The distribution channels of Insurance companies are finding it tough to compete with the government’s cost efficient Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). The government had introduced the scheme with the objective of increasing insurance penetration in India. Insurance penetration in India was at 3.9% in 2013 as compared with the world average of 6.3%. Already, 2.66 crore people have enrolled for the scheme.
Under the PMJJBY scheme, the government offers life insurance cover of Rs. 2 lakh for a small premium of Rs 330/- annually. Even the entry-level plans of other insurers cost much more than this.
PMJJBY v/s Plans of Insurance companies:
PMJJBY
Insurance companies
Cover of Rs. 2 lakh for a premium of Rs.330/year
LIC – offers a five-year term plan with a minimum assured sum of Rs 6 lakh for a premium of Rs 1,212 at the entry level
ICICI Prudential: Premium of Rs 2,452 a year for a 25-year-old for a 30-year plan
With this massive difference in premium and sum assured, agents are finding it difficult to push higher-value insurance products, especially in the smaller cities and towns. As of now the agents are making people aware about the limitations of the government scheme and being able to sell their plans. But it will be interesting to see how much these government-initiated plans have impacted the sales of insurance companies.
Besides PMJJBY, Prime Minister Narendra Modi had launched two other schemes – the Pradhan Mantri Suraksha Bima Yojana for accidental death insurance and the Atal Pension Yojana to provide old-age income. Total enrolment in all three schemes is 10.4 crore as of now.
