FINANCE minister Arun Jaitley’s Budget can be termed as a path-breaking attempt towards lifting the status of the poor and vulnerable. Also, the beneficiaries can proudly claim that they are not subscribers to the account of doles, but are actually paying for it themselves.
The Pradhan Mantri Suraksha Bima Yojana, which provides for an accidental death cover of R2 lakh for an annual premium of R12, is a great leveler, considering that 60% of vehicles on the road ply without any insurance. As a result, the victims/dependants are left in the lurch and forced to dispose of their valuables, or borrow at exorbitant rates, to provide for such an emergency. Due to non-insurance of vehicles, they can’t claim compensation from insurance companies. The compensation from the Solatium Fund is time-consuming and not easy to obtain. The web spun by intermediaries is so intricate that the victims or their dependants do not get relief when they need it the most.
At present, 3% of the country’s population has life cover. The Prime Minister’s Jeevan Jyoti Bima Yojana aims to extend this cover to nearly 12 crore people under the aegis of the Jan Dhan Yojana. This will take the insured population to around 9%.
The plan’s success, however, will depend on enrolment to the Jan Dhan Yojana by the target date of December 31. As such, not just insurers but also banks need to actively support the process. In return, the regulator could consider offering relief in terms of their mandatory targets for rural and semi-urban areas.
In this age of ever-increasing medical costs, tax relief on medical insurance premium for self and dependent children to R25,000-30,000 if both the subscriber and spouse are above 60 years — is a welcome step. The provision of R5,000 for annual health checkup will aid preventive care.
Over the years, insurance penetration has taken a dip. The exemption from service tax in respect of premium paid under the Varisht Bima Yojana is well thought of. However, the same should also be extended to non-single premium policies to make life insurance competitive in relation to other products.
The insurance industry has suffered a lot due to mis-selling and frauds. Unit-linked insurance products, of course, could be excluded in view of its investment orientation. Financial experts tend to recommend risk-based life insurance products only, notwithstanding the fact that traditional products protect the family commitments of an individual — education of children, their marriage, and so on. This would only make insurance products more non-competitive, leading to a further decline in sales.
The option to subscribers of ESI to shift to insurance schemes will force ESI establishments to vie for retention of subscribers. It is further hoped that there will be a simultaneous option to return to ESI, if necessary.
By P R Grover
The writer is advisor, Amity School of Insurance, Banking & Actuarial Science, Amity University