NUTS AND BOLTS OF SOCIAL INSURANCE IN INDIA
Abstract
Social security in India was traditionally taken care of by the set up of family/community in general. With the rapid industrialization/urbanization beginning during the early 20th century resulting to an extent the breakup of the family set up the need for institutionalized and State-cum-society regulated social security arrangement has been felt necessary. The problem has been aggravated further with the ageing of the society and embarking towards market economy. Social insurance is considered to be a type of social security. Social insurance is a public insurance program that provides protection against various economic risks (e.g., loss of income due to sickness, old age, or unemployment). The implementation of social insurance schemes helps the unorganized employee and weaker section people for their joyful life especially the during the old age and retirement time.
Nuts and Bolts of Social Insurance in India
Introduction
Social Insurance is a dynamic concept of modern age which influences social as well as economic policy. It is the security that the state furnishes against the risks which as individual of small means cannot stand up by himself or even in private combination with his fellows. In any society no individual is capable of and versatile as to satisfy all his needs. Everyone is dependent upon others for the fulfillment of some or other needs. In particulars, the aged, helpless, the unemployed and the ones suffering from difficulty chronic diseases are badly in need of help from others. The pregnant women need assistance during last stage of pregnancy and for the delivery of the child. In case such persons are not given adequate help and assistance chaotic conditions will result in the society and the social order will be upset. More over when the aged, the sick, the pregnant and the other helpless persons have rendered help to other then they were able bodies, young, healthy and strong, the society owes them a debt for their earlier services and they must receive social assistance and social insurance in the hour of their need. This article highlights the social insurance programme in detail.
Statement of the Problem
India has a very basic social security system catering to a fairly small percentage of the country’s workforce. Traditionally, Indians relied on their extended families for support in the event of illness or other misfortunes. However, due to migration, urbanization, and higher social mobility, family bonds are less tight and family units much smaller than they used to be. Every person is faced with social problems and risks at some time in his life span due to risks associated with sickness, accident, unemployment, disability, maternity and old age. So far, neither the state nor private insurance companies have quite stepped up to fill this gap. The Social Security Policies are intended to mitigate or provide cover the costs for these problems and risks faced by persons exposed to these situations. Social insurance aims to help individuals in such time of old age, disability, and support in case the primary breadwinner dies.
Social Security
Social security refers to protection provided by the society to its members against providential mishaps over which a person has no control. The underlying philosophy of social security is that the State shall make itself responsible for ensuring a minimum standard of material welfare to all its citizens on a basis wide enough to cover all the main contingencies of life. In other sense, social security is primarily an instrument of social and economic justice.
Social security is a very comprehensive term. The two important means of providing social security are
- Social insurance and
- Social assistance.
- It involves the establishment of a common monetary fund out of which all the benefits in cash or kind are paid, and which is generally built up of the contribution of the workers, employers and the State.
- The contribution of the workers is merely nominal and is kept at a low level so as not to exceed their paying capacity, whereas the employers and the State provide the major portion of the finances.
- Benefits are granted as a matter of right and without any means test, so as not to touch the beneficiaries’ sense of self-respect.
- Social insurance is now provided on a compulsory basis so that its benefits might reach all the needy persons of the society who are sought to be covered.
- The benefits are kept within fixed limits, so as to ensure the maintenance of a minimum standard of living of the beneficiaries during the period of partial or total loss of income.
- It has to be borne in mind that social insurance alleviates the sufferings of the individual from the particular event, but, it does not prevent it.
- Social insurance is financed by contributions which are normally shared between employers and workers, with perhaps, state participation in the form of a supplementary contribution or other subsidy from the general revenue.
- Participation is compulsory with few exceptions.
- Contributions are accumulated in special funds out of which benefits are paid.
- Surplus funds not needed to pay, current benefits are invested to earn further income.
- A person’s right to benefit is secured by his contribution record without any test of need or means.
- The contribution and benefit rates are often related to what the person is or has been earning.
- Commercial insurance is necessarily voluntary, whereas social insurance is generally compulsory.
- In commercial insurance, the policy benefits are according to the premiums paid, while in social insurance the benefits received by the workers are much larger than their contributions.
- The inspiring motive of social insurance is the maintenance of minimum standard of living whereas commercial insurance does not aim at providing a minimum standard of living.
- Moreover, while commercial insurance provides against an individual’s risk only, Social Insurance is undertaken to meet a chain of contingencies of diverse nature and intensity.
- Sukanya Samriddhi Yojana
- Sukanya Samriddhi Account can be opened only by parents or legal guardians for upto two girl children.
- This account can be opened for a girl child till she attains the age of 10. A minimum contribution of Rs. 1000 per account has to be deposited per year. A maximum of Rs.1, 50,000 per account can be deposited.
- There is no limit in the number of deposits in a financial year. The money can be deposited through cash, cheque or draft.
- The guardian is expected to deposit amount in the account only till the completion of 14 years. No deposits after that is required till the maturity of the account.
- The scheme is offering an interest rate of 9.1% per year. The interest will be compounded yearly and directly credited to the account.
- The account can be closed only after the child turns 21. If the money is not withdrawn even after that, it will continue to earn the interest.
- Moreover the investment (up to Rs.1.5 lakhs) under the scheme, all the payments including the interest payment and the total maturity amount will be fully exempted from taxation.
- An accident insurance scheme, PMSBY offers a one-year accidental death and disability cover.
- The insurance premium of PMSBY scheme is Rs.12 per annum for each member.
- It can be renewed annually (i.e) the premium amount will be deducted from the bank savings account of the policyholder via auto-debit facility every June.
- Individuals between 18 to 70 years of age can apply for PMSBY scheme.
- It provides the risk coverage of Rs 2 lakh for accidental death and permanent total disability, and Rs 1 lakh for permanent partial disability.
- It is not a Mediclaim scheme, i.e., there is no provision for reimbursement of hospitalisation expenses following accident, resulting in death or disability.
Key Features
- The subscribers who will join the scheme would receive the fixed pension of Rs. 1,000.00 per month, Rs. 2,000.00 per month, Rs. 3,000.00 per month, Rs. 4,000.00 per month, Rs. 5,000.00 per month, at the age of 60 years, depending on their contributions.
- The minimum age of joining this scheme is 18 years and maximum age is 40 years.
- Under the scheme, a subscriber can contribute for minimum period of 20 years or more and pension payment will start at the age of 60 years.
- Under the scheme government of India will co-contribute 50% of the subscriber’s contribution or Rs. 1,000.00 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years.
- All bank account holders under the eligible category may join the scheme with auto-debit facility to accounts, leading to reduction in contribution collection of charges.
- Subscribers who will join the scheme before December 31, 2015, can avail the benefit of government’s co-contribution under the scheme.
- The policy provides life coverage for 1 year.
- The insured can renew the policy every year.
- According to one’s own choice, the insured can walk out of the scheme at any time and rejoin it in future.
- The policy offers a maximum sum assured of Rs2 lakh.
- As compared to the other term insurance policy the plan offers very low premium rates per year i.e. Rs. 330. Moreover, the premium rate is equal for all age groups ranging from 18 to 50 years.
- The claim settlement process offered by the policy is very simple and subscriber friendly.
Author
Dr. M.J. Senthil Kumar Associate Professor, Department of Commerce (UG) Sri Kaliswari College (Autonomous), Sivakasi 626130.
Dr. P. Sundara Pandian Principal, VHNSN College (Autonomous), Virudhunagar.
Dr.N.R.Nagarajan Senior Faculty, Department of Commerce Sri Kaliswari College (Autonomous), Sivakasi 626130.
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