Jan Suraksha insurance schemes to see no premium hikes in FY17

Insurers expecting some upward movement due to claims will now have to provide cover at the same cost

Insurance schemes under the Pradhan Mantri Jan Suraksha Yojana will not see any premium increase this financial year.

While pure-term insurance and personal accident policies under the scheme have seen claims being reported and paid, the price of the cover has not been revised upwards.

Insurers expecting some upward movement due to claims will now have to provide the cover at the same cost. Besides, a pension scheme (Atal Pension Yojana), the scheme provides term insurance and an accident insurance scheme — Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY). Eleven months since launch, the schemes have sold almost 124 million policies.

“Volumes have been big and, hence, the sector has faced claims as well. Some premium increase was expected but we are told there would not be any in this financial year,” said a senior general insurance executive. There could, he said, be some revisions from FY18, based on data. 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. Not all segment entities in the private sector have become a part of this, as the cover cost is low and servicing costs are high. Of the Rs 12, the premium given to the insurer per annum is Rs 10. Apart from this, Rs 1 is paid per year as reimbursement of expenses to the intermediary (business correspondent, agent) and another Rs 1 goes for reimbursement of administrative expenses to the bank in question.

The accident insurance scheme, renewable yearly, offers protection against death or disability due to an accident. The premium is deducted from the policyholder’s bank account. Among private general insurers, not all of them are a part of it; all government-owned ones are.

Even when the scheme was launched, to enable more penetration in the country, there was some apprehension among insurers about its viability.

They felt it would not cover basic administration and distribution costs. Those with bank partners and tie-ups were among the first to get in, as banks were at the centre of the scheme and given the responsibility of selling the products to their customers.

Regular insurance schemes undergo revision in premiums on an annual basis, based on the claims received, losses due to fraud and allied costs. Jan Suraksha schemes have auto-renewal mechanisms where every year the premium is automatically deducted from the account.

Rural areas have been able to gather more enrolments than urban centres, say data on the Jan Suraksha website. It shows 52 per cent of the rural market has been covered. The share of policies being taken by women continues to be lower than males.

The accident cover of the member shall terminate or be restricted on attaining the age of 70 years or closure of account with the bank or insufficiency of balance. If a member is covered through more than one account and premium is received by the insurance company inadvertently, the cover will be restricted to one account and the premium liable to be forfeited.

Fraudulent claims have also been reported. Insurers fear if these go up, they will incur heavy loss. The head of the actuarial team at a private life insurance company explained the scheme had been priced very aggressively and it would be difficult to sustain over a longer duration. The head of claims at a mid-size private general insurer said even if claims lead to a premium increase, the focus will be to keep the product affordable. Breaking even might be a problem.