Life insurance benefits for over six crore formal sector workers could see a significant rise with the labour ministry set to initiate an actuarial evaluation of the Employees’ Deposit Linked Insurance (EDLI) scheme.
The Employees’ Provident Fund Manager (EPFO), which runs the EDLI, is set to appoint a consultant for the exercise in order to match benefits provided by private sector group insurance schemes.
“The bids will be opened this week. We expect to appoint a consultant and start the evaluation over the next few months,” said a senior EPFO official.
The EPFO’s Central Board of Trustees had in January this year cleared a proposal for an actuarial evaluation of the EDLI scheme.
As an interim move, it had also hiked benefits under the EDLI by 20 per cent up to a maximum of Rs 1,56,000. Under this scheme, the family of a worker will get 20 times the average wage of the worker over the last 12 months subject to a ceiling of Rs 1,30,000 in case of his or her demise during the service period.
Employers contribute 0.5 per cent of basic pay (with a ceiling of Rs 6,500 per month) of an employee as insurance premium to the EDLI scheme every month. But with the relatively low life cover under the scheme, the EPFO had allowed employers to shift to group insurance plans of private companies if the benefits were better compared to the EDLI. Over 2,000 India Inc firms moved their workers to private group insurance plans.
However, with annual outflows much lesser than the yearly contributions from over 6.04 crore members, the EDLI scheme’s over Rs 12,000 crore corpus has been largely unutilised. For instance, the scheme received contributions of Rs 620.13 crore in FY13 of which Rs 123.88 crore was paid as assurance benefits, leaving a surplus of Rs 1,438.55 crore. Similarly, in FY12, the scheme had a surplus of Rs 1,347.55 crore after receiving contributions of Rs 566.40 crore.