While the government will pay the premium on the Rs 30,000 life insurance cover, the National Payments Corporation of India, promoted by public sector banks, will provide the premium on the Rs 1 lakh accident insurance cover on behalf of the customers.
The premium on Rs 1 lakh cover is less than Re 1 per person. This is probably a world record that such a massive package of bank accounts and insurance cover is being offered to record number of people, said NPCI managing director AP Hota.
If the government manages to open 7.5 crore bank accounts by January 26, 2015, NPCI, which is also the issuing authority of RuPay card, will have to shell out less than Rs 7.5 crore as annual premium to HDFC Ergo, which pipped public sector insurers to get the mandate for managing the package. The cover will be available if the customer swipes the RuPay card within 45 days.
The nitty-gritty of the two insurance packages are yet to be announced. If the bank accounts remain dormant for a long period, will the insurance cover lapse Dormant accounts are a big problem in poorly banked areas, said a senior banker.
The premium on the life cover will be somewhere between Rs 90 and Rs 100, said a senior official of the Life Insurance Corporation (LIC), which will manage the life cover. Only those persons who have either completed 18 years of age or whose maximum age was 59 years will be eligible for the life insurance policy, said the official.
The 7.5 crore target notwithstanding, the LIC life cover is likely to be issued only to around 2-3 lakh beneficiaries due to the riders related to the scheme.
In addition to the age bracket of 18-59 years, the LIC official said that the scheme mandates every beneficiary to carry the Aadhaar card to meet biometric requirements and avoid duplication. Further, one beneficiary holding one RuPay card will be eligible for only one policy.
The premium on life cover is high as the customer will get the full amount of Rs 30,000 after death. In the case of accident policy, the customer can make the claim only if some mishap occurs. The life insurance policy will be valid throughout the life of the beneficiary. The government will pay the premium on life cover, Hota said.
Public sector insurance firms, however, were disappointed with HDFC Ergo bagging the contract.
We were not given a chance to participate in the contract, said the chairman of a public sector company.
In what appears to be a compromise, the finance ministry asked the four public sector companies to provide an additional Rs 1 lakh cover to the new bank account holders for the first 100 days of the scheme.
This proposal was, however, dropped in the final stage and instead Rs 30,000 life cover was added. Insurance circles said the financial inclusion programme would expand insurance penetration in the country.
By George Mathew