The claims-to-premium ratio for the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) — a term life insurance policy — hit an unsustainable 121 per cent in 2016-17, the second year of operations. The ratio was an even higher at 170 per cent in 2016-17 for the Pradhan Mantri Suraksha Bima Yojana (PMSBY), under which payment of Rs 2 lakh is guaranteed in the case of accidental deaths or grievous injuries.
These schemes, launched in May 2015, were projected as path-breaking steps to provide affordable, universal access to essential social security protection. The annual premium payable under PMJJBY, which covers even suicidal deaths, is Rs 330 while the same is just Rs 12 for PMSBY. The premium amount has to be paid by May-end every year for renewal and the policies are linked to the beneficiary bank accounts.
In the first two years of the schemes, the claim-to-premium ratios were 88 per cent for PMJJBY policies, under which the sum assured is again, Rs 2 lakh, and 121 per cent for PMSBY. Compare this with the claims ratio of 40-45 per cent for usual personal-accident and term life covers.
Very high claim ratios have caused a sense of discomfort among insurers over the policies, particularly PMSBY. Mostly, public sector insurance companies like New India Assurance, National Insurance Company and United India Insurance offer the extremely low-cost policies under PMSBY.
According to sources, the insurers have made several representations to the government, asking for a major increase in premium amount so that the losses from PMSBY don’t surge. “The companies have written to the government suggesting that PMSBY be repriced from Rs 12 to Rs 75-100 while agreeing to give a higher accident cover of `4 lakh,” an actuary with a state-run insurance company told FE.
The government is, however, still on a wait-and-watch mode as it is hopeful that once the pool of policy holders reach a critical mass, claims ratio could climb down. Analysts also feel that the trends in the two schemes meant for the poor need to be watched for another couple of years before repricing them.
“It (claims ratio in PMJJBY) is not very alarming as of now. But, if this trend continues year after year, then something has to be done in terms of pricing,” said S B Mathur, former chairman of LIC and Life Insurance Council.