What this means most starkly is that the cross-subsidisation which was characteristic of the insurance sector earlier, and which indeed is typical of most public sector service provision, is disappearing. The general insurance companies have already been instructed to calculate profits on each line of business separately. Life insurance is likely to follow suit.
 
The irony is that both the Life Insurance Company and the general insurance companies were already highly profitable in the aggregate. Their cross-subsidies, which were based on some notions of income and ability of people to pay, and the need to provide insurance services to as many people as possible, did not prevent them from providing large surpluses to government coffers. Now, however, because they are concerned about showing profit rates or margins which are comparable to those of the private sector, they are likely to turn more cautious and more stingy about providing insurance cover to a range of consumers, simply in order to maintain "competitive" profitability.

What does this mean for consumers ? It means the complete opposite of what was promised when the insurance sector was liberalised. Thus, not only have premium rates gone up quite sharply, but it may become more difficult to be eligible for a whole range of policies. So people may actually find it more difficult or more expensive to take on policies in areas where they really require it, that is, where they are in fact at risk. 
 
Also, rates of claim settlement were earlier in India the highest in the world, at more than 90 per cent in life insurance and 70 per cent in general insurance, compared to around 40 per cent internationally in both. These are now likely to fall, as companies try to ensure higher profit margins through this means as well. This means that in the event of some misfortune, which may be covered by the policy on paper, the policy-holder would be less likely than before,  to get his or her claim settled.
 
This whole process may appear very paradoxical. But actually it brings out very clearly why privatisation of certain services, as well as opening up of this sector in particular, may be very problematic, and why the concerns of critics at the time were not misplaced. It should also be noted that this is quite unlike the privatisation of loss-making concerns in the manufacturing sector, which often simply reflects the urgent need to restructure and allow the government to move out of dead-end economic activities.
 
There were many points with respect to insurance sector liberalisation that the critics had raised. There was the possibility of fraud by, or failure of, private companies, which would adversely affect those who had sunk their life savings in such companies. The high incidence of such cases was indeed why the companies in India had been nationalised in the first place. There was the potential misuse of the huge pool of savings raised by this sector, which could be utilised for productive investment, including by the state.
 
In addition to these very serious worries, there was also the concern that consumers, who were supposed to be the main beneficiaries, would in fact be adversely affected. At the time, such fears were simply laughed at. But already, with the recent change in price structure, there is evidence that such a tendency of worsening conditions for insurance consumers may not be so far-fetched.
 
It is especially sad because it is so unnecessary. It is bad enough that private sector insurance companies, in their zeal to cut costs and improve profitability indicators, ignore the basic interests of people and effectively deny important sections of people insurance cover for different categories. This is, after all, only to be expected in a business driven entirely by profit. In fact, one of the reasons for curtailing services and raising costs is because of the huge increase in advertising costs which all the companies – private and public – are now engaging in, which makes the need to generate more revenue even more imperative.
 
But when public sector companies start behaving in exactly the same way, then it is worse than pointless. The entire purpose of having public provision of such services is to ensure that they do not simply behave like other private players. The achievement of broader social goals can then be achieved by cross-subsidisation, which is sustainable as long as the entire operation remains profitable. There is no need for such enterprises to be as profitable as possible using any possible means, because then the basic objective of using public corporations to provide public services would not be met.
 
The tragedy is when the government itself starts imposing upon such public companies, the pressure of being profitable at all costs, then people will end up finding little to choose between public and private sectors. It could well be that there as an implicit agenda in this, to eventually privatise these large and profitable public sector companies which would anyway be behaving no differently from private players.
 
While this may serve the purpose of those who are ideologically committed to the destruction of public sector activity independent of context, it can do little to serve the real interests of the citizens of this country.