The debate on privatisation

Case study of the Life Insurance Corporation of India

AIITEU Research Team on Social Issues

A brief history of life insurance in India

• The first insurance company in India ever recordedwas Oriental Life Assurance Company which was established in Calcutta in 1818.
• It initially covered life security benefits of Europeans (the ruling class at the time) only. Although later privileged Indian citizens were included, the monthly installment rate for Indian citizens was much higher than that of the British Indian citizens. As a result, it was not possible for the working class under colonial rule to afford life insurance.
• Later in 1870, the first Indian venture in the Insurance sector, “Bombay Mutual Life Assurance” started its business and provided life coverage without racial discrimination.
• In 1906, Surendranath Tagore from Jorasanko Tagore House started an insurance company. But the insurance installment rates for both companies was too high for the Indian working class to afford.
• In 1912, the Life Insurance Act and the Provident Fund Act were passed in British-occupied India. But even then, in terms of premiums and coverage, private life insurance companies were guided by unwritten policies of ethnic inequality and racial discrimination.
• Post independence, in 1955 Feroze Gandhi first raised the issue in the Parliament of embezzlement by the faulty stock of a private insurance company. This is the first ever recorded financial corruption in independent India. The villain of this fame was a business magnate from Calcutta, Mr. Ramakrishna Dalmia. At that time, the scam summed up to around Rs 1.2 crore. Later Ramakrishna Dalmiya was sentenced to 2 years imprisonment. Of course, he spent all his time in the hospital on the pretext of being physically ill.

Public Sector Vs Private Sector

The main goal of a private company is profit, whereas the main goal of a government company is public service.

The bulk of the profits of a private company are confined to the governing body or management authorities of the company, whereas the profits of a state-owned company can be reused by the state for the benefit of the state and the public interest.

It is often said that privatisation creates a corruption-free system or service and is capable of providing improved services at a lower cost due to competition among many private institutional partners in the market. ‌If this were true, then private health or education would have brought a revolutionary change in India. In fact, just the opposite has happened. The privatisation of education and health has made these services unaffordable in both cases, resulting in a large number of financially backward people and socially deprived groups in India failing to avail these basic rights of citizenship.

A private sector company always tends to increase profits, hence it always needs a larger market base. To pump up the insurance market, artificial social uncertainties, insecurities or problems can be introduced to our nation through mass propaganda sponsored by private companies.

Historically capitalism has always had a certain type of development. Although capitalism first highlights the lucrative aspects of a competitive market, the main purpose of these capitalist organizations is to increase personal profits by establishing a monopoly by abusing the political power of the state through influence and corruption. A good example of such a scenario is available in the telecom sector market where the government itself is promoting a privately owned network connection service.

Privatising Profits & Socialising Losses

The Central Government of India has emphasized on the decentralisation of Indian government agencies as a corrective measure to stem the decline of the Indian economy following demonetisation. Profitable public companies like ONGC, Bharat Petroleum are also going into private hands, while government financial institutions like LIC, SBI are being pushed forward to make up for the losses incurred due to financial corruption in IDBI or YES Bank, resulting in a drop in interest percentage for public users.

This process of privatisation of profit and constantly socialising the loss and risks will soon lead to a crisis among the middle and lower middle classes, resulting in a complete rupture of the Indian economic distribution model.

What is to be done?

The decision of allowing FDI in LIC will act as a catalyst in bringing back the ghost of inequality and financial corruption in India among the working class. It should be kept in mind that the financial budget of the country, which has been created for 130 crore people this year, is less than the total capital of 70 privileged families. With such levels of inequality existing in our nation already, FDI in LIC will only result in another cause of insecurity for the common masses.

Therefore, such a decision must be condemned and immediately stopped through constant, organised and united protests by the working class for the working class.