1 D1 Flashcards
Meaning and significance of Insurance
- Meaning: insurance policy is a Debt instrument / Legal contract against eventualities of death or damage.
- 2 parties in this contract: 1) Insured / client 2) Insurer / Underwriter.
- Insurance provide stability to the households (against death, disability, damage) and entrepreneurs (against fire, theft, natural disasters etc.)
- Insurance companies invest clients’ premium in various public and private sector projects, thereby channelizing savings towards investment & economic growth.
History of Insurance in India
Read in handout
Types of Life insurance and money returned?
Whole life= Longer policy: (e.g. 35-40 yrs) Endowment= Shorter policy: (e.g. 10-20) - At maturity - Yes, savings returned, At death - Yes
Term = Short Policy, Low Premium e.g. PM Jeevan Jyoti Bima Yojana , At maturity - no , At death - Yes
ULIP: Unit Linked Insurance Plans: Part of money goes in insurance, part in Mutual fund, At maturity - Yes, savings returned, At death - Yes
Life Insurance → notable entities in public sector
What is Post Office Life Insurance?
- Initially started as postal life insurance for the postal employees (1884), later extended to rural people as well.
- Presently, 6 schemes for govt employees and 6 schemes for rural areas (usually with prefix of “GRAM” e.g. gram Suvidha / Suraksha / Santosh….)
Life Insurance → notable entities in public sector
Sampoorna Bima Gram Yojana (2017)
✓ by Ministry of Communications
✓ In every district, atleast 1 village identified → In that village, cover all households with a minimum of one RPLI (Rural Postal Life Insurance) policy.
✓ All villages under the Saansad Adarsh Gram Yojana will also be covered.
Purpose of LIC act?
Headquarters location and name?
LIC motto
✓ To take over/nationalize the private life insurance companies → LIC Act, 1956. So, LIC is a statutory corporation/statutory company.
✓ Rigveda: (Yogakshema: well being) = name of LIC HQ@Mumbai & its corporate magazine.
✓ Gita: (Yogakshemam Vahamyaham:- I ensure safety and well being (of my devotees) = LIC motto.
✓ 2018: became majority shareholder in IDBI bank. 2019-March: RBI classifies IDBI as a ‘private sector’ bank.
WHY is Govt disinvesting LIC?
Budget-2020: LIC Act will be amended → LIC will be converted from a statutory corporation into a (listed) Public Limited Company → Initial Public Offering (IPO) → Government will sell part of its shareholding.
WHY is Govt doing disinvestment?
LIC’s insurance products come with a sovereign guarantee by the Govt. So people prefer to buy it over private sector insurance policies. This hampers perfect competition.
If Government shareholding ⬇ → LIC functioning becomes independent → less financial repression of households (e.g. how LIC bought loss making IDBI under Government’s pressure. Ref Pillar#1B-1: Banks’ classification).
So, earlier, International Monetary Fund (IMF, 2018) and Justice B.N.SriKrishna’s Financial Sector Legislative Reforms Commission (FSLRC-2011) had also advised the same to Government of India.
Disinvestment = Government will earn some ₹₹ by selling its shares → welfare schemes.
PM schemes for Life Insurance & Accidental (Gen) insurance launched by Finance Ministry → Dept of Financial Services ?
Does it cover hospitalisation cost?
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJB)
Pradhan Mantri Suraksha Bima Yojana (PMSBY)
Neither scheme gives hospitalization cost.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJB) Age Purchase from Premium Type Nature of Plan Return?
18-50 years with bank account in India. NRIs eligible but payment in rupee currency only.
LIC or any empaneled pvt. life insurance company.
Rs. 330 per person/ annum
LIFE Insurance
1 year “term” LIFE insurance. Term LIFE insurance = no death, no money returned.
Any type of death: ₹ 2 lakhs
doesn’t cover hospitalization cost.
Pradhan Mantri Suraksha Bima Yojana (PMSBY) Age Purchase from Premium Type Nature of Plan Return?
18-70 years with bank account in India. Remaining same as PMJJB
4 Public Sector, or any empaneled pvt. General Insurance company.
Rs.12/- per person/ annum
General Insurance
1-year “term” accident cum death insurance.
Accidental Death: murder, natural disaster etc. ₹2 lakhs
- 1 eye/hand/leg: 1 lakh
- 2 organs/>: max. 2 lakhs
Suicide, alcohol-drugs related death: not eligible
doesn’t cover hospitalization cost.
What is General insurance?
An insurance policy other than ‘life insurance’, is called General Insurance. e.g. Accident Insurance, Health Insurance, Crop Insurance, Fire-Theft-Marine & Vehicle Insurance.
Name Public Sector General Insurance Entities with years
1948: Employees’ State Insurance Corporation (ESIC) under Labour Ministry – through an act of Parliament to protect selected category of workers.
1957: Export Credit Guarantee Corporation of India (ECGC) under Commerce Ministry. Gives insurance cover to exporters, and credit guarantee to Bank/NBFC who loan to exporters.
1961: DICGC Act: banks must buy deposit insurance from it. Although not considered a General Insurance Company in textbook sense because doesn’t directly sell insurance
policy to any individual household/businessman.
1972: General Insurance Nationalization Act: 107 (private) general insurance companies were taken over by GIC and its 4 subsidiaries (viz. National insurance, New India Assurance, United India, Oriental). Later, Govt took direct control over these 4 subsidiaries, and left GIC to take care of re-insurance biz.
2002: Agriculture Insurance Company ltd, (formed with funding of GIC, above 4 public sector Gen. Insurance Cos and NABARD.)
2018-Feb: Budget announced to merge National Insurance Company, United India Insurance Company and Oriental India Insurance Company- but the plan
has not materialized yet.
2018-Oct: FinMin → Dept of Financial services organized ‘Insurance Manthan’ for Public Sector GI @Delhi. Outcome? six-point agenda: fully insured society, customer orientation, digital -analytics for future, sustainable-prudent business, reach for everyone and talent management.
Employees’ State Insurance Corporation & Act year and ministry
1948: Employees’ State Insurance Act → 1952: ESIC corporation (ESIC) setup under Labour Ministry.
Where does ESIC apply?
any establishment with 10/> (10 or more) employees - BEFORE - Compulsory ATMANIRBHAR Reform (2020)- Compulsory
If establishment less than 10 workers → but it’s a hazardous industry e.g. (firecrackers, toxic chemicals, acid) - BEFORE - Voluntary, ATMANIRBHAR Reform (2020)- Compulsory
If establishment less than 10 workers → Non- hazardous industries - BEFORE - Voluntary, ATMANIRBHAR Reform (2020)- Voluntary
Who are the ESIC subscribers?
Employee in above establishment, with monthly salary less than ₹21,000/-
Who pays ESIC premium?
“x%” of employee’s wages+ “y%” from employer’s side.
An ESIC subscriber gets following benefits?
1) Medical insurance for the worker and his family from day#1 of joining
2) Maternity Benefit to women employees
3) Monthly payment to family, if worker dies by employment related injuries.
4) Sickness benefit: partial wages during medical leave.
5) Monthly payment on disability
6) Unemployment allowance if involuntary loss of employment- through the scheme ‘Atal Bimit Vyakti Kalyan Yojna’.
Project Panchdeep - digitization and automation of ESIC processes by WIPRO
Project Arrow - (2017) Modernization of India Post (2008)
What are Project Panchdeep and Project Arrow?
PP- digitization and automation of ESIC processes by WIPRO (2017)
PA- Modernization of India Post (2008)
[Asked in UPSC-Pre-2012] Consider the following:
1) Hotels and restaurants 2) Motor transport undertakings 3) Newspaper establishments 4) Private medical institutions The employees of which of the above can have coverage under ESIC? (a) 1, 2 and 3 only (b) 4 only (c) 1, 3 and 4 only (d) 1, 2, 3 and 4
D
Details about general insurance for corona warriors?
Age limit?
Company?
Who pays premium?
Duration?
Gen Insurance → Corona Warrior ₹50 lakh cover (2020-March)
ATMANIRBHAR → PM Garib Kalyan → ₹50 lakh accident insurance scheme cover for health workers involved in managing the Coronavirus such as doctors, nurses, paramedical staff, ASHA workers etc.
o If corona illness death / corona duty related accidental death (like mob lynching & stone pelting) = family gets ₹50 lakhs.
o If corona led illness but recovered AND NOT DIED = no ₹₹ given to anyone.
Age limit? None.
Company? New India Assurance, a public sector general insurance company.
Who pays premium? Ministry of Health and Family welfare
Duration? Upto 2020-September.
Types of Health Insurance schemes under General Insurance?
Fixed Benefit
Fixed payment given depending on illness.
If the Policy agreement said “if you get cancer, we’ll give you ₹50 lakhs.”
So, even if a patient spends ₹10 lakh on hospitalization, still the company will pay ₹50l.
Indemnity Based
Upto to the “actual hospitalization cost” from the total insured sum.
“Indemnity” = upto actual cost in treatment, subject to max limit. so, if ₹5 lakh ki policy=
Actual treatment cost ₹2 lakh → company pays only ₹2 lakh
Actual treatment cost ₹7 lakh→ company pays max ₹5 lakh
Further Subtypes:
Cashless policy: patient simply goes to an
empanelled hospital = free treatment.
Non-Cashless policy: patient first payshospital bill from own pocket → submits bills to insurance company → gets refund.
What is Arogya Sanjeevani Policy (2020) and features?
Too many types of health insurance policies with various features and premiums = a common man gets confused which health policy is best for him.
So, IRDAI ordered health insurance companies to launch a Standard Health Insurance Product (SHIP) to cover the basic health insurance requirements of every person.
With following Features:
Name: must be “Arogya Sanjeevani Policy -”. Any other name NOT allowed.
Type: Indemnity based Health insurance policy.
Premium :Decided by individual insurance company.
Validity: minimum 1 year to lifetime
Entry age:
✓ Minimum 18 to Maximum 65.
✓ Policy can for (A) self and/or (B) Family Floater policies
What are costs covered under Arogya Sanjeevani Policy?
hospitalization cost, pre and post hospitalization cost, Ayush treatment (=Ayurveda, homeopathy etc).
Under General Insurance - Health insurance =
Differences between Corona Kavach vs Rakshak?
2020: IRDAI issued guidelines for the general insurance & health insurance companies to launch standard health policies against Covid-19, with following standard names:
Corona Kavach
Compulsion: general insurance & health insurance
companies have to compulsorily launch this policy
Type: “Indemnity” = upto actual cost in treatment, subject to max limit.
Coverage: ₹50,000 to ₹5 lakh
Premium: Decided by an individual company.
but the company will have to keep it uniform across all States/UT.
Age: minimum age 18 to maximum 65. (dependent younger children are also covered, but they can’t ‘subscribe’ by themselves.) subscribers’ min. age is 18 years.
Corona Rakshak
Compulsion: optional for company to launch this policy
Type: Fixed Benefit Plan- Fixed amount of money if
subscribers gets Corona. Irrespective of actual treatment cost.
Coverage: ₹50k to 2.5 lakh
Premium: Decided by an individual company.
but the company will have to keep it uniform across all States/UT.
Age: minimum age 18 to maximum 65. (dependent younger children are also covered, but they can’t ‘subscribe’ by themselves.) subscribers’ min. age is 18 years.