Lobby group appeals to IRDA to allow 50% rebate in re-insurance rate for government plan

KOLKATA: Life Insurance Council, a lobby group of insurers, has appealed to the Insurance Regulatory & Development Authority of India (IRDAI) for 50% concession in re-insurance rate on Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), arguing its members face losses as the premium may not cover the cost.

The council will also approach states to waive stamp duty of Rs 40 in order to improve viability of the scheme, said V Manickam, secretary general at Life Insurance Council.

Out of 24 life insurance companies, 10 have joined the national programme, offering Rs 2 lakh sum assured in case of death of a policy holder on an annual premium of just Rs 330. Insurance companies will get just aboutRs 249 after deducting towards bank commission and stamp duty, which many believe is not going to cover cost of insurance.

Banks that are mandated to sell the social security scheme have sold 2.5 crore life insurance policies since May. Insurers will have to pay Rs 100 crore as stamp duty collectively.

"The insurance industry has not done anything of this scale earlier," said Mayank Bathwal, deputy chief executive officer at Birla Sun Life Insurance Company. "It will be difficult to say whether we will face losses or not. As the year progresses, we will get a clearer picture."

Insurers have also expressed concerns over duplication of death claims and the Council has engaged Credit Information Bureau (India) (Cibil) to detect them. "The finance ministry directed us to find a partner to detect duplication of policies. We thought Cibil would be the right one," Manickam said.

"Our mandate is to make a repository of the death claims," Cibil MD Arun Thukral told ET.

"As and when death claims happen, the data will start feeding in," he said.

Cibil has built a database of 40 crore bank customers and 2.3 crore commercial loans, besides repository data of one crore mortgages.

"Cibil is equipped to access insurance policy holders' data and using them for the benefit of insurance companies," Cibil chairman MV Nair said.
The lobby group for life insurance companies is planning a bigger fraud monitoring framework too for its members.

"We are in the process of shortlisting a vendor who will build a database aiming to provide a fraud monitoring framework", Manickam said on the sidelines of an Indian Chamber of Commerce event in Kolkata.
A meeting is slated next week to finalise the terms of reference, he added. The mechanism will help insurance companies get details of customers and detect fraudulent claims.