LIC wants clarity on Rs1,000 crore project

LIC wants clarity on Rs1,000 crore project
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First Published: Tue, Mar 06 2007. 02 22 AM IST
Updated: Tue, Mar 06 2007. 02 22 AM IST
The Life Insurance Corporation of India has written to the finance ministry for details on the Rs1,000 crore rural insurance programme announced in the Budget last week, as questions are being raised whether states can effectively implement it.
In his Budget, finance minister P. Chidambaram earmarked the money to subsidize and extend death and disability coverage to one person from the estimated 1.5 crore rural and landless households.
Under the Aam Admi Bima Yojana, which translates into an insurance plan for the common man, the state and Union governments are expected to equally bear the premium of Rs200 for every policy holder. LIC has been appointed as manager of the fund.
“We want details on whether it will cover only landless labourers or will it include the unorganized sector as well,” said an LIC official based in Mumbai.
The letter, according to the official, also seeks clarification on which agency will be appointed to collect money from the states. It also questions whether the new coverage will be introduced in all the districts or 250 districts identified earlier. LIC will meet officials in the ministry on Wednesday. While nearly 20 crore people live below poverty line, only about 70 lakh people, or 3.5%, have Janashree Bima Yojana (people’s insurance programme), the government’s flagship group insurance policy for the poor. The policy was introduced in 2001.
While response to Janashree Bima Yojana from some states, such as Rajasthan, has been good, many states have been reluctant to start it and the programme has become known as a trump card during elections.
With the state’s backing, Rajasthan currently has 22.23 lakh policy holders, but penetration level in several areas is negligible due to poor publicity and often because the states either cannot or are reluctant to meet the matching grant. The poorest performers continue to be areas in Bihar, Jammu & Kashmir and the Northeastern states, said the official.
In Pondicherry, the programme signed up some three lakh policy holders — and then abandoned two years after it began when the government changed hands, officials said.
Corporation officials are also worried whether Uttarakhand, which has nearly three lakh policyholders, will continue with policy after the recent election toppled the previous Congress government that committed to meet the state’s part of the financing .
In India, currently, only 30% of policies mature at the end of the policy, according to the corporation official. “So it’s a tough call to get the poorest people to sign up for a life policy,” he said. At present, LIC said it has met its target and crossed the 20-lakh figure set for this year. Currently, most life insurance policies for rural families are sold through a network of self-help groups.
“Most of the time the government subsidized programmes do not work because the money never arrives on time so the life insurance companies, which run on profit motive, lose interest,” said N. Balagopal, founder member of Confederation of NGOs of Rural India (CNRI).
The network of some 3,000 NGOs is now implementing the government’s non-subsidy flexible social security scheme, called Jeevan Madhu, launched last year for vegetable sellers, tailors and housewives.
According to secretary of Centre of Indian Trade Union secretary, Dipankar Mukherjee, money earmarked for Aam Admi is “peanuts,” and does not comrehensively address the issues involving the unorganised sector which comprises 37 crore people, including agricultural workers.
“Even here they have left it to the state government for the 50% contribution. The government must first draw up an omnibus social security scheme for the unorganised sector,” Mukherjee said.
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First Published: Tue, Mar 06 2007. 02 22 AM IST