After the National Democratic Alliance government’s Pradhan Mantri Jan Dhan Yojana (PMJDY) that had kept the banks busy, the next big-ticket programme is insurance schemes (group-term and personal accident), announced in the Budget, which would be provided to all account holders.
Initially, the insurance firms will tie-up with public sector banks (PSBs) but at a later stage private banks will be roped in.
Public sector insurers like Life Insurance Corporation of India (LIC) have already tied up Dena Bank, Corporation Bank and IDBI Bank to implement the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJBY) for savings bank account holders.
In a recent Indian Banks’ Association meeting to discuss the social security schemes in insurance and pension, all member banks were requested to explore tie-ups with suitable insurance companies who are willing to offer the insurance schemes. These schemes would be on those terms as offered by LIC and the public sector general insurance companies.
“As announced in the Budget, we are required to tie up with banks since there will be direct debit of premium from the bank accounts. Discussions are on regarding how to implement the schemes and at least the public sector insurers (life and non-life) will tie-up with the major PSBs by June,” said a senior public sector insurance executive.
PSB executives said the initial costs are going to be much more than what the fee will be proposed to be paid. Bank staff, especially at branch level, would have to shoulder burden.
Finance Minister Arun Jaitley had announced two new insurance schemes in the Budget for lower income groups. The Suraksha Bima Yojana, an accident insurance scheme of Rs 2 lakh sum assured with premium of merely Rs 12 per year, is one of them. Prior to finalisation of terms, insurance companies had indicated a premium of Rs 24 to make the scheme viable. But the ministry prevailed upon the companies to reduce it to make it more attractive for masses, said a bank executive.
Similarly, there will be a Jeevan Jyoti Bima Yojana, with a life insurance cover of Rs 2 lakh with an annual premium of Rs 330. This will be for those between the age group of 18 and 50 years. Jaitley said these schemes would be part of a universal social security scheme.
Besides, there will be another scheme, Atal Pension Yojana (APY). The modalities of this scheme are being worked out with Pension Fund Regulatory and Development Authority (PFRDA).
APY will be focussed on all citizens in the unorganised sector, who join the National Pension System (NPS) administered by PFRDA and who are not members of any statutory social security scheme. Under the APY, the subscribers would receive a fixed pension ranging from Rs 1,000 to Rs 5,000 a month, at the age of 60 years, depending on their contributions, which itself would vary on the age of joining APY.
This scheme is open to all bank account holders, who are not members of any statutory social security scheme. All bank account holders under the eligible category can join APY with auto-debit facility to accounts, leading to reduction in contribution collection charges.
Both public and private life and general insurers can participate in these schemes. Industry officials said this would be similar to the other schemes, where a tender will be floated and quotations will be sought. Insurers would require to apply state-wise for getting a particular scheme contract implementation in each state.
Jaitley had said the premium for this scheme would only be direct debit from the bank accounts and only account holders would be eligible for the product.
The country’s insurance penetration has fallen to 3.9 per cent in 2013-14 compared to four per cent in 2012-13. With these schemes, insurers expect the penetration levels to increase. However, this is not a new phenomenon. With lower rates of renewal and lesser disposable income available to invest, insurers said the penetration has come down.
While the PMJDY was only open to those people who did not have a bank account, these schemes are open to anyone who wishes to be part of the scheme. Further, these schemes would not be subsidised by the government and all claim-related services would be provided by the banks.
Insurers said that they are still in talks on how to deal with individual claims in the life and non-life schemes. Designated bank branches will be set aside for these claims and there would atleast 2-3 personnel in each branch handling these claims. Apart from this, renewal facilities would also be given by banks.