Money & Banking

Insurers struggle with populist life cover scheme PMJJBY

G Naga Sridhar Hyderabad | Updated on April 23, 2019 Published on April 22, 2019

Industry sees losses under the scheme at over 20%; seeks a hike in premium

Low premium life cover scheme, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), has become a ‘white elephant’ for insures.

The losses under the scheme are understood to have gone up over 20 per cent for many an insurer in the financial year ended March 31, 2019 impacting their profitability.

“Though private players are also selling it, its a loss-making portfolio for many. The industry has requested the government for enhancement of premium from present ₹330 to around ₹440 or so,” RM Vishakha, Managing Director and Chief Executive Officer, India First Life Insurance Company Ltd, told BusinessLine.

The PMJJBY scheme offers a life cover of ₹2 lakh at a premium of ₹330 per annum per member and is renewable every year with effect from June 1.

“While life cover is always good, it is populism which is the main problem with an otherwise good scheme. The issue is you and me can also subscribe for it even though we afford to pay a reasonable and workable premium,” said the Chief Financial Officer of a top insurer.

If there is no intervention, the losses will further mount, say insurers as both gross enrolment as well as total claims have been going up significantly.

“As per the provisional estimates, there has been a significant increase in enrolment as well as claims in the year that ended March 31, 2019 and loss could escalate beyond 20 per cent,” said the CFO.

Private insures feel that LIC, the leading administrator of the policy, with a lion’s share should also confront the government on the disadvantageous aspects of the scheme. When contacted, a top executive of the LIC has refused to comment.

According to government data, the gross enrolment for PMJJBY in 2017-18 was 5.33 crore with total paid claim amount of ₹1795.32 crore.

Since its inception in 2015, the subscriber base has gone up from 2.96 crore to 5.33 crore and claim amount paid rose by over three times in the same period.

This assumes significance as the PMJJBY is now set for renewal by automatic debit of premium from bank account of the subscribers next month.

Published on April 22, 2019
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