as all

previous claims by this and earlier Commissions that

poverty had declined, because at its 2009-10 official

poverty lines the same consumption standard is not

maintained as at the 2004-05 poverty lines; a

lowering of the standard is entailed. Actual poverty,

measured by keeping the standard unchanged, far

from declining, has increased and a much higher

proportion of our population by 2009-10 was unable

to reach the modest nutrition standard, compared

to five years earlier. This is hardly surprising given

the twin impact of global recession from 2008 and

severe drought in 2009-10. Per capita food grains

consumption for all uses in India by 2008 touched

the lowest level in the world, lower than the average

for Least Developed Countries.

China’s official poverty lines are equally absurd, and

for the same reason as in India. A nutrition norm was

applied in 1984 to obtain a correct 200 yuan annual

rural poverty line which thereafter was merely

indexed, giving 1067 yuan by 2007, or below 3 yuan

per day. This is supposed to cover all living costs

but would not have bought even a single kilogram of

the cheapest rice, selling then at 4 yuan according to

information provided by residents in China. Actual

poverty in China is far higher than is officially claimed.

One

NEWS BULLETIN THANKS

ALL WHO CONTRIBUTED TO THIS ISSUE

l l l

16


CASH ACCEPTANCE THRESHOLD

Ref: IRDA/F&I/CIR/AML/231/10/2011 Date: 05-10-2011

AML/CFT Guidelines

Insurance sector has entered into sixth year of effective AML/CFT regime. In this context, extant AML/

CFT guidelines to the insurance sector are being reviewed to assess the need for changes to facilitate Risk

Based Approach. Due consideration is placed on the threats posed by the money laundering/terrorist financing

vulnerabilities in the insurance sector.

The following modifications are therefore being advised to AML/CFT guidelines (References of Master

Circular 2010 dated 24th September 2010):

Acceptance Stage:

Clause 3.2 (ii) on Monitoring and Reporting of Cash Transactions shall be replaced with the following

stipulations:

a) With a view to ensuring that premiums are paid out of clearly identifiable sources of funds, it

has been decided to permit premium/proposal deposits remittances in cash beyond ‘50000/-

per transaction subject to the customer quoting PAN. Insurers shall verify the authenticity of the

details of PAN so obtained.In case of customers not required to have PAN orwith only agricultural

income, Form 60/61 prescribed under the provisions of Income Tax Rulesshall be obtained.

b) From the perspective of AML/CFT guidelines, it becomes imperative to obtain the details of PAN of the

person/entity funding the premium/proposal deposit on an insurance policy.

c) Any cash transaction above ‘10 lakh and integrally connected cash transactions above‘10 lakh per

month shall be reported to FIU-IND by 15thof the succeeding month

d) Insurers shall lay down proper mechanisms to check any kind of attempts to avoid disclosure of PAN

details. In case of possible attempts to circumvent the requirements, the same shall be reviewed from the

angle of suspicious activities and shall be reportedto FIU-IND, if required.

Payout Stage:

Clause 3.1.6 (i) shall read as under:

In life insurance business, no payments should be allowed to third parties except in cases like superannuation/

gratuity accumulations and payments to legal heirs in case of death benefits. Payments in all cases shall be

made after due verification of the bona fide beneficiary. Payments exceeding ‘10000/- per claim should be

made through account payee cheques, electronic payment methods such as ECS, NEFT systems approved

by the Reserve Bank of India.

The above stipulations are effective from 1stNovember 2011. Insurers are advised to note the same for

compliance.

Sd/-

(R.K. Nair) Member (F&I)

17


PERSPECTIVEFrom the Secretary General’s Desk

NFIFWI/ 43/ 2010-127th October 2011

The ChairmanLife Insurance Corporation of IndiaCentral Office, ‘Yogakshema’Mumbai – 400 021

Ref: Discussions held on 18th January 2011, 13th

July 2011, 17th September 2011, 29th September2011 on Review of “Growth Oriented IncentiveBonus Scheme 2004 and 2007 and Proposal forGOIB review

Dear SirThis is further to our earlier letters with

regard to the “Review of GOIB Scheme 2004”and “Review of GOIB 2007 bearing the followingreference numbers

NFIFWI/ 09 /2007-08 dtd 31st July 2007NFIFWI/ 14/2007-08 dtd 14th November 2007NFIFWI/ 15/2007-08 dtd 15th November 2007NFIFWI/ 06/2008-10 dtd 14th June 2008NFIFWI/ 09/2008-10 dtd 1st September 2008NFIFWI/ 12/2008-10 dtd 8th September 2008NFIFWI/ 19/2008-10 dtd 9th January 2009NFIFWI/ 37/2008-10 dtd 7th October 2009NFIFWI/ 38/2008-10 dtd 7th October 2009NFIFWI/ 43/2008-10 dtd 05th February 2010NFIFWI/ 07/2010-12 dtd 27th March 2010NFIFWI/ 17/2010-12 dtd 27th July 2010NFIFWI/ 23/2010-12 dtd 14th October 2010NFIFWI/ 30/2010-12 dtd 18th January 2011NFIFWI/ 32/2010-12 dtd 22nd March 2011NFIFWI/ 38/2010-12 dtd 06th May 2011NFIFWI/ 41/2010-12 dtd 9th July 2011 andNFIFWI/ 42/2010-12 dtd 17th August 2011

We had been continuously representingthrough the above letters in the matter of Reviewof GOIB scheme which was unilaterally imposedin 2004. The discussions were held on 18th January

2011, 13th July 2011, 17th September 2011, 29th

of September 2011 on Review of “Growth

Oriented Incentive Bonus Scheme 2004 and 2007.

We were happy to note the various suggestions put

forth by Management for favourable review of the

Incentive Bonus scheme to be effective from

1.9.2010 on the 18th January 2011. These points

included graded credit impact, modifications of No

Man’s land in Eligible premium, No. of Lives,

Productive agents, taking care of non IB earners,

growth element, recruitment and retention of agents,

review of FCA, floor level of 5 times for incentives,

meeting expenses in the expenses form, non

deduction of ULIPs lapsation etc.

Management had stated on 18th January

discussions that for the healthy growth of the

Corporation we want to ensure something for every

D.O rather than huge benefits for some. We

appreciate this line as sustaining a Development

Officer in the initial stages and at performance levels

of cost norm is very important. Many of the

Development officers amongst the the large chunk

of Development officers performing upto Rs.1 crore

SFYPI are non incentive earners and not even paid

expenses. The vast majority of D.O’s need to be

supported and motivated with adequate expenses

and good Incentive scheme. This is required to push

the large number of D.Os to higher levels of

performance in a reasonable manner which is the

real asset of the corporation. The American

philosophy based business decisions which has

ruined the economy has been losing ground. The

“Occupy Wall Street” protests which is a reflection

of the growing frustration is spreading across the

globe. The business models based on such

philosophies should not be imported into LIC. In

LIC the business model prior to 2004 which was

taking care of the entire marketing force was very

successful.

The review of GOIB scheme 2004 which

was imposed unilaterally had been discussed at

length. The NFIFWI has been giving various

suggestions for review of the GOIB Scheme 2004

and 2007 continuously. We have given our feedback

to Marketing Department led by ED (Mktg) that

many areas of grievances are left out without

18


redressal and even the assured points have not been

favourably redressed. There needs to be a lot of

further improvements based on logic, reason and

fairness on the offers made to redress the grievances

and meet our basic requirements.

The discussion and offers made on 29th of

September 2011 in the Review of the GOIB is not

redressing our grievances and not meeting the basic

requirements of the Development Officers for life

insurance marketing duties. The improvements

offered in the area of Graded credit for getting

higher credit is unreasonable and very steep thus

making it impractical. We call upon the management

to further improve the offers on the following major

areas as well as the other minor points.

1. Effective Date & Growth element: We have said

that the effective date has to be 01.09.2010. The

proposal of the effective date as 01.09.2011 is

not acceptable and is contradictory to the

assurance of the management and government.

The proposal to withdraw the exemption of

Growth requirement for Development Officers

performing at Cost ratio of up to 8% is unjustified.

In Growth element there should not be any

debits. We request you to introduce a incentive

for Growth. Every year we have to bring in new

business and Growth should be a point for

incentive only. We have suffered because of the

recession, natural calamities and terrorism in

states like Jammu and Kashmir, the latest being

the menace of Maoists in many places. Growth

cannot be continuous for a Development Officer

as the performance is dependent on agents who

are also being diversified by the management

itself. This is apart from the external factors of

Industry, Regulators, Economic scenario and

Market conditions.

2. Graded Credit: In gradation, we have been

representing for the “removal of the unjustified

gradation”. The management had stated that the

issue of Graded credit can be done away with in

a phased manner. In this context we have urged

the management to remove the Graded credit

or scale it down to 100 – 95 - 90 (for up to

10yrs, 11 to 15 years and above 15yrs) along

with opportunities for removal of gradation with

reasonable qualifying condition. The insurance

market is a dynamic one and especially in a

competitive market the agent requires a permanent

coach which is in the form of a Development

Officer. The statistics of the agency force shows

that seniority of an agent does not guarantee

performance by the agent. We also need to insulate

the agent from being poached or diversified to

maintain the agent as an asset of the Corporation.

This concept was accepted when the management

had revisited the agency allotment circular. In

order to reduce the agents termination and give

them support to perform better, all agents who

are performing upto Rs.5 lakhs FYPI irrespective

of their service period are made allotabe. Here

again the limit of Rs.5 lakhs FYPI is a bone of

contention but the principle of “seniority of an agent

does not guarantee performance by the agent”

has been accepted. When management has

appreciated and accepted the fact that any agent

irrespective of the service period and

performance, needs the support of the

Development Officers for sustenance and better

performance, there is absolutely no logic for the

element of “Graded Credit” which is only to

reduce the already reduced premium credit

(SFYPI). We request you to kindly review the

Graded system of credit and grant full credit for

all business done by all agents.

The management should stop diversification of the

professionally developed club member agents as

CLIAs. Even encouraging appointment of their

spouse and children as their supervised agents to

divert business for earning more commission is

unethical. This is in violation of the accepted

principle in the guideline of IRDA on appointment

of relatives as agents. This is also inflicting losses

to the Corporation at the cost of creating conflicts

in the well groomed units of Development

Officers. This has to be stopped in the interest of

the Corporation and to give confidence to the

Development officers.

3. Quantum: Quantum needs to be further increased

with a higher percentage for calculating basic IB

19


and incentive to be payable for Premium over

Five times the annual remuneration ofDevelopment Officer in appraisal year. Thelater slabs should be seven, nine, ten, elevenand twelve times. The number of slabs can bereduced to 4 or 5 by clubbing the later slabs.

4. Expenses in the form of Expenses: Theexpenses for additional conveyance andmarketing/procurement expenses should bepaid amounting to roughly around 7% to 8%and the balance as incentive. In GOIB 2007,management has accepted the requirement ofexpenses and certifying 10% as ACA and 10%as Procurement expenses. This should beraised to 20% each. The nomenclature shouldbe such that we can claim tax exemption asper section 10(14) of IT Act or payments byvouchers. The ACA has to be paid to everyDevelopment Officer based on the PremiumIncome brought in. The non payment of ACAand marketing expenses and drastic reductionof incentives has diluted the aggressivemarketing of the field force.

5. No Man’s Land and Eligibility: The floor leveleligibility is 15% which should be increasedas per the provisions in Special Rules 1989and any performance above the prescribedcost should be incentivised and expenses paid.The “No Man’s Land” in various conditionsshould be removed. We call upon you torestore the past agreement in lieu of secondyear lapsation (i.e FCA, Insurance & RoadTax should not be costed + Reimbursement).Incentive and Expenses should be payable toall working at 20% cost. There should not beany lapsation taken for ULIP policies. Alsothe natural lapsation of policies should not betaken. This concept has already been acceptedby the management in the agents clubmembership rules.

In other areas of the GOIB Scheme thefollowing issues needs to be addressed

1 In additional incentive for D.Os above 11 yearsservice, NFIFWI strongly objects theintroduction of the new element of calculatingcost on the Qualifying Premium. This is unfair

and deviation from the basic norms of working.

2 For Non incentive earners we have said that

the ACA and Expenses should be paid for the

appraisal year at the end of the appraisal without

taking into cost and the condition of net agency

addition should not be there.

3 Incentive to manage large agency unit should

be an incentive to manage agency unit and all

D.Os should be paid this and the amount should

be adequate as every D.O has to manage agency

unit whatever be the size of unit.

4 The number of lives should be reasonable as

there should not be overload on the D.Os which

will result into non quality supervision in selection

of lives and incidence of negligence in writing

MHR. The new Persistency norms byIRDA

does not encourage high benchmarks for number

of lives as it will lead to lapsations.

5 The minimum number of agents should be kept

at 25 and other conditions in recruitment should

be simultaneously modified. The condition of

“Net Agency” for various aspects should be

replaced by Agency recruited.

6 Corrections in some of the administrative

instructions, calculation procedures and

programme. Rectification of the calculation of

lapse of policies done by agents above 11years.

Apart from this our representation for increased

Fixed conveyance allowance of at least 200 litres

of Petrol at base level has not yet been considered.

The steep increase in petrol/diesel prices has made

travel on duty very expensive, difficult and

impossible. The insensitivity of the management

towards this issue is very painful.

Management adopted different business model

from 2004. Management had said that LIC will

advertise & implement professional strategies

strongly which will increase the business

automatically. Hence expenses and incentives has

been reduced. In reality situation is different.

Management had strategically marketed ULIPs

very aggressively from 2004 onwards. Today the

analysis is that ULIPs have been eroding

policyholder’s trust, Agents who were focused on

ULIPs because of the pressure by Branch

managers, Divisional, Zonal & Central Office

20


authorities have lost confidence in the market and

shying away from facing policyholders. We

appreciate the management shifting focus to

conventional insurance policies, selling insurance,

relationship building, back to basics etc etc.

The reimbursement for unit meetings to D.Os which

was performance oriented were stopped and

instead Branch Managers were directly conducting

agents meetings without condition of ensuring

performance. Agents were being forcefully guided

by BMs & ABM’ to satisfy their competition

conditions. We appreciate the decision for payment

for unit meeting expenses which has to be a regular

scheme.

Unethical recycling of business through forced

surrenders, diversion of agents as CLIAs and

diversion of agents business through spouse-

children agency has adversely affected LIC and

caused damage to the most successful channel of

D.Os & tied Agency system. Added to this is the

unreasonable Minimum Business Guarantee of

Rs.1 lakh FYPI in a country where poverty line is

fixed at Rs.32 per day. This has lead to huge

termination of agents whereas agency world over

succeeds on trial & error method only.

Management has had hands on experience through

Career agency system, direct agency system, Banc

assurance, corporate agents etc. The harsh and

difficult recruitment conditions by IRDA is making

things more difficult in a country where anybody

irrespective of qualification can even become

ministers and rule the nation.

The brand LIC has slipped from the most

TRUSTED brand position, thanks to the aggressive

focus on ULIPs, publicity of the CBI cases of

corruption against LIC’s management and

mismanagement of issues. The drastic reduction of

bonus is doing harmful rounds raising fingers at the

investment practices. The Development Officers

are trying hard to retain the agents and boost their

confidence levels in the wake of the above

mentioned difficult atmosphere .

Without payment of expenses and appropriate

incentive package, it is impossible to work

aggressively and meet high target levels to fight

competition. Sir, the Development officers are your

aggressive foot soldiers who needs to be fuelled

properly and adequately. The attempted business

model of GOIB 2004 has been showing up the

negativities for quite some time. When the

management has experienced the realities and

shifted focus to conventional business and given

the clarion call of “Back to Basics” it is high time

to shift to the remuneration structure for D.Os prior

to 2004 which ensured qualitative and inclusive

growth. Experimenting with business models, the

Nation and Government lost out on UTI and Air

India.

The performance in 2007-08, 2008-09, 2010-11

and the current financial year has helped us to

substantiate that there cannot be an automatic

growth due to competition, which was being stated

as a logic for the drastic reduction of incentives

and non payment of expenses. Sir, you will agree

that life insurance marketing is a relationship

oriented marketing requiring lot of leg work and

nurturing. This necessitates the remuneration

structure of adequate expenses and encouraging

incentives. This is required to sustain and grow LIC.

We have been aggressively working ensuring

excellent productivity keeping aside all the

grievances in the GOIB scheme. We have been

hopefully awaiting the settlement of our grievances

as assured by the management. But, the proposal

for review given is not only disappointing but breach

of trust and confidence. We once again call upon

the management to settle all our issues some of

which are more than 6 years old.

We urge upon you to personally intervene in the

matter and give us a satisfactory solution to resolve

the issue of Review of GOIB amicably thereby

motivating the Development Officers and ensuring

that LIC regains its dominant position. We sincerely

look forward to a favourable solution at the earliest.

With best wishes and regards

Yours sincerely

R.Jayprakash

Secretary General

OBITUARY

Red Salute Comrade Aravindakshan

Com.M.Aravindakshan ( 75y ), Former Zonal President, South Zone breathed hislast on ) 4 Sep 2011, during the Divisional General Body of Coimbatore Division at Erode. Asoft-spoken and committed member, he was always a guiding figure for NFIFWI.

Starting his career fro the pre-nationalisation era, he joined as a Stenographer in theUnited India Insurance Company, in his father place who had expired in service. His skill inhigh speed stenography and deep knowledge in English, soon caught the eyes of higherofficers. Subsequently, he changed roles and became a Field Officer. From then on, hebecame very active in National Federation. He was General Secretary of the then UndividedMadras Division. He was very sincere, dedicated and a National Federationist to the core.

His ability to convince, inspire and control the membership was really seen to bebelieved. During an agitation under his leadership, when 1200 Development Officersmarched all the 13 floors to meet the Zonal Manager,it was only his control over themembers that not even a paper was displaced or not a glass broken. He was also the movingforce behind the Federation Office at T.Nagar,Chennai

Agood negotiator, he loved National Federation, he loved his members and he lovedLIC. Like a true soldier of the National Federation, he also breathed his last at a Federationvenue in the midst of his Comrades.

Red Salute Comrade Aravindakshan.

th

Edited, Printed and Published by : R. Jayprakash, Editor, News Bulletin of Insurance Field Workers of India on behalf ofNational Federation of Insurance Field Workers of India

from Kalvit Bhavan, S3, 2nd Floor, Capital Heights, Opp. RSP Office, Plamoodu, Pattom P.O., Trivandrum - 4Printed at SB Press, Trivandrum

Licensed to post without pre-payment : KL/TV (N)WPP/166/2010-12

National Executive Committee Meeting on13,14 and 15th of September 2011 at Amritsar, North Zone

Flag hoisting by National President

The dias at prayer

NEC delegates at the meeting

Secretary General garlanding the photo of Com. S.W.Kalwit

Secretary General addressing the meeting

NEC delegates at the meeting

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