Prime Minister of India - Dr. Manmohan Singh

PM inaugurates Golden Jubilee celebrations of LIC

"I am delighted to be here today to inaugurate the Golden Jubilee Celebrations of the Life Insurance Corporation of India. Over the last five decades, LIC has done remarkably well in serving the cause for which it was created. Its long journey in the service of our country, from its launch on 1st September 1956, mirrors the journey of our economy. From infancy, and the teething troubles associated with it, through years of growth and development, and the challenges associated with it, LIC has entered the phase of maturity, capable of facing competition. This has been the saga of our economic development since independence too.

This past half century has been an eventful period for our country and LIC has played an important role in the building of the modern Indian economy. The visionary behind the launch of LIC, one of our most distinguished civil servants and Finance Ministers, Dr. Chintamani Deshmukh, would have been proud today to see the distance LIC has traveled since its inception. Launching LIC, Dr Deshmukh had expressed the hope that, "Into the lives of millions in rural areas, LIC will introduce a new sense of building for the future in the spirit of calm confidence which insurance alone can give. It is a measure conceived in a genuine spirit of service to the people. It will be for the people to respond, confound the doubters and make it a resounding success." LIC has proved to be a great success and has fulfilled its mandate of oiling the wheels of economic growth and development while caring for the concerns of its policy holders. Today, it is the single largest insurer in the whole world. I salute the vision of a great son of India, the late C.D. Deshmukh.

Our country was fortunate to have had men like Dr. Deshmukh at the helm of national affairs at the time of our Independence. They were men of foresight and integrity. They conceived and implemented plans for the long-term development of our country. LIC was one such initiative. Its founders looked into the future and realized that without such institutions, it would not be possible for us to mobilize the funds required for sustained and planned national development. We are, today, the beneficiaries of their vision and commitment.

Based on such firm foundations, LIC has been able to grow, find its feet, and stand its ground even in the face of the winds of change and competition. In the early 1990s, when we appointed the R N Malhotra Committee and encouraged LIC to face competition from private players, there was much concern expressed about the future of this great financial institution. The political process through which insurance sector reform had to be guided is an interesting case study of the political economy of reform in India.

The Malhotra Committee report was presented in January 1994, but our Government was unable to implement its recommendations because of the resistance to change both within LIC and within Government. Interestingly, it was in 1997, under our Finance Minister Shri Chidambaram who was the then Finance Minister in the United Front government, that the first steps to create a statutory regulatory authority for insurance were taken. I compliment Shri Chidambaram's initiative in this regard. He had also declared his intention to open the pension and health insurance segment to private sector participation. However, it was only in 1998 that the NDA government introduced legislation to allow insurance to be opened up to private investment, setting a cap of 26% for foreign equity, with an additional 14% for NRIs.

While the critics of reform and liberalization in the insurance sector worried about the impact these would have on LIC, the actual experience has shown that LIC had the internal capacity for change and competition. I compliment the management and the staff of LIC for the dynamism they have shown. Each one of LIC's employees and its ten lakh agents should be proud for having proved to the world that you are second to none.

India, as I have said in the past, is at the cusp of a historic change in its economic history. It is possible for the economy to enter into a sustained phase of growth of 7-8%, breaking away from the trends of the recent past. The economy has already demonstrated this capability and I am confident that this potential will be realised. Our manufacturing sector has shown tremendous dynamism and our services sector has been a key driver of growth. Hopefully, with our focus on agriculture and irrigation, the primary sectors too will show faster growth. Infrastructure is a constraint and requires huge investments in roads, railways, ports, power, civil aviation and telecommunications so that our growth processes are not throttled. With all round growth and with the possibilities thrown open by technological developments, it is possible for us to eradicate poverty and liberate our people from want, disease and ignorance within the next decade. This is a feasible goal which we should aim for.

In this dynamic scenario, it is essential that we have developed and efficient financial markets. The basic role of these markets as intermediaries between savings and investment is a critical one as this ensures that the economy gets the required investments. Our capital markets and financial institutions have evolved considerably over the last few decades. They have expanded in their size, scope and reach and have become far more competitive. Our stock markets are some of the most modern in the world. Our banking system - both public and private - has shown remarkable improvement in its financial parameters and performance in the last decade. In fact, our public sector banks have been remarkable in the manner in which they have adjusted to competition and have proved wrong all predictions about a steep erosion in the market share. They have demonstrated that with the necessary will, commitment and leadership, they can hold their place in a competitive world.

The insurance sector is a key building block in our overall financial framework. It performs the necessary risk distribution function for individuals and firms. It, along with pension funds, also mobilizes long term savings. Both these functions are critical for the growth of the economy. As a source of long term funds, insurance will be a key driver of infrastructure growth. Keeping in mind our large requirements of investment in infrastructure, it is necessary that the insurance sector shows the necessary dynamism to be able to keep pace with these investment requirements. Infrastructure firms too need to come up with more innovative long term investment products where long term funds can be deployed. I am confident that the growth of both infrastructure and insurance will match our expectations.

As for the risk distribution function itself, we must remember that we are still an underinsured country. While the reach and scope of insurance has been phenomenal in the last fifty years, we still have a lot of distance to cover and far to go. There are large segments of our population and economy which are still not insured. We need to come up with more innovative products to increase the coverage of insurance. We need better marketing techniques, new marketing channels, superior actuarial systems and enhanced risk management capabilities in our insurance firms. The public sector firms need to be more efficient in their functioning, reducing costs and improving returns. In the more competitive era we are gradually moving into, public sector insurance firms have to show the flexibility to be innovative and responsive to customer needs, just as their banking counterparts have shown.

The entire debate on insurance sector liberalization and the opening up of the insurance market to new products shows us that many of our apprehensions about liberalization are often over-stated. We often lack the self-confidence required to deal with new opportunities. We worry far too much about the risks and do not grasp adequately the power of our own capabilities and the wealth of opportunities available for us. Once again we find such apprehensions being expressed today when we look at new market opportunities. There is excessive anxiety with change.

For example, in the retail sector, apprehensions are being expressed about opening it up to foreign investment. I am reminded about the kind of apprehensions that were expressed when we first proposed foreign investment in insurance. I urge all Indians to think big. I urge them to unleash their creative potential. Indians have globally competitive capabilities. We are second to none. We can take on competition, and make good use of new opportunities at home and abroad.

I do sincerely believe that LIC is today ready to face more competition in all segments of the insurance market. Proving all the doubters of liberalization wrong, LIC has surged ahead, creating new records, in a more competitive market. Forty-four years of sheltered existence did not blunt LIC's edge. It retained a combative spirit and has proactively changed itself to meet new market aspirations. Implementing global standards in investment practices, product innovation, technological upgradation, strategic alliances and improved customer servicing, LIC continues to lead the Indian life insurance market with a huge margin. I'm glad to know that LIC has more than sixteen crore policyholders in its fold and adheres to defined world standards in claim settlement. I am told that on an average, more than 3 claims are settled every 2 seconds during working hours.

I am impressed by the "Citizen's Charter" you have drawn up, by your Vision Statement and by your Mission Statement. Your Vision of being a "trans-nationally competitive financial conglomerate of significance to societies and pride of India", is an inspiring vision. I am also impressed by your social commitment. LIC has earned for itself a pride of place in the hearts of millions of Indians through its various schemes and by the work it has done to alleviate distress in situations caused by natural disasters. I also commend the social security schemes you have introduced, like the Janashree Bima Yojana and the Krishi Shramik Samajik Suraksha Yojana. I believe over 3.5 crore people living below the poverty line, marginally above the poverty line, are covered under the social security schemes of LIC. Self-employed communities like fishermen, weavers, rickshaw pullers and petty traders require insurance cover against the ups and downs of life and the market. Serving and servicing the needs of such groups can also be a commercially viable proposition. As the management guru, C K Prahlad has said so often, there are market opportunities available at the bottom of the pyramid waiting to be exploited. You have shown enterprise and social responsibility in tapping these opportunities. I hope you will continue to widen the ambit of your activity and reach. When we visualize an India that is free from the clutches of poverty, unemployment and illiteracy, LIC, will have to play a significant role in achieving this vision.

Today marks the beginning of the fiftieth year of the LIC. On this happy occasion it gives me great joy to launch LIC's Golden Jubilee policy, 'Bima Gold', a policy that has been designed to take care of the needs of a vast population, including those in the unorganized sector. I'm sure the year ahead will bring prosperity in the lives of all those associated with the LIC. I'm glad to convey from this platform my best wishes to all the policyholders of the Life Insurance Corporation of India, its agents, employees and officers."