THE GIST of Editorial for UPSC Exams : 24 October 2020 Keeping it saral (The Hindu)

Keeping it Saral(The Hindu)

Mains Paper 3: Economy 
Prelims level: IRDA 
Mains level: Measures taken by the IRDA for their product accessibility 

Context:

• The insurance industry often rues the fact that despite a crying need for protection products in India, risk covers are often sold and not willingly bought. 
• The blame for this lies squarely at the industry’s doors, given its penchant for complicating even simple products like pure term plans with superfluous features and indecipherable jargon. 

Measures taken by the IRDA:

• The Insurance Regulatory and Development Authority (IRDA) has tried to solve this problem by getting all insurers to launch templated products with uniform features and minimal frills, examples being the Arogya Sanjeevani health cover, Corona Kavach and Corona Rakshak. 
• It has now mandated a standard term plan, Saral Jeevan Bima, which it hopes will simplify choices for consumers and reduce mis-selling and disputed claims. 
• While the idea of a no-frills term plan is a good one, IRDA will need to keep a close watch on actual product rollouts to ensure that the industry delivers on its intent of making this plan accessible to all.
• Saral Jeevan Bima does simplify choices for investors — its common formula for deciding death benefits and standard waiting period of 45 days and minimal exclusions are examples. 
• IRDA however has been too conservative in setting the sum assured at ?5 lakh to ?25 lakh, as even a ?3 lakh annual income earner would need a life cover of ?30-45 lakh for adequate protection. 
• While insurers are allowed to offer higher covers, it is doubtful if they will as the product could cannibalise on their existing high-cost plans. 

The regulator also needs to exercise vigilance on three other aspects:

• One, it must ensure that Saral Jeevan Bima, unlike existing term covers, is not denied to lower-income people who make up the bulk of the population and have the most need for protection. 
• Two, the product must not lack marketing push by way of prominent website display and advertising. 
• Three, given that IRDA has only standardised features for this product and not premiums, it must ensure that players do not over-charge or add hidden costs to this no-frills product. 

Conclusion:

• IRDA should also examine why the premium differentials on existing pure term plans are so high today. 
• Despite being based on the same mortality tables, base premiums charged by different players on their term covers, for investors of identical age, vary by as much as 50-60 per cent. 
• Infusing more transparency into these calculations will help make term products more affordable and accessible to all.

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Prelims Questions:

Q.1) With reference to the BharatmalaPariyojana, consider the following statements:
1. BharatmalaPariyojana is an umbrella program for the highways sector that focuses on optimizing efficiency of freight and passenger movement across the country.
2. This will be done only by development of Economic Corridors and Inter Corridors.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: A

Mains Questions:

Q.1) What are the major objectives of the Insurance Regulatory Development Authority? Do you think it needs to ensure the product is accessible to the common people?