Private insurers wait for premium hikes to enter Jan Suraksha schemes

While it has been more than a year since the launch of the Pradhan Mantri Jan Suraksha Yojana, several private insurance companies are still not part of the scheme. The reason: They are still waiting for the pricing of the product to improve, so that it can be sustainable on a long-term basis. The scheme includes a term plan, a personal accident plan and a pension plan.

The government has fixed Rs 12 as annual premium for the Pradhan Mantri Suraksha Bima Yojana (PMSBY) or accident insurance scheme whereas the premium is Rs 330 per year for the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). This was fixed during the scheme’s launch in May last year and it hasn’t been revised since.

This is despite the fact that both the pure term insurance and personal accident policies under the scheme have seen several claims being reported. With this being a direct debit plan, the insurance policies would continue with the same rates, leading insurers to continue providing services at the same costs, though claim amounts have increased.

A senior executive of a large general insurance company explained that several companies are not part of the scheme at this point, since premiums are very low. “We will enter the scheme if the pricing is revised, but the current rates are not sustainable,” he said.

In the personal accident plan, of the Rs 12, insurance premium given to the insurer per annum is Rs 10. This apart, Rs 1 is paid per year as reimbursement of expenses to the intermediary (business correspondent, agent among others), while Rs 1 goes towards reimbursement of administrative expenses to the participating bank.

Similarly, for the pure term insurance plan, insurance premium given to the insurance company is Rs 289 per annum per member. For reimbursement of expenses to the intermediary, Rs 30 per annum per member allocated, while Rs 11 per annum per member is paid as reimbursement of administrative expenses to participating bank.

The government has not increased the premium, since the endeavour is to reach the maximum number of people at minimum cost. It was made mandatory for public sector insurers to be a part of it. Among private insurers, nine among the 23 private life insurers are part of the scheme, while six private general insurers of the 17 private non-life ones (excluding specialist insurers and standalone health insurers) are participating.

Even when the scheme was launched, there was apprehension among insurers about its viability since they feared that it would not be able to cover basic administration and distribution costs. However, those with bank partners and tie-ups were among the first to become a part of the schemes since banks were at the centre of the scheme and were given the responsibility of selling the products to their customers.

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

Insurance penetration in India has risen partially to 3.4 per cent in financial year 2015-16 compared to 3.3 per cent in 2014-15, according to Swiss Re's sigma report. The report said that total insurance premiums in India grew by 7.9 per cent in 2015 owing to stronger growth in life and non-life premiums. Insurers had said this was due to the Jan Suraksha insurance schemes that helped widen the spread of products.