Non-life insurers seek business guarantee

Our Banking Bureau

Mumbai, Dec 6: The four state-owned insurance companies are seeking guarantees for securing certain size of business from the development officers in case they plan to continue in the company after the proposed Voluntary Retirement Scheme(VRS).

The four non-life insurance companies, New India Assurance, United India, Oriented Insurance, National Insurance are planning to kickstart a restructuring process by launching a VRS for their class-II employees soon.

The class-II employees basically comprises of 17,000 development officers in the four companies.

The VRS plan, which will be launched for the first time in the public sector insurance industry, will be extended to class-I and class-III employees after rationalising the number of development officers. The VRS plan for the development officers need to be taken up early as intermediary system in the domestic insurance industry is being expanded to allow the brokers and corporate agents after the Parliament approves the pending amendments in the Insurance Act.

At present, the state-owned insurance company uses the channel of development officers and agents in procuring the business which have to compete with the new channels of brokers and corporate agents very soon.

‘‘Rationalsing the number of development officers will render some cost advantages in procuring the business,’’ said a top official of a company adding that company will have the freedom to use the new channeels of brokers and corporate agents by paying them stipulated commission.

There are three broad options in the VRS plan for the development officers - option of availing of it or option of shifting to an administrative department of the company or gurantee of procuring certain size of business.

‘‘In case a development officer decides to continue with a company and avail of all the facilities, he has to guarantee certain business which will help the company in having a better cost benefit,’’ said top offcials.