A few days ago, I had a chance to help an illiterate person fill up the forms of Suraksha Bima Yojana and Jeevan Jyoti Bima Yojana. These two schemes are supposed to ensure financial security for millions who are unprotected today. While the idea is noble, what will be the experience on the ground?
First, here is what I found strikingly good about these schemes. One, accident cover of Rs 2 lakh for Rs 12 is really inexpensive. Two, the forms were designed thoughtfully. They are just a page long and essentially require only Aadhaar, mobile number and address. The longer the form, the sharper the drop in adoption and I am delighted to see that someone in the government knows it and has taken the trouble to eliminate every detail that is unnecessary - except possibly one, which could be its Achilles heel. Third, in both the schemes, the government is acting as a facilitator. Subscribers are putting their own money to get covered. The government is not funding anything (except using the already stretched government banks), though I am not sure it will stay that way.
Having said that, I have a major apprehension about the outcome of the schemes and it stems from three aspects: one, no medical test; two, the behaviour of insurance companies; and three, the behaviour of subscribers.
One of the major benefits touted for the life insurance scheme is that there is no requirement for a medical test. The "no medical test" feature was brought in possibly as part of the effort to simplify the "onboarding" and ensure large, early adoption for a successful take-off. But does this create pitfalls, especially for the poorer sections?
A medical test is a cornerstone for life insurance companies agreeing to underwrite policies. There are very few life insurance products that waive medical tests. Those that do carry a higher premium on a like-to-like basis. Indeed we have come across cases where online term plans considered an application, asked for a medical test and finally denied a policy.
The Jeevan Jyoti Bima is being backed by the same insurance companies. In this case, the insurers are taking a self-declaration from the applicant that he or she does not suffer from medical issues. How many people will read the form fully - and in case they do have a medical history, not go ahead? My guess is hardly anyone, unless they are guided by someone knowledgeable. How likely is it the millions who have bought the scheme from the harried bank officials (a branch I know was teeming with potential subscribers and so was postponing normal banking work) were guided correctly? If not, many of these self-declarations are defective and create grounds for the denial of claims.
I gather that the government is also leaning on the insurers to waive the usual process of investigating thoroughly deaths within one year of buying the policy. Another major negative is that the scheme ends once you cross 55, when you really need it. And I have not even gone into the foul play that regularly happens in rural areas in the greed for insurance money - an insight that I picked up from a top insurance executive several years ago. Maybe this is why the policy is more expensive than the current rate for group policies.
I have two other practical issues with the scheme. The first is the attitude of insurance companies. At Moneylife, we analyse insurance schemes threadbare. At Moneylife Foundation, we have run an insurance helpline to help people deal with mis-selling of insurance products and the rejection of claims. Let me share with you a cruel fact. Insurance companies live by a simple motto: "deny if you can, pay if you must". They apply this day in and day out to even well-educated people. In an extraordinary case, New India Assurance had charged excessive premium to thousands. It refused to admit it when pointed out. As expected, the regulator's attitude was of apathy. One policyholder filed a public interest litigation. Having lost there, New India is returning the money, but only to those who ask for it and not to all, even though it has all their details.
In another case, HDFC Life had turned a senior citizen's Rs 3.2 lakh into just Rs 11,678 after seven years. The policyholder filed a complaint with the insurance ombudsman in Delhi. The ombudsman, who usually does not consider mis-selling cases, ordered a full refund of the premium. But HDFC Life has not paid the money even after three months. After we wrote to it on behalf of the policyholder, it has promised to pay in seven days.
I have given just two example of how insurers behave, when facing claims. It is inconceivable for me that that such people will abandon their stance and go out of their way to meet the claims of millions of illiterate and semi-literate people. The person I had helped fill up the form lives in Mumbai. The nominee, his wife, lives in the Azamgarh district of Uttar Pradesh. I had to write the names of two post offices as the village home address. I wonder whether the claim will reach the right person if a situation arises. If not, his wife will have no recourse to fight.
In this article, I have only touched upon the selling process and claim denials and not on grievance redress, which is a dead end for even urban well-educated people. Will the finance ministry subsidise insurance companies, so that a high claim-payment record is maintained? Or will the premiums go up? Time will tell.
The writer is the editor of www.moneylife.in
editor@moneylife.in
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
