The Insurance Regulatory and Development Authority (IRDA) of India announced late October that the insurance sector was now open to the private sector by giving licenses to three companies. The Telegraph newspaper declared that fifty year of fetters had been taken off the sector. It continued that the new companies with their foreign partners would bring innovative products to the underexploited market since only 18% of India's population had insurance. The spokesman for one of the companies that was issued a license gushed that this was a momentous day for the sector. Amid the fanfare not many are asking questions. Just what have the fetters been taken off of- the well being of society or the well being of companies?

It is perhaps symbolic of the direction in which society is heading that a basic issue of what a family will do to support itself when the breadwinner of the family dies or retires is now left to the family itself.  If it is not the government's role to ensure that no family is left to fend for itself,  what is its role? Is it simply to tax the ordinary citizens (companies hardly pay any taxes) and spend it on missiles and big dams? What is the purpose of an economy?

On the other side of the equation are the companies providing these "innovative products". Who are these companies? Reliance General Insurance, HDFC Standard Life Insurance and Royal Sundaram Alliance Insurance are the first to get licenses. ICICI-Prudential Life Insurance, Max-New York Life Insurance and Iffco-Tokio General Insurance Company have also been issued with in-principle licenses. Tatas and Birlas have also applied for licenses. In other words,  the biggest monopolies Indian and foreign will now dominate the market. 

The purpose of these companies is crystal clear - to increase shareholder value i.e. to maximize their profits. "Innovative products" thus takes on a new meaning - how to create products that nobody else knows how to price and thus extract monopoly rent for as long as possible. So the hapless Indian consumer will be bombarded with insurance policies claiming to make tax- free money in the stock market while putting in small print the fee they will exact out of the consumer. Also at risk are the 600,000 workers currently in the insurance sector. How many of them will still have a job is anybody's guess.

What of the government's role in all of this? During they heyday of the "socialistic pattern of society" in 1956, provident and life insurance companies were nationalized. In 1971, the government took over the management of non- life insurance companies and nationalized them two years later. Both of the nationalizations were done because of widespread malpractice. However ever since Narasimha Rao initiated the liberalization policy there have been attempts to privatize the sector. The Bill to grant statutory powers to the IRDA was shot down twice in the Parliament, but eventually passed in December of 1999 after certain "social sector commitments" were added. What commitment these companies have for a society in which half the population does not know where its next meal is going to come from is unclear.

The biggest impact of the privatization of the insurance sector maybe indirect. Insurance companies with their huge cash pools generally lend their money to generate higher returns. In India, banks and the LIC have been a source of capital for the government when starting infrastructure projects. At present, the total annual accrual to all such funds is about USD 2.4 billion. The Rakesh Mohan report estimates a current requirement of USD 2,823 billion for infrastructure over the next ten years. The bulk of this must be raised domestically requiring a huge expansion of the life insurance and pension fund industry. This may have been one motivation for the government to privatize. Privatizing however means that these companies maybe able to charge even higher rates from the government, pushing the government further into debt.

Although it may not always be obvious, the universe is unfolding as it should. Nowhere in the path that is unfolding before India, is it obvious that Indian people's interests are being put first. It is up to the Indian workers, peasants and intellectuals to rise to the occasion and create an India where the government not only ensures a job for everybody willing to work but where the death of the breadwinner does not mean poverty for the rest of the family.