New Delhi, Sept. 16: The four state-owned general insurance companies are planning to slash staff strength by 10-15 per cent through another voluntary retirement scheme (VRS) likely to be offered soon.
The second round VRS will be offered to class I, III and IV employees. These categories include technical, administrative and clerical grade staff. The first exit scheme was offered to 1,400 class II or development officers in the last financial year.
“By offering VRS, the company will be able to cut expenses by at least 2-3 per cent. Downsizing is necessary or else we will have to increase premiums. Due to the entry of private players, business is not increasing much. The retrenchment of about 1,500 employee will also help control the expense ratio,” said a senior official of Oriental Insurance.
The company, which paid close to Rs 49.54 crore in the first round of VRS, expects to shell out another Rs 150-170 crore in the second round.
United India Insurance is also expected to cough up a hefty amount to fund the second round VRS.
“What sort of scheme would actually be offered has not been decided yet. What really concerns us is that after the liberalisation of the insurance sector, new distribution channels and tie-ups have emerged” said D Chakroborty, general manager, personnel from United India Insurance.
“Consequently the cost of management expenses in addition to cost of business acquisition has gone up. In a competitive scenario we need to cut costs. We are likely to give almost Rs 7-8 lakh per employee,” he added.
A senior official of New India Assurance, which has roughly 19,380 employees in class I, III and IV categories, said, “Of course, time and competition demands that we cut some flab.”
It is understood that ion the new round of VRS, 50 per cent settlement will be made in the form of a five-year bond. The remaining amount will be paid straight away.