State owned non-life insurers ordered to cut costs

The government is prescribing austerity measures for six government controlled non-life insurance companies, with the aim of saving 20% of costs in the current fiscal year ending 31 March 2021 (FY2021), in light of difficult operating circumstances brought on by the COVID-19 pandemic.

Towards this purpose, the Department of Financial Services (DFS), which is part of the Ministry of Finance, has issued a letter to the six non-life insurers: New India Assurance, National Insurance, Oriental Insurance, United India Insurance, General Insurance Corporation of India and Agriculture Insurance Company of India, reported Indo-Asian News Service (IANS) citing an unnamed industry official.

Pointing to the decline in the companies' topline which may hit their profitability, the DFS suggests cost saving measures like: cutting budget allocations for office expenses by 15%, stopping advertisements except statutory ones, as well as a ban on fresh recruitment and financial commitments that are not provided in the companies' budgets.

The government has also banned foreign travel for the insurers' chairman, 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 travel by internal auditors who are to be accommodated in company guest houses wherever available.

According to the official, the government has as well suspended spending on commemoration, seminars, conferences, anniversaries and other functions. The government also said reimbursement of fuel costs for motor cars is to be cut by 20% 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 state owned non-life insurer told IANS.

While no pay cut has been suggested for employees, wage revision talks may not take place soon. Wage revision in the insurance sector will follow the conclusion of revision in the banking sector.

Source: Asia Insurance Review