Rope in states to make Aam Admi Bima Yojna work

If LIC generates surplus out of the scheme, other companies will seek level playing field. There are questions to be answered in this budgetary announcement. Health Insurance for weavers being extended to other artisans. It is known that health insurance in rural India needs two considerations. First affordable premium and second desirable physical health assistance within the reach of the rural insured. While fiscal incentive can be given at micro-level for making the premium affordable, provision of physical assistance poses problems in making the program useful.

The budget is largely silent on this aspect. Weather insurance on actuarial basis will replace NAIS in three states on a pilot basis. World Bank has already taken up a project for India to launch eight pilot products based on weather. There has to be integration of coping strategy, agricultural indemnity insurance, weather index insurance, agronomical phase insurance and agro-output price stabilisation to be of real help to the farmer.

Another aspect that came out of some recent research in the field also needs attention. The farmer is traditionally intelligent but not techno-savvy. The tractor he purchases is faulty because of bad faith delivery by the vendor. There is no quick insurance against such risks. This is one of the major causes of farmers plight. Budget has nothing for such risks of farmers.

Increase in medical insurance premium tax deductibility is a welcome measure anytime. But there is no measure to create robust institutional mechanism to arrest the tendencies of moral hazard, bad delivery of claims and bad pricing of physical care delivery. Similar is the case of senior citizen health insurance scheme of National Insurance Company Ltd being adopted by other PSU insurers. This is only an impetus making arrangement independent of budgetary accounting — an arrangement between the insurers and insured without any fiscal commitment by the budget.

Proposed amendment of insurance law is a substantive declaration by the finance minister. The amendment will be tabled during the budget session as a consequence of cabinet appointed group of ministers perusing it to neutralise the contents that may provoke the coalition partners.

Service tax continues to be a major irritant in insurance accounting and interpretation. Is acceptance of premium a service or payment of claims in the event of a loss is service? What constitutes a risk component in a risk plus investment top-up insurance? Should the extent of risk be discretely quantified? What are its repercussion in pooling system as insurance risk is a pool of risk? The budget making pundits should apply their mind and resolve the dilemma some day.