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.
What is Rashtriya Swasthya Bima Yojana?
✓ Fee? One time registration ₹ 30. No premium by beneficiary. Govt pays premium.
✓ Benefits?
o ₹ 30k for medical treatment [smartcard, cashless: even existing ailment, even private hospital.]
o ₹ 25k for accidental death. And if breadwinner dies: ₹ 50 x 15 days.
✓ ++Senior Citizen Health Insurance Scheme (SCHIS) –if 60/> they get additional ₹ 30k for treatment.
✓ Both RSBY and SCHIS are subsumed in PM-JAY (2018)
What is Ayushman Bharat?
(Introduction: DATA) In the last decade, in-patient hospitalization has increased nearly 300% in India. More than 80% of the hospital expenditure met by out of pocket.
So, rural households are forced to use household savings and borrowings = vicious cycle of poverty. So, Ayushman Bharat launched in Budget 2018, with two components:
A) 1.5 lakh Primary Health Care Centers (PHC) to be transformed into Health & Wellness Centres. Free drugs, checkup, mother-child care etc.
B) National Health Protection Scheme (AB-NHPS) → Later renamed ‘PM Jan Arogya Yojana (PMJAY)’ and launched with Motto “Swasthya Aapka, Saath Hamara” from Ranchi, Jharkhand (2018, Sept). It has subsumed Rashtriya Swasthya Bima Yojana (RSBY) & Senior Citizen Health Insurance Scheme (SCHIS).
PM Jan Arogya Yojana (PMJAY, 2018)
What is given?
Who are the beneficiaries?
Where to get treatment?
✓ What is given?
A FREE insurance cover upto ₹ 5 lakh per family,
per year for secondary and tertiary hospitalization.
All pre-existing disease covered from day 1.
Pre and post hospitalization & medicine expenses.
Cashless and paperless access [NITI partnered web portal, with privacy protection]
✓ Beneficiaries?
Socio-Economic Caste Census (SECC) data → + 8 cr rural + 2 cr urban = 10 cr families= ~50 crore people. No limit on family size or age of members.
✓ Where to get treatment?
All public hospitals and empaneled private hospitals (by the respective States).
Hospitals to have Pradhan Mantri Aarogya Mitras (PMAMs) to help patients with the paperwork.
These PMAMs are trained using National Skill Development Corporation (NSDC) and Ministry of Skill Development.
National Health Authority’s role in PM-JAY?
✓ Originally it was an “Agency”, then restructured & renamed into “Authority” (2019).
✓ NHA oversees the implementation of PM-JAY, operational guidelines, collaborate with
insurance companies & IRDAI, running web-platform etc.
✓ NHA is an ‘attached (adjunct) office with health ministry. i.e. Health Ministry only looks after parliamentary matters like replying in question hour, tabling annual reports etc. thus giving NHA more freedom in day to day functioning.
✓ NHA has a Chief Executive Officer (CEO) with status of Secretary to Govt of India
. Above NHA → “Governing Board”
o Chairman: Minister of Health & Family Welfare
o Members: NITI Ayog CEO, NHA-CEO & other govt officials and experts.
o States will be represented in the Governing Board on rotational basis
State Health Agency’s (SHA) role in PM-JAY?
- Each State to form a Trust / Society / Not-For-Profit Company / Nodal Agency → that will act as State Health Agency (SHA).
oSHA can directly implement the scheme by themselves OR.
oSHA can tie up with an insurance company to implement the scheme.
“Special Category States”:
- North-Eastern States, and
- TWO Himalayan Hilly States: Himachal Pradesh
and Uttarakhand# - Cost sharing: Union contributes 90%: State contributes 10% of the cost for scheme implementation in the given State.
- Other States: who are not in above category (UP, Bihar, etc.)
- Union territory (UT) with legislature: Delhi, Puducherry, Jammu & Kashmir. - Cost sharing: 60:40
- UT without legislature: Ladakh, Andaman Nicobar etc. - Cost sharing: 100%
- # Before the removal of Article 370 (in 2019), the State of J&K was previously in Special category, so it got 90:10 funding.Afterwards: J&K is UT with legislature, so, J&K will get 60:40. So, 2019-Aug: Central
Government considering creating a new category ‘Hill Union Territory so J&K may continue to received 90:10 funding.
Budget-2020 on Ayushman Bharat PM-JAY
✓ We’ll setup hospitals in aspirational (=backward) districts for treatment of PM-JAY beneficiaries. Hospital construction Funding: Public private partnership (PPP) →
Public side’s funding will be provided using ₹₹ from tax on medical devices.
✓ We’ll use Artificial Intelligence and Machine Learning (AI-ML) to take preventive actions against the spread of diseases. Total ₹6400 cr allotted for PM-JAY.
Challenges for PMJAY?
- Cooperative Federalism: spirit is missing. States have to sign agreement with Union to begin operations. But, W.Bengal already has state-govt sponsored “Swasthyasathi” scheme in State with similar features so CM Mamta has left PM-JAY (2019, Jan). Similar issues in other Non-BJP states.
- Fiscal Challenges: Budgetary allocations insufficient. If govt borrows more money→ ⏫ in fiscal deficit. Private hospitals may perform unnecessary surgeries & prescribe excessive amount of medicines to extract more money from govt.
- AdministrativeChallenges:
o Beneficiary identification
o Doctor to patient ratio
o Physical and IT infrastructure, Transport & connectivity upto village level.
o Medical privacy of Patient-data may be leaked to Pharma companies for their clinical trials and commercial motives. - Lack of coordination with other schemes: 2019-Feb NHA announced PM-JAY will not cover cataract surgeries, dialysis and normal deliveries because already there are
other schemes for poor people.
❓ Which one of the following is not a feature of the Ayushman Bharat Scheme? (UPSC-CDS-i-2020)
(a) There is no cap on family size and age.
(b) The scheme includes pre- and post-hospitalization expenses.
(c) A defined transport allowance per hospitalization will also be paid to the beneficiary.
(d) The scheme provides a benefit cover of Rs. 10 lakh per family.
D
❓ Centrally sponsored scheme Ayushman Bharat is a national health insurance system for: (UPSC-Geologist-2020)
a) women b) every citizen c) old age people d) poor and vulnerable.
D
Under GENERAL INSURANCE → OTHER THAN HEALTH INSURANCE, What is Pradhan Mantri Fasal Bima Yojana (2016)? Nodal agency and challenges?
- Against natural calamities, pests, diseases
- Protects before, during and after harvest.
- Premium paid by farmers against the total insured amount: Rabi winter crops (1.5%) – Kharif summer monsoon crops (2%) –Horticulture & Commercial crops other than oilseed & pulses (5%). Remainder premium is paid by Union: State Govt (50:50).
- It’s optional for States to join.
- It’s compulsory for farmer to buy a crop-insurance IF he’s taking crop-loan from banks
- Nodal Ministry: Agri Min → Public sector general insurance companies, and empanelled private sector insurance companies.
- Challenges? States not paying their portion, Pvt insurance companies not settling claims quickly. Union upgraded technical guidelines to fix the delays.
Features of PM-FBY (2.0) revamped in 2020?
Controversy?
Before-2020
- Suppose a kharif crop insurance premium = ₹100.
Farmer paid ₹2 of the premium
Union paid ₹49 + State paid ₹49. In other words, Union and States shared their premium burden half-half (50:50).
- Compulsory for farmer to buy this insurance policy, IF he wanted crop loans from bank
- Multiple Perils covered such as flood, drought, hailstorm. But, farmers in Rajasthan had no fear of floods.
- Government allotted a district /area to an Insurance company for usually 1 year.
From 2020-Kharif
- Suppose a kharif crop insurance premium = ₹100.
Farmer pays ₹2 of the premium
Union pays only ₹25 to 30 based on whether it’s
irrigated or unirrigated respectively.
State may have to pay ₹68-73. So, states’ burden increased.
However, the Union will bear 90:10 of the burden in case of North Eastern States.
- Voluntary for farmers.
- ‘Single-peril’ insurance can be taken e.g. “protection only against drought.” This will help reduce premium amount.
- Minimum 3 years. And if company shows outstanding performance then even more years may be granted. This will encourage companies to invest more in the marketing & insurance agent network.
-Updated the methodology for assessment of crop
loss
Controversy: W.Bengal implemented scheme in 2016 to 2018 but then stopped it, & launched its own Bangla Fasal Bima Yojana (2019) so cooperative federalism missing.
Under GENERAL INSURANCE → OTHER THAN HEALTH INSURANCE, What is NIRVIC Scheme (2019)?
Insurance to Banks on Exporters’NPA → NIRVIC Scheme (2019)
Boss? Commerce Ministry → Export Credit Guarantee Corporation (ECGC)
✓ NIRVIK (Niryat Rin Vikas Yojana) is an Export Credit Insurance Scheme (ECIS).
✓ Exporter takes a loan from a bank. But if he defaults then ECGC will cover upto 90% of his principal + interest losses to the bank. (Before NIRVIC scheme, it was only 60%)
✓ Exporters pay ‘premium’ to the bank → bank pays it to ECGC.
✓ Premium rates depend on sector e.g. diamond, chemical etc.
Under GENERAL INSURANCE → OTHER THAN HEALTH INSURANCE, What is Third Party Motor Insurance?
- Motor Vehicles Act (1988) requires all motor vehicle owners to purchase it.
- Third party (TP) insurance: When your vehicle hits another vehicle, person or property → that victim (third party) registers a case, gets compensation. IRDAI
regulates premium rates & other norms. - SC judgement (2019): TP insurance validity should be 3-5 years, so even if owner forgets to renew annually, the third party is protected.
What is Own Damage Insurance (OD)?
It protects owner of vehicle against theft, vandalism, accident, fire.
Under GENERAL INSURANCE → OTHER THAN HEALTH INSURANCE, What is Title Insurance?
- ‘Title’ means a legal document showing ownership of a property.
‘Title dispute’: usually happens when multiple persons are claiming ownership of the same
land / building. - ‘Title Insurance’ protects the new buyer in case of such legal disputes (by refunding the money he had spent in buying land, construction, legal expenses etc).
- Real Estate Regulation and Development Act 2016 (RERA) requires the builders to buy this type of insurance.
RERA requires builders to buy this type of insurance A- Catastrophe insurance B - Title insurance C - Own damage insurance D - Third Party insurance
B
What is Catastrophe Insurance?
It is just proposed.
Protects the client from natural and manmade disasters.
Presently, farmers’ crops are protected from natural disasters through PM-Fasal Bima Yojana. But, if his own home was destroyed in floods, it’s not covered → Union & State Governments forced to use taxpayers’ money for paying compensation to victims of floods, cyclones etc.
2019: IRDAI planning to allow catastrophe insurance (or CAT cover) for poor people.
What is Re-insurance?
- DICGCI Act (1961) requires banks to take deposit insurance from DICGCI. Similarly, Insurance Act (1938) requires insurance companies take ‘re-insurance’ on their biz.
- Previously, only GIC was the sole-reinsurer, but then norms liberalized (2015). New re- insurance cos allowed. e.g. India’s ITI Reinsurance Ltd. Even foreign re-insurers such as Swiss Re, Munich Re, General Reinsurance (Warren Buffet) are permitted.
- Benefits of multiple re-insurance cos? GIC’s monopoly in dictating re-insurance premium rates is gone. So, insurance cos’ cost of operations declined → biz. expansion, launch innovative products etc.
- (Full) Budget 2019: Technical Norms relaxed to attract foreign reinsurers to open branches in India.
HQs and Chronology of IBBI, PFRDA, RBI, IRDAI, SEBI?
RBI - Mumbai, 1934 SEBI - Mumbai, 92-99 IRDAI - Hyderabad, 96-99 PFRDA - New Delhi, 2003-13 IBBI - New Delhi, 2016
IDRAI - The insurance regulator - setup, HQ, structure and functions?
- 1996: IRDA setup→ given statutory status in 1999
- 2014: Its name changed to Insurance Regulatory and Development Authority of India (IRDAI)
- HQ: @Hyderabad, Telangana.
Structure - 1 Chairman: Dr. Subhashchandra Khuntia (IAS) (5/65), 9 members (5/62) = Total 10. They can be re-appointed
Functions
IRDAI gives separate licenses for life, general & re-insurance companies.
Prescribes norms for insurance companies for accounting, solvency, audit, commission to agents etc. It can penalize companies, suspend or cancel registration. Appeal → SAT
Norms for agents & brokers, banks selling products (Bancassurance), Surveyor/ Loss Assessor, and Third-Party Administrators (e.g. Hospital)
Consumer grievance redressal via Insurance Ombudsman
IRDAI is member of Financial Stability and Development Council (FSDC).
Challenges to insurance industry?
1) Capital intensive industry: Private players not generating enough profits due to poor returns in sharemarket. Bleeding in commission rates and marketing
2) Products are not cheap.
3) Insurance agents need more skill, network than banker. For bankers- loan recovery easier (SARFAESI, I&B) compared to an insurance company that invested into shares/bonds of a failing company (like IL&FS).
4) Rural people: either disinterested / un-served despite schemes & IRDAI norms.
5) People hesitate in buying House / Factory / Fire / Theft insurance due to fear of discovery of ‘asset value’- IT/GST raids & ransom demands. As a result, India’s “insurance gap” is high i.e. all the assets are not insured.
6) Insurance: Highly regulated, but Healthcare: highly unregulated, so
o Supply demand mismatch: between (doctors-hospitals) vs. patients.
o Standardized medical treatment costs difficult to ascertain, unlike car damage.
o Delays in claim settlement= fewer repeat customers for health insurance.
What are the Insurance progress indicators?
Insurance penetration % = Premium divided by GDP
Life (2011-2018) - decreasing in zig zag fashion
Non- Life (2011-2018) - improving in zig zag fashion
Insurance density $ = Premium divided by population
Life (2011-2018) - improving in zigzag fashion
Non-Life (2011-2018) - improving steadily
For India, these indicators are low compared to many developing countries due to aforementioned challenges.
Should FDI be increased beyond 49% in insurance companies?
Arguments for:
Indian insurance companies will get additional capital from Foreign investors = this can help mitigating the challenges.
- They can expand overseas, mobilize money from Bangladesh/Kenya’s insurance clients etc. & invest it in Indian economy.
- IRDAI prescribes “Investment pattern”, there is ombudsman for customer complaints. Further, Companies Act has norms for independent directors, auditing, whistleblower protection, CSR. So, apprehension that foreign investors will cause mischief = unlikely.
- China, Thailand, Indonesia et al have raised FDI limits in insurance sector. We should also follow their path.
Arguments against:
Foreign investors will put pressure on Indian insurance companies to generate more profit. So
- investment in junk bonds that offer higher return → Collapse.
- Insurance company may reject insurance claims for frivolous reasons to increase its profitability to keep foreign investors happy.
What is Pension?
Insurance: person/his family eligible to receive ₹ ₹ if he suffers death / damage. e.g. PM Jeevan Jyoti: ₹ 2 lakhs on death.
Pension: person eligible to receive monthly ₹ ₹ when he retires. And when he dies, his wife (is usually) eligible to receive monthly ₹ ₹. When she also dies, scheme stops.
ES2019 observed that in future, we’ll have an ageing population and less young people, so we should gradually raise the age of retirement. More in Pillar#6 → Demographic dividend.
When was EPFO set up, nodal ministry, governed by?
EMPLOYEE PROVIDENT FUND ORG.
- 1951-52: EPFO was setup initially by ordinance & then Act.
- Nodal: Labour Ministry.
- EPFO governed by Tri-partite “Central Board of Trustees”
I. Government (Union + state) – 15 nominees
II. Employers (industrialists) - 10 nominees
III. Employees (workers) – 10 nominees - They make policy decision about where to invest money (usually G-sec>C- Bonds>Shares; with minimum and maximum slabs) and they decide how much interest should be paid to subscribers.
Chronology of EPF, EPS EDLI
Employee Provident Fund (EPF) 1952
Principal + interest returned upon retirement age/ death
Partial withdrawal upto“X%”allowed for education, marriage, illness and house construction.
2020: ATMANIRBHAR → PM Garib Kalyan Package→ labour ministry allowed EPFO subscribers’ to withdraw upto “X%” of EPF fund to help the workers during lockdown.
Employees Deposit Linked Insurance Scheme (EDLI) 1976
If worker dies → family gets upto 6 lakh insurance.
Employee Pension Scheme (EPS) 1995
Monthly pension on retirement (once they attain the age of 58 years old) / permanent disability
What is UAN?
- EPFO subscriber worker has UAN (Universal Account Number) that remains unchanged even if he changes job from one organization to another.
- Previously, employee himself couldn’t generate his UAN, he had to request his employer to send forms to EPFO.
But 2019: EPFO allowed employees to generate UAN online by simply giving Aadhar & Mobile Number.
What is LIN?
Factory owner/Employer has LIN (Labour Identification Number)- which he uses while uploading EPFO documents on Shramsuvidha webportal of Labour Ministry.
- EPFO & ESIC transactions can be done through
o public and pvt sector banks
o through Ministry of Electronics and Information Technology (MeitY)’s UMANG App (Unified Mobile Application for New-age Governance).
