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EXCLUSIVE: Life insurers seek longer exclusion period, higher premiums for govt-sponsored term insurance

Insurers believe the annual premium for a Rs 2 lakh cover under Pradhan Mantri Jeevan Jyoti Bima Yojana is not sustainable

April 19, 2018 / 01:19 PM IST

Life insurance companies have sought an increase of at least 30 percent in the annual premiums, or be allowed to have a higher exclusion period of three months from the current 45 days, for the term insurance scheme sponsored by the government. Life insurers have sought these changes in the policy structure from the Department of Financial Services, an arm the Ministry of Finance.

Exclusion or waiting period refers to the immediate period of a few weeks after the purchase of an insurance policy when no insurance claim is payable. So, if the period is three months, no claims are payable during those first 90 days of the policy.

The Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) that offers a cover of Rs 2 lakh for an annual premium for Rs 330 has led to losses for several life insurance companies.

“We do not want to exit the scheme, but want it to be sustainable in the long run from a pricing perspective. Also, several fraudulent claims have been filed and currently there is no provision to reject those,” said the chief of a private life insurance company.

PMJJBY is part of the Jan Suraksha Yojana which was launched as an extension to the Jan Dhan Yojana in May 2015. Jan Suraksha includes a term insurance cover, a personal accident cover and a pension plan. Even in the personal accident cover, insurers have sought an increase in the annual premiums which is only Rs 12 currently.

This scheme will open for renewal from June 1 and the premium hikes (if any) and waiting period will have to be revised prior to that.

The number of enrolments under the Pradhan Mantri Jeevan Bima Yojana has been 53.2 million as on March 26, 2018. Here, the number of claims received have been 97,023 meaning the total claim amount would be Rs 1940.46 crore considering Rs 2 lakh sum assured per person.

As against this, the premiums collected (Rs 330 per annum) has been Rs 1755.60 crore. This had led to claims losses for insurers.

The scheme includes a one-year cover term life insurance scheme, renewable from year to year, offering life insurance cover for death due to any cause. If the policyholder dies during this period, Rs 2 lakh is the benefit paid.

However, insurance claims resulting from death during the first 45 days from the date of enrollment into the scheme is not payable.

The actuary of a mid-sized private life insurance company said that the pricing has not been commensurate with the sum assured, especially since frauds have been reported.

“Policies being taken in the name of dead people has not been uncommon and it has been a challenge to ascertain the veracity of the claims. Unlike a regular insurance policy, medical examinations are also not part of the scheme,” said the official.

Another round of meetings will be held between the ministry officials and the life insurers for deciding the new structure and pricing of the product in May.

M Saraswathy
first published: Apr 19, 2018 01:19 pm

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