Select any one Group Insurance Scheme and discuss the various features of the scheme in detail. Also discuss how the scheme is playing a decisive role in preventing and reducing poverty, inequality, social exclusion and financial vulnerability amongst the economically weaker sections of the society.

Q. Select any one Group Insurance Scheme and discuss the various features of the scheme in detail. Also discuss how the scheme is playing a decisive role in preventing and reducing poverty, inequality, social exclusion and financial vulnerability amongst the economically weaker sections of the society.

A Group Insurance Scheme is a form of insurance policy that provides coverage to a group of people under a single contract. These schemes are usually offered by employers to employees, trade unions to their members, or other collective bodies to their members or customers. One of the popular examples of such schemes in India is the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). This is a government-backed life insurance scheme designed for individuals between the ages of 18 and 50, with a low premium amount. The scheme aims to provide life insurance protection to the economically weaker sections of society, thereby contributing significantly to reducing poverty, inequality, social exclusion, and financial vulnerability.

Features of the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

1. Eligibility Criteria:

The PMJJBY is available to all Indian citizens who fall within the age bracket of 18 to 50 years. The individual must have a valid savings bank account in any participating bank. The scheme is primarily aimed at individuals from the lower and middle-income strata, including those who are not typically covered by conventional life insurance schemes. The premium payments are automatically deducted from the account holder’s bank account on an annual basis, which helps ensure smooth participation.

2. Coverage and Sum Assured:

PMJJBY offers life insurance cover of ₹2 lakh in the event of the policyholder's death due to any reason. This sum assured is significant for low-income individuals who typically lack access to other forms of financial security. In case of death, the nominee receives the amount, which serves as a financial cushion for the family members. The scheme is structured to be affordable yet beneficial, ensuring that the beneficiaries are adequately covered without burdening them with high premiums.

3. Premium Amount:

One of the standout features of the PMJJBY is its low premium rate. The annual premium for a sum assured of ₹2 lakh is just ₹330, which is significantly lower than the premiums of traditional life insurance policies. This low premium ensures that even individuals with limited financial resources can afford the coverage. The affordability of the scheme plays a crucial role in encouraging widespread participation, particularly among economically weaker sections.

4. Automatic Renewal and Payment:

The premium for the PMJJBY is automatically deducted from the policyholder’s linked bank account every year. This ensures that the coverage remains uninterrupted, and the insured individuals do not miss out on the benefits due to non-payment of premiums. Automatic renewal is particularly useful for people who may not be able to remember or prioritize such payments in their busy lives, ensuring that insurance protection is continuous.

5. Claims Process:

The claim settlement process under PMJJBY is straightforward. In the event of the insured's death, the nominee or legal heir can submit a claim at the bank where the insurance is held. The bank then processes the claim and disburses the amount directly to the nominee. This simple, easy-to-follow process minimizes the burden on the beneficiary, especially in times of grief, and ensures the financial protection reaches the family as quickly as possible.

6. Rural and Urban Coverage:

PMJJBY is designed to be inclusive and offers coverage to both rural and urban populations. Given that the economically weaker sections in India are often found in rural areas, the scheme ensures that even those in the most remote locations have access to life insurance. The widespread participation from rural areas is facilitated by the fact that the scheme is implemented through the extensive network of banks in India, which reach even the most distant corners of the country.

7. Renewal Process and Duration:

The PMJJBY operates on an annual renewable basis. The scheme is valid for one year from the date of enrollment, and it needs to be renewed each year. If the insured individual remains in the eligible age group and has a valid bank account, the policy can continue for as long as the person wishes to maintain it. This flexibility allows individuals to continue their coverage without any interruptions.

Role in Preventing and Reducing Poverty, Inequality, Social Exclusion, and Financial Vulnerability

1. Poverty Alleviation:

One of the primary benefits of the PMJJBY is its role in alleviating poverty. In a country like India, where a large portion of the population lives in poverty, especially in rural areas, the sudden death of a breadwinner can push a family further into financial hardship. Many families living below the poverty line are unable to afford basic life insurance coverage, which makes them particularly vulnerable in such circumstances. By providing life insurance at an extremely low premium, PMJJBY ensures that even the poorest families can have financial protection in case of an untimely death. The ₹2 lakh sum assured can significantly reduce the financial burden on the family, allowing them to recover from the immediate loss and continue their lives with fewer financial obstacles.

2. Reduction of Inequality:

Economic inequality is a major challenge in India, and access to financial products like insurance has historically been limited to the wealthy. The PMJJBY helps to reduce this inequality by providing a financial safety net to those who otherwise would not have access to life insurance. This policy has been designed to be inclusive, targeting the economically weaker sections of society and ensuring that they are not excluded from the benefits of life insurance simply because of their income level. By providing affordable insurance to the masses, the scheme helps bridge the gap between the rich and poor, allowing the less privileged to have the same financial protection as their wealthier counterparts.

3. Combatting Social Exclusion:

Social exclusion refers to the process by which certain groups are systematically marginalized from society and denied access to resources and opportunities that others take for granted. In India, marginalized communities such as the rural poor, women, and low-income workers often face social exclusion when it comes to accessing financial products. The PMJJBY plays a critical role in addressing this exclusion by making life insurance available to all, regardless of their social standing or economic background. The easy accessibility of the scheme through banks and the simplicity of the application process ensure that individuals from all walks of life can avail themselves of this financial protection, promoting social inclusion.

4. Financial Vulnerability Reduction:

Financial vulnerability is the state of being prone to economic instability or shocks. Families that are economically vulnerable are often hit the hardest when a breadwinner passes away, as they are left with little or no resources to cope with the loss. PMJJBY helps to mitigate this vulnerability by offering life insurance at a low cost, thus providing a financial buffer to families in case of such an unfortunate event. The ₹2 lakh sum assured can help families pay for funeral expenses, clear outstanding debts, and cover living expenses in the short term, preventing them from falling deeper into financial distress. For individuals in low-income households, this can make a significant difference, helping them navigate through difficult times without succumbing to poverty or financial ruin.

5. Encouraging Financial Inclusion:

The PMJJBY also promotes financial inclusion by integrating individuals who were previously excluded from formal financial systems. The scheme is linked to the banking network, and many individuals from low-income backgrounds, particularly in rural areas, already have savings accounts, which facilitates easy enrollment into the scheme. By ensuring that the most economically vulnerable groups can access financial services, the PMJJBY supports the broader goal of financial inclusion, which aims to provide every individual with the opportunity to participate in the financial system, thereby enhancing their ability to build wealth and secure their financial future.

6. Empowerment of Women and Marginalized Groups:

Women, especially in rural areas, often face challenges in accessing financial products. The PMJJBY has been an effective tool in empowering women by providing them with affordable life insurance coverage. This not only helps secure their future but also ensures that they have a means of financial support in case of emergencies. Additionally, the scheme is accessible to other marginalized groups, including tribal populations, migrant workers, and agricultural laborers, who traditionally have limited access to financial services. By targeting these vulnerable groups, the scheme helps reduce the disparities between different sections of society and supports inclusive economic growth.

7. Promoting Savings and Financial Literacy:

Although the PMJJBY is primarily a life insurance scheme, it also indirectly promotes savings and financial literacy. The automatic deduction of premiums from bank accounts encourages individuals to save regularly, even if the amount is small. Over time, this habit of saving can have positive implications for the financial well-being of individuals. Furthermore, the widespread implementation of the PMJJBY has helped increase awareness about the importance of insurance and financial planning, contributing to greater financial literacy among the masses.

Conclusion

The Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a prime example of how government-backed group insurance schemes can play a pivotal role in preventing and reducing poverty, inequality, social exclusion, and financial vulnerability. By offering an affordable life insurance option to economically weaker sections, the scheme helps create a safety net for families, reducing the financial shock caused by the untimely death of a breadwinner. The low premiums, easy enrollment process, and straightforward claims procedure ensure that even the most vulnerable individuals are not left behind. By promoting financial inclusion, reducing inequality, and supporting the financial well-being of marginalized communities, PMJJBY contributes significantly to building a more equitable and resilient society.