Vijayan emphasized that strengthening the operational aspects of insurance companies requires more than just increasing capital. Over the past decade, the number of employees in these companies has drastically decreased, from approximately 16,000 to around 7,000 per company. This significant reduction in workforce has likely impacted the efficiency and effectiveness of these organizations.
According to Vijayan, it is essential to not only boost capital but also to augment manpower. The process of listing companies can lead to improved capitalization, which can be achieved through various means such as initial public offerings (IPOs) or private equity investments. Furthermore, mergers can also play a crucial role in strengthening these companies. By combining resources and operations, merging companies can eliminate redundancies, reduce costs, and enhance their overall competitiveness.
The ultimate goal, Vijayan stressed, is to achieve economies of scale, which is a critical factor in the insurance industry. Currently, only the Life Insurance Corporation of India (LIC) enjoys this advantage, which has enabled it to maintain its market dominance. Economies of scale allow companies to reduce costs, improve efficiency, and increase profitability, ultimately leading to better services and products for customers.
In the context of the insurance industry, achieving economies of scale can be particularly challenging due to the high capital requirements and intense competition. However, by focusing on operational strengthening, increasing manpower, and pursuing strategic mergers, insurance companies can position themselves for long-term success. Vijayan’s comments highlight the need for a comprehensive approach to strengthening the insurance industry, one that goes beyond mere capitalization and addresses the critical issue of manpower and scale.
The insurance industry is expected to play a vital role in the country’s economic growth, and it is essential that companies in this sector are equipped to meet the evolving needs of customers. By prioritizing operational strengthening, manpower augmentation, and strategic consolidation, insurance companies can build a strong foundation for future growth and success. As Vijayan noted, this will ultimately benefit not only the companies themselves but also the customers they serve, who will have access to a wider range of products and services.