Whither State owned Insurers?

A friend of mine forwarded me this article. I would suggest you take a quick look at this before going on with my views.

http://in.biz.yahoo.com/071021/203/6m81x.html

The gist of the article is - you dont need to spend INR 640 million to understand something fundamental.

First a couple of points missed in the article -

- Whilst private general insurers have gained 40% market share, Public Sector insurers have not exactly "lost" business. They merely have a lesser share of a growing pie. This is the purpose of all opening up - more competition increases the pie itself which benefits both buyer and seller.

-LIC's success in retaining or even increasing market share is also a function of the policy period. Life Insurance means longer policy period provoking the question - Will the Insurer be around to pay the claim 5/10/15/20 years down the line? I would trust a state owned entity to a private player for such a crucial need. Hence LIC = perceived safety.

-this does not happen in non-life insurance. most policy periods are 12 months. Also there is rarely the same sense of personal involvement whilst protecting assets; after all its not one's own life.

-but most importantly the market has to see a couple of collapses ; only then the buyer will understand the value of a strong balance sheet.


Now on to my real question

Consultants are usually hired to do the management's dirty work - like that great invention of modern managements - "Rightsizing"!.

But the best solutions for any business in crisis is to listen to its own employees. Unfortunately most management love to listen to Outsiders. A classic case of "ghar ki murgi daal barabar"

I am convinced there are enough right minded people in the state owned insurers with sufficient pride of stakeholdership to take their organisations forward.

Ownership is never the problem. Lack of competition is. A private sector monopoly is probably worse than public sector monopoly.Look at power distribution in Delhi. Or ask the residents of Mumbai how an excellent BSES has degenerated into a pathetic Reliance Energy.

So before the insurance consumers get the shock of their life lets pray some inspired thinking will allow the PSU Insurers to get back to their glory days - not inspite but because of open market competition.It will be good for everybody in the industry.