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WAGE REVISION

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					          JOINT MEETING OF ALL CHECK-
             OFF QUALIFIED UNIONS /
          ASSOCIATIONS OF GIPSA COs.


             EXPLORATORY TALKS ON
            PROPOSED WAGE REVISION
                W.E.F. 01.08.2007
                    Friday, November 28, 2008
                             New Delhi




November 28, 2008          GIPSA                1
      PUBLIC SECTOR GENERAL INSURANCE IN INDIA


     FROM A MODEST BASE OF Rs. 208 CRORES IN 1973,
      GROSS PREMIUM HAS GONE UP TO Rs. 17,813 IN
      2007-08.

     AVERAGE GROWTH RATE 12.68% PER ANNUM
      SINCE 1973. HOWEVER, THE AVERAGE GROWTH
      RATE DURING PAST 5 YEARS HAS BEEN 5.68%.

     MANPOWER GROWN FROM 26,112 IN 1973 TO
      84,097 AS ON 31.03.2002 AND THEN CAME DOWN
      TO 69,445 AS ON 31.03.2008.

     NUMBER OF OFFICES INCREASED FROM 750 IN
      1975 TO 4,074 AS ON 31.03.2008.



November 28, 2008        GIPSA                     2
      Contd…….

     INVESTMENT PORTFOLIO INCREASED FROM Rs. 355
      CRORES IN 1975 TO Rs. 31,342 CRORES AS ON 31-
      03-2008

     INVESTMENT INCOME INCREASED FROM Rs. 21
      CRORES IN 1975 TO Rs. 6,189 CRORES AS ON 31-
      03-2008

     RESERVES AND SURPLUS AS ON 31-03-2008
      STANDS AT Rs. 13,253 CRORES

     NET WORTH APPROX Rs. 13,800 CRORES AS ON 31-
      03-2008


November 28, 2008        GIPSA                       3
              MANPOWER & PRODUCTIVITY

                                                               %
                                 Gr.        Productivity/
                      No. of                                Growth
    As On                       Prem.         Employee
                    Employees                               in Prod.
                                (Rs. Cr.)     (Rs.'000)
                                                              Y2Y
31.03.2003           78000      13520           1730           -
31.03.2004           73580      14285           1941         12.20
31.03.2005           72223      14949           2070         6.62
31.03.2006           71868      15976           2223         7.40
31.03.2007           70979      17283           2435         9.54
31.03.2008           69445      17813           2565         5.34

Average Annual Increase in per employee productivity over last
5 years is 8.22%


November 28, 2008               GIPSA                              4
             MANPOWER AND PAY SCALES
     FOUR CLASSES OF EMPLOYEES IN GIPSA COs. AS
      ON 31.03.2008, TOTAL STRENGTH IS,
           CLASS I   :     17375
           CLASS II :       9104
           CLASS III :     34040
           CLASS IV :       8926
           TOTAL     :     69445
     PAY SCALES OF ALL CLASSES OF EMPLOYEES
      GOVERNED BY SCHEMES NOTIFIED BY
      GOVERNMENT
     FIRST SCHEMES FOR PAY SCALES NOTIFIED IN
      1974, 1975 AND 1976 (CALLED RATIONALISATION
      SCHEMES) FOR CLASS III/IV, CLASS I AND CLASS
      II EMPLOYEES RESPECTIVELY



November 28, 2008        GIPSA                       5
           FIVE REVISIONS OF PAY SCALES


     1985 SCHEME W.E.F. 01.10.1983
     1989 SCHEME W.E.F. 01.08.1987
     1996 SCHEME W.E.F. 01.08.1992
     2000 SCHEME W.E.F. 01.08.1997
     2005 & 2008 SCHEMES W.E.F. 01.08.2002


   CURRENT WAGE REVISION DUE W.E.F. 01.08.2007




November 28, 2008        GIPSA                    6
      SIGNIFICANT DEVELOPMENTS SINCE LAST
                    REVISION
     TOTAL NUMBER OF GENERAL INSURANCE
      COMPANIES IN INDIA WERE 10 AS ON 31.03.2002
      AND HAVE GONE UP TO 20 AS ON DATE.

     DETARIFFING OF PREMIUM IN MOTOR OD W.E.F.
      01.01.2007 AND ALL OTHER CLASSES OF
      BUSINESS, W.E.F. 01.01.2008, FURTHER
      STIFFENING THE COMPETITION.

     MARKET SHARE OF GIPSA MEMBER COs. HAS
      SLIDED DOWN FROM 95.91% AS ON 31.02.2002 TO
      60.08% AS ON 31.03.2008.

     GIPSA MEMBER COs. HAVE UNDERTAKEN BUSINESS
      PROCESS RE-ENGINEERING INTITIATIVES.


November 28, 2008        GIPSA                      7
                             MARKET SHARE

           AS ON                PUBLIC      PRIVATE

       31.03.2002               95.91        4.09
       31.03.2003               90.35        9.65
       31.03.2004               85.52        14.48
       31.03.2005               79.93        20.07
       31.03.2006               73.66        26.34
       31.03.2007               65.28        34.72
       31.03.2008               60.08        39.92
   Sept-08 (Flash Figures)      58.25        41.75


November 28, 2008                GIPSA                8
           BUSINESS PROCES RE-ENGINEERING
                  (BPR) IN GIPSA COs.
     ALL THE FOUR COMPANIES APPOINTED
      MANAGEMENTS CONSULTANTS (MCs).

     MCs TO MAKE AN ASSESSMENT OF KEY
      FUNCTIONAL AREAS AND DEVELOP OVERALL
      STRATEGIC PLAN FOR THEM IN FIRST PHASE

     THE UNIQUE FEATURE IS THAT THE MCs WOULD BE
      INVOLVED IN IMPLEMENTATION OF
      RECOMMENDATIONS ACCEPTED BY THE
      MANAGEMENT OF COs.




November 28, 2008       GIPSA                       9
                    MAIN AGENDA FOR MCs

     REVIEW OF ORGANISATIONAL STRUCTURE AND
      ASSESSMENT OF KEY FUNCTIONAL AREAS

     MARKETING AND SALES – REVIEW OF PRODUCT
      RANGE AND DISTRIBUTION STRATEGY

     OPERATIONS – BETTER CUSTOMER SERVICING

     HUMAN RESOURCE – RECRUITMENT & TRAINING,
      INCENTIVE SCHEMES

     INVESTMENT, U/W, FINANCIAL MANAGEMENT, IT –
      REVIEW AND IMPROVEMENTS


November 28, 2008          GIPSA                 10
                    BPR IN „NATIONAL‟

     BANCASSURANCE – 5 Dedicated Bancassurance
      servicing offices have been opened. Target for 15
      such offices by 31.03.2009
     SME SECTOR – 18 dedicated SME Cells have been
      opened and 22 more planned by 31.12.2008 and
      another 35 by 31.03.2009.
     Claims Processing Hubs – Opened at Kolkata and
      Chandigarh for Motor OD Claims – Average Claim
      Processing Time reduced to 25 days. More such
      Hubs to be opened at New Delhi, Bangalore,
      Chennai, Luncknow and Hyderabad by 31.12.2008.
     Agency Force - Efforts being undertaken to
      incentivise the performing agents through
      recognition and felicitation


November 28, 2008          GIPSA                          11
        BPR IN „NEW INDIA‟ (NEW ENERGY)

     WAVE 1 INITIATIVES – Process Redesign,
      Bancassurance, Brokers, Auto-dealers and Large
      Corporate – Pilot Work started in January, 2008
      and rollout has commenced across the nation.
      Performance is being monitored by a dedicated HO
      Team for each initiative.

     WAVE 2 INITIATIVES – Agency Performance
      Enhancement Program, Health TPA Management,
      HR & Organization Structure, Motor TP process
      redesign, Risk Based Pricing – Pilot work on these
      initiatives already started and performance is being
      closely evaluated.


November 28, 2008           GIPSA                        12
         BPR IN „ORIENTAL‟ (NAYEE DISHA)
     AGENCY MANAGERS – Project AGNI envisaged
      appointment of 80 Agency Managers at 10 Regional
      Centers by 15.10.2008 which has been achieved.

     SERVICE CENTRES – Pilot launched in 9 Cities for
      Motor OD Claims and 3 more coming. 1 Pilot for
      Policy Issuance at Jaipur to be launched shortly.
      Motor TP Claims Hub Pilot started in Chennai and
      Bangalore.

     HEALTH INITIATIVES – Regular and Enhanced
      Monitoring of TPAs started and Health Managers
      network created across the Regional Offices.

     ORGANIZATION STRUCTURE, PMS AND INCENTIVE
      SCHEMES – Initiatives under advanced stages of
      finalization.

November 28, 2008           GIPSA                         13
         BPR IN „UNITED INDIA‟ (UNISURGE)
     As on 15.10.2008, have opened 7 Bancassurance
      Offices against 6 planned, 9 Tie-ups with Motor
      Dealers against target of 8, implemented Agency
      Managers concept in 96 Offices (9 ROs) and opened
      3 Large Corporate & Broker Cells.

     In Motor, 2 ‘filing ready’ products have been
      developed.

     Design and Plan for Service Hub finalized with
      identification of location and personnel.

     PMS and Incentive Schemes for Employees under
      final stages of discussion.



November 28, 2008           GIPSA                      14
           BPR – HR - COMMON IN ALL COs.

     Management Consultants in each Company took
      extensive studies in the area of Manpower
      Planning.

     Reforms in Promotional Processes undertaken by
      GIPSA to address the contemporary requirements
      in the changed business scenario.

     New Promotion Policies evolved for Class I Officers
      and Class III/IV Employees. Promotion Policy for
      Development Officers amended to the requisite
      extent.




November 28, 2008           GIPSA                       15
      Contd…….
     Companies have initiated Promotion Exercises for
      Promotions From Class IV to III, within Class III,
      From Class III to Class I, From Class II to I and
      within Class I (Scale I, II, III & IV)

     All these Promotion Exercises scheduled to be
      completed by 15.12.2008.

     Transfer and Mobility Policy now in vogue in all
      cadres to provide requisite flexibility in deployment
      to serve Organizational Requirements and career
      development of Employees.

     PMS and Incentive Schemes for Employees under
      final stages of evolution.


November 28, 2008            GIPSA                         16
         PROCESS AND FACTORS OF WAGE REVISION



     12 CHECK-OFF QUALIFIED UNIONS /
      ASSOCIATIONS OF EMPLOYEES IN MEMBER
      COMPANIES.

     2 OF THESE UNIONS REPRESENT MORE THAN ONE
      CLASS OF EMPLOYEES

     ALL CHECK-OFF QUALIFIED
      UNIONS/ASSOCIATIONS (EXCEPT ONE FROM
      DEVELOPMENT OFFICERS) HAVE SUBMITTED THEIR
      CHARTER OF DEMANDS.




November 28, 2008       GIPSA                     17
        CHECK-OFF ACCREDITED UNIONS/ASSNS
       CLASS I
  1-4   NATIONAL/NEW INDIA/ORIENTAL/UNITED INDIA INSURANCE COMPANY
        OFFICERS’ ASSOCIATIONS (4)
  5.    GENERAL INSURANCE OFFICERS’ ALL INDIA ASSN
  6.    BHARTIYA VIMA KARAMCHARI SENA**
  7.    NATIONAL FEDERATION OF GENERAL INSURANCE EMPLOYEES**

       CLASS II
  1.    ALL INDIA GEN INS FIELD WORKERS’ ASSN
  2.    BHARTIYA VIMA KARAMCHARI SENA**
  3.    NATIONAL FEDERATION OF GEN. INS. EMPLOYEES**
  4.    GENERAL INSURANCE DEV. OFFICERS’ ASSN
  5.    GENERAL INSURANCE DEV. OFFICERS’ FEDERATION*

       CLASS III/IV
  1.    GENERAL INSURANCE EMPLOYEES’ ALL INDIA ASSN
  2.    ALL INDIA INS. EMPLOYEES’ ASSN
  3.    NATIONAL FEDERATION OF GENERAL INS. EMPLOYEES**

  *Charter not submitted
  ** Representing more than 1 Class of Employees




November 28, 2008                  GIPSA                        18
          CHARTERS OF DEMANDS BY UNIONS /
                  ASSOCIATIONS



         Charters of Demands submitted by
         the Unions / Associations talk of
         increasing the pay package by
         degrees varying from 20% to 60%.




November 28, 2008      GIPSA                 19
      GROWTH RATE (GROSS PREMIUM) %

       YEAR         NIC     NIA        OIC      UII    ALL COs

      2003-04       18.47   2.26       1.10    3.16     5.65

      2004-05       12.08   3.69       6.58    -3.88    4.65

      2005-06       -7.20   11.22      16.79   7.14     6.87

      2006-07       8.22    4.60       11.39   10.90    8.18

      2007-08       5.09    3.62       -3.00   6.88     3.07

   Sept-08 (FF)     10.75   4.58       2.59    12.94    7.37




November 28, 2008              GIPSA                           20
          MANAGEMENT EXP. (% TO GROSS PREMIUM)


   YEAR             NIC     NIA           OIC      UII    ALL COs

    2002-03         20.94   18.59         22.75   20.96    20.49

    2003-04         21.48   27.24         26.97   26.02    25.55

    2004-05         22.53   23.30         23.62   29.30    24.35

    2005-06         24.95   23.03         23.57   30.96    25.14

    2006-07         22.67   19.44         18.76   25.56    21.23

    2007-08         24.59   16.57         21.12   24.40    21.02


November 28, 2008                 GIPSA                            21
        MANAGEMENT EXP. (COMPLIANCE TO SEC 40C)


    YEAR            NIC   NIA          OIC   UII   ALL COs


     2003-04        NO    NO           NO    NO      NO


     2004-05        NO    NO           NO    NO      NO


     2005-06        NO    NO           NO    NO      NO


     2006-07        NO    NO           YES   NO      NO


     2007-08        NO    YES          NO    NO      NO

November 28, 2008              GIPSA                      22
                    M.E. (% TO NET PREMIUM)

       YEAR          NIC     NIA           OIC      UII    Wtd. Avg.

     2005-06         31.94   31.84         36.08   44.35     35.50


     2006-07         31.30   25.44         28.02   37.70     29.94


     2007-08         32.65   21.18         28.63   33.77     28.03




November 28, 2008                  GIPSA                         23
        COMMISSION (% TO NET PREMIUM)


       YEAR         NIC    NIA           OIC    UII    Wtd. Avg.

     2005-06        5.09   8.66          4.37   2.92     5.70


     2006-07        4.13   8.23          3.68   2.86     5.19


     2007-08        6.75   9.54          4.57   5.05     6.88




November 28, 2008                GIPSA                          24
                    ICR (% TO NET PREMIUM)


       YEAR          NIC     NIA           OIC      UII    Wtd. Avg.

     2005-06        102.43   88.13         87.61   93.09     92.20


     2006-07        86.50    80.34         87.66   90.26     85.43


     2007-08        94.05    86.82         90.47   92.75     90.47




November 28, 2008                  GIPSA                         25
        COMBINED RATIO* (% TO NET PREMIUM)


      YEAR           NIC      NIA            OIC      UII     Wtd. Avg.


     2005-06        139.46   128.63         128.06   140.36    123.41


     2006-07        121.93   114.01         119.36   130.81    120.55


     2007-08        133.45   120.00         123.67   131.58    126.24


    *INCLUDES NET INCURRED CLAIMS, M.E. & COMM.

November 28, 2008                   GIPSA                           26
             UNDERWRITING PROFIT / LOSS

                                                          (Rs. in Crores)
    YEAR            NIC     NIA             OIC    UII        TOTAL

   2003-04          -527    -688            -462   -544        -2221


   2004-05          -535    -682            -610   -745        -2572


   2005-06          -1089   -1243           -678   -932        -3942


   2006-07          -608    -656            -536   -770        -2570


   2007-08          -1013   -844            -680   -853        -3390

November 28, 2008                   GIPSA                              27
       ESTIMATED WAGE BILL AS ON 31.07.2007*


                                                          (Rs. Crores)


       NIC           NIA        OIC           UII          ALL Cos.



     641.41         774.26     560.89       720.85         2697.41




   *Extrapolated on the basis of expenses as on 31st March, 2007 & 2008



November 28, 2008                 GIPSA                                   28
     ME & WAGE BILL – PROJ. Vs. ACTUAL

                              M.E. %             WAGE BILL (Rs. Cr.)
      YEAR
                    PROJECTED      ACTUAL      PROJECTED     ACTUAL


     2004-05          21.34            24.35     2170         2860


     2005-06          20.54            25.14     2333         3184


     2006-07          19.77            21.23     2508         2708


     2007-08          19.04            21.02     2697         2676


November 28, 2008                      GIPSA                           29
       WAGE BILL Vs. PRODUCTIVITY – PER CAPITA


                    Parameters           2002-03       2007-08

  Gross Premium (Rs. Crs.)               13520             17813

  Wage Bill – Aug 02/Mar 08 (Rs. Crs.)    1953             2676

  Employees Strength – Aug 02/Mar 08     79980             69445

  Per Capita Productivity (Rs. Lacs)      16.90            25.65

  % Increase over 5½ Years                         51.74

  Per Capita Wage (Rs. Lacs)              2.44             3.85

  % Increase over 5½ Years                         57.81


November 28, 2008                GIPSA                             30
      CUSTOMER SERVICE INDICES (%)
                                         NIC     NIA    OIC      UII


                    Avg. - last 3 yrs   25.40   28.23   25.99   24.89
    Suit Claim
      Ratio
                    Actual 2007-08      27.09   27.00   23.87   29.50
                    Target 2008-09      35.00   35.00   35.00   35.00
                    Avg. - last 3 yrs   81.96   89.90   86.95   85.53
    Non Suit
   Claim Ratio
                    Actual 2007-08      83.85   90.00   88.67   87.60
                    Target 2008-09      90.00   95.00   90.00   90.00
                    Avg. - last 3 yrs   87.48   82.33   90.91   73.21
    Grievance
    Redressal
                    Actual 2007-08      83.29   83.00   96.16   81.04

                    Target 2008-09      88.00   90.00   95.00   85.00

November 28, 2008                       GIPSA                      31
                    CHALLENGES AHEAD



        EXTERNAL CHALLENGES

        INTERNAL CHALLENGES


November 28, 2008         GIPSA        32
                    EXTERNAL CHALLENGES

   Intense Competition on more profitable
    lines of Business.

   Premium rates to remain under pressure in
    De-tariffed regime.

   Business acquisition cost continue to rise.

   Re-insurance cost also continue to rise due
    to reduction in ceding commission by
    Treaty Re-insurers to compensate for
    lower rates in de-tariffed regime.
November 28, 2008          GIPSA                  33
     Contd………

  Shadow of global recession looming large
   on Indian Industry and Economy

  Capital Markets meltdown reduces reliance
   on investment portfolio for net profit

  Changing customer profile and increasing
   customer expectations

  New emerging risks and need for
   continuous innovations

November 28, 2008    GIPSA                    34
                    INTERNAL CHALLENGES

   Statutory limits on ME Ratios – Sec. 40 C

   Every rise in Wage Bill demands
    corresponding rise in productivity

   Rigidity in pay package impedes retention
    of talent - need for flexi pay / differential
    pay package

   Skill gap in the manpower flowing from fast
    changing technologies

November 28, 2008          GIPSA                35
     Contd…………..
   Adverse age profile of manpower – climate
    of inertia and rigidity

   Imbalances in deployment of manpower –
    continued pockets of surplus / deficit
    despite structured TMP – widen TMP or
    more flexible TMP?

   Continuous losses in Motor TP, Health etc. –
    Loss Management and Minimization

   Attitudinal issues of manpower at various
    levels – commitment vs. alienation


November 28, 2008     GIPSA                     36
         GAP BETWEEN “HAVE” & “WANT TO HAVE” - 1

                                                                 (Rs. in Crores)
                          ACTUAL                   PROJECTIONS
                          2007-08     2008-09 2009-10 2010-11 2011-12    2012-13
Gross Prem ↑ @ 5.68%
                            17813      18825    19894   21024   22218     23480
p.a.
M. Exp (w/o WR) ↑ @
                             3744       4085     4456    4862    5304       5787
9.1% p.a.
ME %                        21.02       21.70   22.40   23.13    23.87     24.65
Addition to ME with 5%
                                 93      153      167     182     199        217
WR w.e.f. 01.08.2007
Total ME                     3837       4238     4624    5044    5503       6004
ME (% to GP)                21.54       22.51   23.24   23.99    24.77     25.57
For 19.50% ME, Required
                             -         21733    23710   25868   28222     30790
Gross Prem. (@11.5 GR)
Premium Gap                  -          -2908   -3816   -4844    -6004     -7310

November 28, 2008                     GIPSA                                 37
           GAP BETWEEN “HAVE” & “WANT TO HAVE” - 2

                                                                   (Rs. in Crores)
                           ACTUAL                    PROJECTIONS
                           2007-08      2008-09 2009-10 2010-11 2011-12    2012-13
Gross Prem ↑ @ 5.68%
                             17813       18825    19894   21024   22218     23480
p.a.
M. Exp (w/o WR) ↑ @ 9.1%
                              3744        4085     4456    4862    5304       5787
p.a.

ME %                         21.02        21.70   22.40   23.13    23.87     24.65

Addition to ME with 10%
                                  185      306      334     365     398        434
WR w.e.f. 01.08.2007

Total ME                      3929        4391     4791    5227    5702       6221
ME (% to GP)                 22.06        23.33   24.08   24.86    25.66     26.50

For 19.50% ME, Required
                              -          22518    24567   26803   29242     31903
Gross Prem. (@12.3 GR)

Premium Gap                   -           -3693   -4673   -5779    -7024     -8423
November 28, 2008                       GIPSA                                 38
           GAP BETWEEN “HAVE” & “WANT TO HAVE” - 3

                                                                  (Rs. in Crores)
                          ACTUAL                    PROJECTIONS
                          2007-08      2008-09 2009-10 2010-11 2011-12    2012-13
Gross Prem ↑ @ 5.68%
                            17813       18825    19894   21024   22218     23480
p.a.
M. Exp (w/o WR) ↑ @
                             3744        4085     4456    4862    5304       5787
9.1% p.a.
ME %                        21.02        21.70   22.40   23.13    23.87     24.65
Addition to ME with 15%
                                 278      460      501     547     597        651
WR w.e.f. 01.08.2007
Total ME                     4022        4544     4958    5409    5901       6438
ME (% to GP)                22.58        24.14   24.92   25.73    26.56     27.42
For 19.50% ME, Required
                             -          23304    25424   27738   30262     33016
Gross Prem. (@13.14 GR)
Premium Gap                  -          -4479    -5530   -6714    -8044     -9536

November 28, 2008                      GIPSA                                 39
           GAP BETWEEN “HAVE” & “WANT TO HAVE” - 4

                                                                    (Rs. in Crores)
                           ACTUAL                     PROJECTIONS
                           2007-08      2008-09 2009-10 2010-11 2011-12    2012-13
Gross Prem ↑ @ 5.68%
                             17813       18825    19894   21024   22218      23480
p.a.
M. Exp (w/o WR) ↑ @ 9.1%
                              3744        4085     4456    4862     5304      5787
p.a.

ME %                         21.02        21.70   22.40   23.13   23.87      24.65

Addition to ME with 20%
                                  371      613      668     729      796       868
WR w.e.f. 01.08.2007

Total ME                      4115        4697     5125    5591     6100      6655
ME (% to GP)                 23.10        24.95   25.76   26.59   27.46      28.34

For 19.50% ME, Required
                              -          24089    26281   28673   31282      34129
Gross Prem. (@13.9 GR)

Premium Gap                   -          -5265    -6387   -7649   -9064     -10649
 November 28, 2008                       GIPSA                                 40
                           HOPES

     BPR initiatives expected to boost up productivity
      and rationalize expenses besides improving
      Customer Care.

     Active co-operation from Employees and their
      Unions / Associations required to supplement these
      efforts.

     An Organizational Agenda common to the
      Management and the Unions / Associations
      required for coordinated efforts and synergy.

     Let us evolve such an Agenda.


November 28, 2008           GIPSA                         41

				
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