Prime Minister Narendra Modi is set to launch two insurance schemes, along with one for pension, under the Jan Suraksha Yojana on Saturday. While these schemes – Suraksha Bima Yojana, Jeevan Jyoti Bima Yojana and Atal Pension Yojana – are aimed at bringing more people under insurance cover, low premiums will pose a challenge to effective claim servicing.
The plans have a cover of Rs 2 lakh each, with a premium of only Rs 12 a year for accident insurance and Rs 330 for the life product.
Insurance companies say these schemes might get business volumes due to very low premiums but such pricing might not be sustainable in the long run. And, if premiums are increased, renewals might be a concern.
Claims settlement and post-policy service handling are expected to face issues. The chief executive of a large private life insurer said the scheme’s premium was kept low due to the assumption that there would be large volumes. “If that doesn’t happen, the pricing mechanism would have to be completely reversed, keeping in mind the actual numbers,” he said.
Only some bank branches would handle claims, unlike in the case of other policies for which any branch can be approached. A public sector bank official said banks would have to keep some personnel ready to take care of claims.
“PMJDY (Pradhan Mantri Jan Dhan Yojana) had completed its target of enrolling 75 million people about two months before the deadline of January 26. However, the number of zero-balance accounts are high. Even in these insurance schemes, we are anxious about what the renewal rates would be, as it is anticipated premiums might go up from the second year,” said a senior public sector insurance official.
As of April 15 this year, banks had opened about 150 million bank accounts under PMJDY; 174 accident claims and 158 life claims were received, of which 79 and 93 were settled, respectively. Data from the PMJDY website show as of March 31, 58 per cent of the accounts were zero-balance ones, against 77 per cent at the end of September 2014.
The Suraksha Bima Yojana for accidental death insurance will be available to those in the 18-70 age group who have bank accounts (since the premium will be auto-debited from that account). The scheme will be offered by all public sector general insurance companies, as well as other insurers willing to join the scheme and tie up with banks for this.
Insurance executives say some service request charges might actually turn out to be higher than the premium paid.
“As it is not a subsidised scheme in which the government bears the additional cost, it will be the onus of the insurer and the corresponding bank to look into all costs involved,” said the chief distribution officer of a private general insurance company.
The Jeevan Jyoti Bima Yojana (life insurance cover) will be available to those in the 18-50 age group who have bank accounts. People who avail of the scheme before turning 50 can, however, continue to have the risk of life coverage up to 55 years, subject to premium payment. The scheme will be offered by Life Insurance Corporation of India, as well as those willing to join it and tie up with banks.
While these schemes are mandatory for all public sector companies, life and non-life, it is optional for private insurers. This, some insurers say, will mean all private insurers will not be a part of the scheme. “Unlike other schemes such as the PMJDY, all insurers wouldn’t be a part of these schemes, which defeats the purpose,” said the chief general manager of a state-owned general insurance company.
Both life and non-life insurers have already begun tying up for these insurance schemes, to be operational from June 1. Though the basic facilities for all policies would be similar, bank-wise service facilities and claims settlement processes would be different.
WHAT IS JAN SURAKSHA YOJANA?
- Jan Suraksha involves three social schemes to bring additional financial services to the public, following bank accounts for all under Jan Dhan Yojana.
- This includes Suraksha Bima Yojana, an accident insurance scheme; Jeevan Jyoti Bima Yojana, a group term life scheme; and Atal Pension Yojana.
- The insurance plans have a cover of Rs 2 lakh each with premium of Rs 12 a year for accident insurance and Rs 330 for the life product.
- Atal Pension Yojana will focus on the unorganised sector and provide subscribers a fixed minimum pension between Rs 1,000 to Rs 5,000 a month
- This will start at the age of 60 years, depending on the contribution option exercised on entering at an age between 18 and 40 years
- All three schemes are for bank-account holders and will have direct credit and debit facility.
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