Here's some good news for the working class in the age of pink slips: Corporates are now allowed to buy cover for their retrenched employees. The only catch is, the company cannot plan retrenchment and then buy the cover as that defeats the purpose of insurance.
Four state owned insurance companies -- New India Assurance, Oriental Insurance Company, National Insurance Company and United India Insurance -- today launched Ashraya Bima Yojana which will offer compensation worth 30 per cent of the average pay drawn by the affected employees for a maximum period of 12 months or till the retrenched employee finds alternate employment.
Modelled on the likes of dole handed out abroad to the unemployed, this policy will offer temporary sustenance allowance for retrenched workers at a premium of five per cent of the annual wages. However, unlike in the West, the Indian government has declined to participate and subsidise the cover. The premium, therefore, will have to be borne by the company applying for the cover for retrenched workers.
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The premium will be initially capped at five per cent of the aggregate annual wages of all workers earning a monthly income of less than Rs 10,000.
"The premium quoted is on the higher side, but if more companies enter the scheme, we might see premiums fall," said General Insurers' (Public Sector) Association of India (Gipsa). Finance minister Yashwant Sinha launched this risk product today at Nellore in Andhra Pradesh.
"Companies registered under the Factory Act or the Industrial Act, but not identified to be a BIFR case or its borrowings classified as non-performing assets, would be eligible to take this cover," said the Gipsa official.
Companies that have expressed desire to retrench their employees will not be eligible to apply for such a cover. There will also be a waiting period of six months before the cover comes into effect.
In order to hasten the processing of this cover, the territories have been divided between the four companies with New India looking after west, Oriental Insurance north, National Insurance east and United India south.
The nearest banks to the company's site will be designated to pay the monthly sustenance allowance to the retrenched workers.
The state insurers also introduced personal accident cover to Kisan credit cardholders for a sum insured of Rs 50,000. This is offered at a nominal annual premium of Rs 15 to be shared by the KCC holder and the issuing bank in the ratio of 2:1.