Nu 150,000 life insurance to cost Nu 3.261 billion in 5 years in premium costs

The current government had made a pledge to increase the Rural Life Insurance (RLI) sum from Nu 30,000 to Nu 150,000.

However, this means that the insurance premium to be paid will increase from the current Nu 121.15 million (mn) a year to Nu 652.36 mn a year, which is a huge increase and cost on not only the government, but also the members.

There were a total of 621,297 members in 2023, with the total annual premium at Nu 195 per member, where Nu 87 is paid by members and Nu 108 is paid by the government.

Each member paying Nu 87 premium contributed Nu 54.05 mn, and with the government paying Nu 108 per member as premium, it totals to Nu 67.10 mn with the grand total of Nu 121.15 mn as premium payment.

In the same year, of the Nu 121.15 mn collected, there was a payout of Nu 30,000 per member for 3,535 applicants which came to a total of Nu 106.05 mn in total claims paid.

If one takes the 2023 numbers of members and applies the Nu 150,000 insurance claim then the total premium jumps to Nu 1,050 per member.

Under the current premium, the members pay around 45% while the government pays 55% and so if the Nu 1,050 premium is divided then the members contribution will increase to Nu 472.50 which is Nu 293.56 mn, and the government share of the annual premium will be Nu 577.50 which is Nu 358.79 mn.

An official from RICBL said that the former DNT government’s Finance Minister Namgay Tshering had asked for a presentation from RICBL on the numbers that would be involved if the government raised the rural life insurance to Nu 150,000.

The official said the former DNT government said it does not have enough budget for the increase and had dropped the idea.

Another issue which came up during the Thrizin’s conference is that if the premium is increased then the rural public may not be able to afford it as it would jump from the current Nu 87 to Nu 472.50 and so if there are 10 members in a family they are looking at Nu 4,725 a year in member’s contribution.

Here, the RICBL official said it will depend on the government on how much premium it wants to pay to ensure affordability for the public.

The RICBL official said the term rural life insurance is a misnomer as it actually covers all Bhutanese who are eight years and above on 1 January of the year.

The current Ministry of Finance has also asked RICBL for a break up.

At the annual premium cost of Nu 652.36 mn a year, it will only go up over the years as more members get added, and so conservatively it would cost Nu 3.261 billion (bn) over the next five years.

The majority of this cost will have to be carried by the government as affordability will be a issue even if the members only have to pay 45% of the premium.

The Rural Life insurance was initially Nu 15,000 but it was increased to Nu 30,000 by the second government.

From 2019 to 2023 a period of five years, a total of Nu 591.41 mn has been paid as premium to RICBL of which the members paid Nu 263.86 mn and the government paid Nu 327.55 mn.

In the same time, a total of 16,941 people have filed claims worth Nu 508.23 mn.

RICBL said that RLI is not a profit-making activity for them, except for a service fee and any leftover amount is kept in the reserve to cover for future exigencies if there are more claims or if there is a catastrophe.  

In case of a big disaster of more than 250 dead in a day, then RICBL has reinsurance in place to cover it. However, if it is 150 a day for a while then RICBL will have to cover it.  The leftover amount is also kept for advance deviation, capital for solvency requirement, fertility rate, future inflation

Death benefit is not payable if the policy premium for the year is not paid.

If the insurance amount is increased to Nu 150,000 then the total claims paid would be huge.

In 2023, it was Nu 106.05 mn for 3,535 claims for Nu 30,000 each. In the case of Nu 150,000 amount the pay-out for the same number of people would be Nu 530.25 mn.

Recently, the Finance Minister, Lekey Dorji, said the rural life insurance is not wholly put in place to encourage people who live in rural areas.

It is mainly put in place as it has been informed that the insurance is not enough for the aftermath of the relatives who passed away.

He said due to the COVID-19 pandemic, the economy has been deeply affected, and so the plan of increasing the rural life insurance from Nu 30,000 to Nu 150,000 won’t be implemented right now.

He said there are other important priorities that should be taken care of first and that the pledge to increase the insurance will be fulfilled, but it will take time and it will be put in place in the coming years.

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