THE CONTRIBUTION OF INSURANCE TO THE AGEING SECTOR

Under the Protection of Elders Act 2000, the Ministry of Social Services established a National Council for Elders and a Secretariat to implement the Act. The Council was expected to implement the Act by establishing Village Level Elders Societies, to expedite issue of Senior Citizens I.D. Cards and promote nearly 20 activities among elders' societies such as agriculture, home gardens, handicrafts, rural industries. So far 10,000 village societies have been established (out of possible 14,000 V.H. Divisions and 8 lakhs of ID Cards issued (out of 2 million elders).

Apart from Govt. Pensioners and provident funds for the private sector, the fact remains that 35% - 40% of the population are not covered by any floor of social protection aside from the means of tested social assistance and benefits from the Samurdhi Scheme.

These are the casualty employed and the extended family members including house-wives, widows, single mothers, grandparents and domestic servants who contribute to the maintenance of families, and the social structure when both parents are employed. These are indeed a vital labour force but with no viable social protection through Life Insurance or Health Insurance during and at the end of their lives.

Brief description of Insurance in India

Insurance activity has been going on for more than 150 years in India. Initially founded by Europeans, Oriental life (1818) and Triton (1850) and first Indian Insurance Company, the Bombay Mutual Life (1870)

In 1928 the Indian Insurance Companies Act enabled Govt. to collect data on life and non life insurance business. Later the Insurance Act of 1938 was adopted and a Dept. of Insurance appointed for administration of the Act. Upto 1939, 199 companies were working in India.

During the years 1939 - 55 there were a series of amendments to the Insurance Act 1928 and reports of several committees on the functioning of insurance companies and their services to the public.

"The study of Insurance companies clearly revealed the concept of trusteeship which should be the cornerstone of life business which seemed entirely lacking. The nationalisation of the insurance business became necessary with a view to provide cent for cent security to policy holders, ensure use of life insurance funds for national building activities, avoid wasteful efforts in competition and some undesirable practices; save the dividends paid to shareholders of Insurance companies and finally to spread the gospel of Life Insurance to rural areas.

Accordingly, the Government of India nationalised life insurance companies comprising 245 Indian and foreign insurance and provident societies, and formed the Life Insurance Corporation of India. For more than 4 decades the Life Insurance Corporation of India (LIC); has been "enjoying monopoly status" enjoying super natural profits at the expense of consumers in Life business. (Page 28 and 29 Insurance Theory and Practice, Prentice Hall India, New Delhi 2007).

"Life Insurances Funds" constitute over 10% of gross household savings of financial assets in India and little over 1% of GDP. Despite its efforts the LIC has not penetrated more than 15% of the insurable population which itself is more than 300 million (at the time of this text) in contrast, the average per capita insurance is USD 4 as against USD 964 in USA and USD 3817 for Japan.

Recognising the need for reform in the financial and insurance sector, the government appointed the "Malhotra Committee" in 1993 (Report 1994) to evaluate the insurance industry and recommend future directions). Among various recommendations an Independent Regulatory Authority was setup; and popularisation of pension schemes in rural areas, allowing Postal Life Insurance (PLI) in rural areas, payment of interest on delayed claims, use of revised mortality table by LIC and revision of premiums every 10 years.

Reforms were initiated with the passage of a Insurance Regulatory

Life Insurance Premium as a percentage of GDP in Sri Lanka is only 0.5 per cent. While penetration of life insurance as a percentage of population is 10.9 per cent and 27.7 per cent as a percentage of the Labour Force. With the end of the war, an ageing population and growing affluence, there is crucial imperative for Life Insurance, retired, and health products The age of retirement (60 years), in the country was determined when life expectation was lower. Currently, expectation of Life for males is 74 and females 80

and Development Authority Bill in Parliament in December 1999 (IRDA). Under the Act, the government has once again deregulated the sector opening it up for private players. The Mulhotra Committee also recommended Banks participation in insurance sector on certain conditions. Accordingly, the Reserve Bank of India issued guidelines for banks entry into Insurance business along with a monetary and credit policy for the year 2000 to 2001 leading to the growth of bank assurance.

Under the Indian Insurance Regulatory and Development Authority Act, 1999 Section 32B and 32C, Insurance Companies are required when expanding in urban areas, to cover a minimum percentage in rural areas. There is high rural market in India as around 2/3 of the rural population live in villages, 60% of the villages have population less than 1,000 around a quarter of rural population is below poverty line, 75% of the rural homes are from lower income groups were literacy rate is less than 40%. (The above history and quotations are from "Insurance Theory and Practice", by Nanili Prava and Prabir Pal 2007 Prentice Hall in India, New Delhi)

The above figures are not very different from Sri Lanka. As the text suggests, a survey of this group would be revealing as to whether there is any floor of protection other than the basic Samurdhi or social assistance, monthly assistance.

Furthermore it would also be opportune to examine the functioning of the insurance industry as a whole and seek newer directions as seen in the Indian experience.

Current situation in Sri Lanka

"The Concept of Insurance for the Plantations originated from the time of British rule. But in 1961, this saw a transformation with the Govt. nationalising the sector which had over 60 local and foreign insurance companies. But even after liberalising the sector in 1986, penetration remain low with 22 Licensed Insurance and 46 Insurance Brokers regulated under the Insurance Board of Sri Lanka. "Life Insurance Premium as a percentage of GDP in Sri Lanka is only 0.5 per cent. While penetration of life insurance as a percentage of population is 10.9 per cent and 27.7 per cent as a percentage of the Labour Force. With the end of the war, an ageing population and growing affluence, there is crucial imperative for Life Insurance, retired, and health products. This poses an immense opportunity for insurers "Interview with Ms. Marina Tharmaratnam of the SL Institute of Directors and currently on the Directorate of DFCC Vardana Bank, Published in Lanka Monthly Digest, August 2012.

Health Insurance

Although the Elders Act mentions inaugurating of Health Insurance Schemes, as one of the functions of the National Council for Elders, no effort has been made in this direction, so far the private insurance sector has private health insurance but with high premiums. This is attributable to the experience that Insurance Corporate face excessive charges for insured clients, seeking treatment from some professionals and private medical institutions.

In New SouthWales (Australia)

In New South Wales (Australia) by arrangements between stakeholders and private medical practitioners, institutions and insurers, the basic maximum medical charges for a whole range of medical interventions have been evolved. The Medical Benefits Schedule operating from 0111-2011 issued in Australia by the Government Department of Health and Ageing cover as many as 82,225 medical procedures in New South Wales. Thus, Private Sector Health Insurance in N.S.W. is a more viable proposition for clients, insurers and delivery of private medical services as fees for medical charges are fixed, and publicly available. It was reported in TV (India) that Dr. Dev Shetty, Managing Director, Narayanan Health City from Bangalore offers affordable health care. He has a network of low cost medical institutions offering services at monthly contributions as low as Rs. 5/- to 10/- per month from membership of a million drawn from 30,000 Cooperative Societies. All ranges of medical treatment are available from the low insurance cover.

Singapore also offers Medi Serve Insurance and Medi Shield Insurance at low cost to clients. These schemes come under the term of Micro Health Insurance and would be worth exploring for this country.

The private insurance sector in this country, which has recently shown impressive profits, could get together as an act of Corporate Social Responsibility to serve the lowest segments of society for life and health insurance in collaboration with private medical institutions. This venture would be welcomed and encouraged by any Government as they contribute to meeting unexpected contingencies of medical care for poorest of the poor, who have no resources to fall back upon for long-term major treatment. The venture would contribute to raising the living of family standards, growth and development in wider unreached sectors low end of income earners, their families and children.

Pre-Planning for Retirement

The above training courses for working population were started in small ways by the Ministry of Social Services but the full potential was not realised.

If diversified schemes of attractive insurance packages could be offers to younger working population early in life, they would be able to face the heavy financial demands at the time of retirement for increased income for investments to meet education of children, their settlement in life and pensioners leading comfortable lives.

This package would be welcomed by the private sector and perhaps state subsidised as welfare measures to workers, in addition to what they receive as terminal benefits under the existing law (EPF / ETF)

Extending Age of Retirement

Some countries wisely do not have an age of retirement but encourage workers, office employees and professionals to continue work as long as they are fit and able. There is thus less strain on country's health, social services and manpower services.

The age of retirement (60 years), in the country was determined when life expectation was lower. Currently, expectation of Life for males is 74 and females 80.

The National Council of Elders (Ministry of Social Services) proposed to Government a year ago, that the age of retirement for public be raised to 62 years without interfering with the Line of promotion of senior SLAS, about to retire.

On the same basis, it is time that private insurers, lift the age of admission of new policyholders from 60 to 65 (males) and females 70 years as many live longer and healthier lives.

The policy discussion would be recognised as bonus for health, ageing, active senior citizens, who would continue to work as long as possible and live with their families.

J.V. Thamber Retd. SLAS Former Member of

Elders Council, Ex President NGO Forum on Ageing