Adding critical illness and disablement benefits can make the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) a more popular and comprehensive protection plan
Commercial insurers have brought some useful micro insurance products but these are not sold too enthusiastically by all, due to a variety of reasons.
By Nirjhar Majumdar
Can we consider Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) as a common man’s Protection Plan? I consider it to be so because the regular protection products offered by the commercial insurers have a minimum sum assured of Rs 10 lakh. Protection plans are most sought after these days and poor people cannot be exceptions. Commercial insurers have brought some useful micro insurance products but these are not sold too enthusiastically by all, due to a variety of reasons.
In the individual micro life insurance space, mostly LIC markets the products. In the group micro life insurance space, private insurers insure lives but claim settlement data of 2018-19 shows (IRDAI Annual Report) average size of the claim to be less than Rs 30,000. That proves, group micro schemes have not insured for any significant sum as compared to PMJJBY. As PMJJBY has become a popular protection plan among the masses, it can give a lot of financial security to the poorer people of the country. In fact, it can be bought by any person in the age group of 18 to 50 and in possession of a bank account.
Popular scheme Under PMJJBY, a One Year Renewable Term Assurance (OYRTA) policy is granted for a sum assured of Rs 2 lakh at an annual premium of Rs 330. This is essentially a group term assurance product. In any group insurance policy, premium is usually very low because a very large number of lives are available and there is very little chance of large-scale adverse selections. On the other hand, a 30-year old person can buy a term assurance product on individual basis from a commercial insurer for a term of 25 years with a risk cover of Rs 1 crore at around Rs 12,000-15,000 per annum. Now, if the same person buys PMJJBY, he pays Rs 330 for a cover of Rs 2 lakh. This is equivalent to paying a premium of Rs 16,500 for a cover of Rs 1 crore. So, we are not doing any act of charity to a customer of PMJJBY.
The problem lies elsewhere. The insurers do not earn much by selling such “social security insurance”. Out of Rs 330, the insurer gets Rs 289, the agent Rs 30 and the bank Rs 11. These are considered too small numbers. However, the fact is, the total number of persons enrolled under this group insurance scheme is 7.46 crore as on September 11, 2020. We have to remember, this scheme has been able to insure 7.46 crore lives in just five years of time. All life insurers taken together do not have more than 35 crore policyholders with in-force policies at any point of time in respect of individual insurance business.
Risk cover Size of the insurable population of the country is close to 100 crore. It can safely be said that at least 50 crore Indians can easily be brought under the fold of PMJJBY. If that happens, the insurers will be able to pocket at least Rs 15,000 crore every year as new business/renewal premium towards PMJJBY alone.
The risk cover under PMJJBY may not be sufficient for better-off people of the urban areas. But, it is really something for the poor people. The money can help the family of a deceased policyholder to be back on its feet very quickly. The maximum age at entry should be increased by at least 10 and the risk cover should continue up to an age of 75 years.
The poor people hardly have any retirement age as they continue doing work beyond 60 or even 65 years of age. So their family members suffer a financial loss even when they die at such ages. Critical illness and disablement benefits should also be built with such schemes. The premium may increase to some extent to accommodate such benefits in the product. But, this will only make PMJJBY a more popular and comprehensive protection plan.
The writer is assistant secretary, Kolkata Audit Centre, LIC of India. All views expressed here are the author’s personal