There has been considerable speculation in the market about how monopolistic insurance companies like Life Insurance Corporation (LIC) and GIC will react to a scenario of aggressive competition from private-sector players like the Industrial Credit & Investment Corporation of India (ICICI), Housing Development Finance Corporation (HDFC), State Bank of India (SBI), and others who are waiting to enter the frayonce the Insurance Regulatory Authority (IRA) Bill is tabled in parliament during the winter session, and subsequently passed, as is being expected.

On the parent-subsidiary relationship issue, which is a major part of the restructuring exercise, Sengupta stated that this was being actively discussed by senior officials at the five companies. GIC, which is a holding company controlling four subsidiaries, does no business directly (except for aviation insurance). It is the subsidiaries which are the actual operative insurance companies, with GIC's role being more in the nature of setting the direction. This relationship was stipulated by the General Insurance Business Nationalisation Act (Gibna), 1972. Whether this culture can continue to work at a time when all players will be regulated and protected by an external regulator is being actively debated.

In fact, another issue under consideration is whether these subsidiaries should continue to compete against each other, or beef up operations to meetexternal competition by increasing their existing equity of Rs 40 crore each to Rs 200 crore through internal accruals. The increase in equity will also have the additional advantage of reducing the price per share on a book-value basis and make the share prices of the subsidiaries more marketable. However, the GIC chief pointed out that all these options were still at the discussion stage.

Sengupta stated that the restructuring would span other crucial areas too. These would be computerisation, manpower deployment, streamlining of the product range, and new product launches. "We have not really done much by way of proactive marketing till now, but merely satisfied the needs of customers and statutes such as the Motor Vehicles Act," concedes Sengupta, who assumed chairmanship of GIC in May this year.

To tackle the problem, GIC is talking to management consultancies like the consultancy divisions of XLRI, the Jamnalal Bajaj Institute of Management Sciences, National Productivity Council, KPMG Peat Marwick,and Arthur Anderson on various issues such as human resources management.

When questioned on the crucial issue of whether a disinvestment of the government's shareholding was on the cards--to give the insurance major the required autonomy-- Sengupta declined to comment on the issue. Industry analysts, however, perceive phased disinvestment to be very much on the cards, especially since this will be one way of ensuring commercially-oriented decision-taking, while at the same time helping the government bridge its fiscal deficit.

One of the most difficult parts of GIC's exercise is widely expected to be the HR thrust. But in spite of apprehensions being expressed in financial sector circles about how GIC, with an 86,000-strong work force, inadequate technology and a legacy of social obligations, would be able to restructure fast enough to meet competition, Sengupta was optimistic about full cooperation from employee associations. Under consideration is promotion of professionally qualified clerical staff,while redeployment of clerical staff to marketing has been approved by the board. The aim is to reduce decision-making layers from 12 to around five.

Computerisation will graduate from what in-house sources refer to as mere word processing to data warehousing and mining, with Rs 500-600 crore of information-technology spend allocated for all five companies together for the next few years. Integrated solutions are being tested at New India and United India, after which, GIC will go in for an integrated local-area network (lan) system, before graduating to the wide-area network system.

As far as products are concerned, each office markets around 150 products now, which is a world record of sorts. While all products without a large enough market will be withdrawn, GIC is planning to introduce a savings-related product where, if something is insured for seven to 10 years, a part of the premium will be returned even if there are no damages. It is also planning to introduce a refined variant of a managedhealthcare product, where diagnostic services are not offered indiscriminately but on a health-need basis as prescribed by a doctor.

Industry analysts feel that while internal issues may still sort themselves out largely with time, GIC will remain hamstrung in the absence of a level- playing field, a point which has been presented before IRA chairman NI Rangachary, insurance secretary Chaturvedi and other senior finance ministry officials. For example, much on the lines of banks' priority-sector requirements, public-sector insurance companies have to fulfil social objectives like extending cattle livestock and fishery insurance at low premium, recruit 25-26 per cent of staff from reserved categories, open offices in every district, and make available all products in all offices even where the business potential is low. The private-sector players would not be subjected to most of these stipulations.

Another hurdle to quick decision-making would be scrutiny by the comptroller and auditor general and theCentral Vigilance Commission that GIC would continue to be subjected to in spite of having an in-house audit department and statutory auditors at all levels.

In non-life insurance, where no two claims are similar (unlike life insurance, where claims are either on the basis of death or endowment), too many levels prevent commercial verification of claims. Sources state that this happened in the case of the Gujarat cyclone, where it became impossible to find out whether goods for which damages were claimed fell outside the insured time limit.