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Private firms may step in to cover government’s insurance plan

Private firms may step in to cover government’s insurance plan

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The private sector, which didn’t quite warm up to the call to open Jan-Dhan Yojana bank accounts to increase access to financial services, is cozying up to the government’s efforts to provide universal insurance.

With premiums close to market rates, companies including ICICI Lombard General Insurance, SBI Life Insurance and Star Union Dai-ichi Life Insurance are finding the government’s new schemes attractive.

The government last week launched the Pradhan Mantri Jeevan Jyoti Bima Yojana to provide life cover of Rs 2 lakh at an annual premium of Rs 330 and the Pradhan Mantri Suraksha Bima Yojana for accidental death and disability at Rs 12 a year for a cover of Rs 2 lakh. The life insurance policy can be bought by people up to the age of 50 and the accident cover by anyone between 18 and 70 years old.

Private firms may step in to cover government’s insurance plan

“The government is talking about insuring crores of underinsured and uninsured people,” said Girish Kulkarni, MD and CEO of Star Union Dai-ichi Life Insurance. “Risk estimates will emerge as we go forward.”

From the Rs 330 premium, Rs 44 goes to distributors and intermediaries. Stamp duty of Rs 40 is also deducted from the premium, leaving insurance companies with Rs 246 for a policy of Rs 2 lakh.

At a certain volume, it makes sense to be selling Pradhan Mantri Suraksha Bima Yojana,” said Sanjay Datta, head of underwriting at ICICI Lombard. “We believe that the scheme will be viable if we rope in 40 lakh policyholders.

To make the scheme workable, insurance companies have asked the Insurance Regulatory & Development Authority and the government to waive the stamp duty and allow reinsurance on the portfolio.

As per Irda rules, life insurance companies need to retain risks for policies of up to Rs 10 lakh. Since the sum assured with these policies is Rs 2 lakh, they cannot be reinsured. Insurance companies that have been in operation for a few years don’t have the capacity and the experience to take on such risks, making it challenging for them to offer government’s new policies.
“It is difficult for us to offer a policy at Rs 12,” said Bhaskar Sarma, managing director and CEO at SBI General Insurance, a venture with Insurance Australia Group that started in 2010.

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