It is going to be a Year Economy for the six government owned non-life insurance companies with the central government prescribing austerity measures to save 20 per cent cost this fiscal, said an industry official.
The Department of Financial Services (DFS) part of the Ministry of Finance in a letter to six non-life insurers – New India Assurance Company Limited, National Insurance Company Limited, Oriental Insurance Company Limited, United India Insurance Company Limited, General Insurance Corporation of India Limited and Agriculture Insurance Company of India Limited – has asked to cut costs their costs by 20 per cent owing to lowering of business due to COVID-19 impact, the official told IANS preferring anonymity.
Pointing out the decline in their topline which may impact their profitability the DFS has suggested to the companies to undertake cost saving measures like: cutting budget allocation for office expenses by 15 per cent, stopping advertisements except statutory ones, ban on fresh recruitment, no fresh financial commitment that were not provided in the Board approved budget.
The government has also put a ban on foreign travel for Chairman and Managing Directors, Directors and General Managers unless to acquire fresh international business or negotiating reinsurance agreements.
Similarly, all official tours for internal meetings and others are to be stopped except the travel by internal auditors and stay for them be arranged at the company guest houses wherever available.
According to the official, the government has also ordered suspension of expenses for commemoration, seminars, conferences, anniversaries and others.
The government also said reimbursement of fuel cost for motor car be cut by 20 per cent across all cadres who are entitled for the same.
“The cost cutting measures are needed given the situation of the industry,” a head of a PSU non-life insurer told IANS.
While no pay cut has been suggested for the employees, the wage revision talks may not happen any soon owing to COVID-19 pandemic.
Wage revision in the insurance sector will follow the conclusion of revision in the banking sector.
The wage revision talks in the banking sector too has come to a halt after COVID-19 pandemic hit India.
Meanwhile a senior industry official said central government Cabinet has to take a decision on the merger of the three companies – United India, National Insurance and Oriental Insurance.
The government had earlier announced its decision to merge the three companies into one, a decision that was welcomed by the industry unions.