New Delhi: Increasing its focus on employee welfare, Indian firms are forking out large sums to buy insurance cover for its employees' security. In the past two years, companies' contribution towards group insurance has increased over 2.5 times to 17,979 crore in the first nine months of the current fiscal from 7,477 crore in the same period in 2007-08, reports Economic Times.
This substantial surge in contribution towards group insurance is to enhance protection. S.Y. Siddiqui, Managing Executive Officer in-charge of HR, Finance and IT, Maruti Suzuki India, one of the largest car maker with over 12,000 employees, told Economics Times, "Companies are increasingly seeking professional help and engaging life insurance firms to manage certain savings-linked pay components of employees to maximise benefits. We have started the process of outsourcing our group insurance schemes and have initiated talks with a host of life insurers for the same."
Salary hikes, in both public and private companies, in the past couple of months, too, have boosted gratuity and superannuation amounts in employees' pay packet, which typically come under group insurance schemes. While companies are doling out increments, they are also taking cautious steps to keep their bottomlines intact, and thus, outsourcing these pay components to life insurance firms.
As per the insurance regulator, new premium collection in the group insurance category, between April and December 2009, grew 63 percent to 17,979 crore from 11,059 crore in the year-ago period. The sharp growth in group insurance this fiscal has also helped private insurers from slipping into the negative territory. Pavan Bhatia, Executive Director (HR), PepsiCo India, said, "We have outsourced certain pay components to life insurance firms to avail the good flexibility they offer." The firm has roped in LIC and ICICI Prudential to manage its employees' savings-linked pay components, such as superannuation and gratuity.
Among private insurers, Bajaj Allianz, HDFC Standard and Birla Sunlife grabbed good business in the group insurance category. However, LIC retained its dominant position with 80 percent market share. The state-owned company collected 14,238 crore from sale of group insurance policies in the first nine months of 2009, a 78 percent growth over the corresponding period last fiscal. "Corporates are developing a confidence in life insurers and approaching both public and private firms to manage their employees' savings-linked pay components to diversify risk," said Sanjay Kumar Jha, Bajaj Allianz Zonal Manager (North) and Head of Pension Business.
Also, the group insurance covers a group of people in an organisation where the employer pays the premium, and is an attractive business for insurance companies as this involves minimal operational expenses. Companies either have the freedom to manage these components on their own or subscribe to a group insurance scheme.