Modi's next challenge after Jan Dhan: Sell more insurance to more Indians

At a time when the Jan Dhan Yojana, which aims to get India’s vast unbanked population into the formal economy, completes three years, the Narendra Modi government deserves a pat on the back for more reasons than one. The newly opened bank accounts of over 295 million beneficiaries have Rs 65,845 crore deposited. Of the total beneficiaries, as many as 230 million now have debit cards and are getting a taste of the digital economy for the first time in their lives. More than 170 million of these new bank account holders are in rural and semi-urban centres of India. The number of Jan Dhan bank account holders in states like Bihar, Jharkhand, Chhattisgarh and Uttar Pradesh equals the population of Australia and Canada put together.


While these numbers look impressive, Modi has many more miles to go before he can rest on the laurels of having created a wildly successful financial inclusion programme with few parallels across the world.


“Those who opened their accounts under the Pradhan Mantri Jan Dhan Yojana have received the benefit of insurance as well. Schemes like Pradhan Mantri Jeevan Jyoti BimaYojana, Pradhan Mantri Suraksha BimaYojana, with a small premium of one rupee or thirty rupees, are giving a new sense of confidence to the poor. For many families, in times of adversity or on the demise of the head of the family, through their one-rupee insurance, they received Rs 2 lakh in a matter of days,” Modi said in his All India Radio address to the nation on August 27.


These two insurance schemes, launched in 2015, have met with limited success so far. The life insurance scheme (called the PM Jeevan Jyoti Bima Yojana) has managed to cover only 35 million people across India since its launch. Finance Ministry data show that the figures for the accident insurance programme (the Pradhan Mantri Suraksha Bima Yojana) have been a bit more encouraging, with almost 110 million people opting to get covered under it. For a government that is hard-selling these schemes as part of its endeavour to usher in a universal social security in India, these are not spectacular results. 


Part of the reason for the accidental insurance scheme being more popular than life insurance is the obvious difference in premiums. While both provide a cover of Rs 2 lakh, an accident insurance can be bought by the underprivileged and poor by paying a premium of Rs 12 every year. What makes the accident insurance more attractive to the economically weaker sections is that it promises an amount of Rs 1 lakh to their families in case of a partial disability arising out of an accidents. The life insurance comes at a premium of Rs 330 a year, a day’s income for many whom the government seeks to bring under the social security net.


What also discourages people is that they have no choice to decide its continuity. Once the insurance is sold, the buyer has to consent to ‘auto-debits’ from their accounts. Every year, the premium is debited at an appropriate time from their accounts by banks and paid to insurance companies.


There also seems to be reluctance on the part of insurers to settle life insurance claims for those availing of these two schemes. Information from finance ministry shows that only 93 per cent of the claims received to date have been processed by the respective insurance companies. Insurance companies in India have a better track record of claim settlement when dealing with those not covered under these schemes. Insurance Regulatory Development Authority (Irdai) figures show that between 2013 and 2016, more than 97 per cent of all life insurance claims were settled in India. The lower settlements might further deter people from becoming part of the Modi’s government’s envisaged social security net. The ministry reports that insurance companies have paid Rs 1,319 crore as settlements under the life insurance scheme till July 2017.


But an encouraging sign is the higher settlement rate of accident claims when compared with the national average. Under the PM’s accident insurance scheme, 74 per cent of the 14,480 claims received were settled by insurance companies. Irdai figures show that the settlement rate nationally over the past three years has been around 62 per cent. For those who are the sole breadwinners for a family, an amount of Rs 2 lakh, though sustainable for only a few months, could mean a lot in terms of immediate sustenance. Until July 2017, under Modi's pet accident insurance scheme, insurance companies had paid Rs 231 crore to families of those permanently maimed or killed in accidents.

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