RICB may take over and enhance govt’s rural life insurance scheme

3Under the directive of the Prime Minister, the Royal Insurance Corporation of Bhutan (RICB), with support from the Ministry of Finance (MoF), has submitted a proposal to the Cabinet to take over and enhance the existing Rural Life Insurance Scheme (RILS) into the National Life Insurance Scheme (NLIS).

The proposal outlines four policy options of Nu.30,000, 50,000, 70,000 and a maximum 100,000. With the proposed annual premium rate of Nu.6.5 for every Nu.1,000 of claim amount, yearly individual premiums payable for the policies would be Nu. 195, 325, 455 and 650 respectively. RICB actuaries have used data from national censuses in identifying age brackets and mortality rates (which give a basic estimate of possible payouts in a year) to determine premium rates and arrived at these figures as a viable amount for both provider and consumers.

The new scheme will be a permanent (validity till death) insurance policy and solely cover deaths. Eligibility starts from age eight and unlike commercial insurance policies which require exhaustive screening of the health, age and lifestyle risks of buyers, consumers of the new scheme will not have to undergo any vetting process. Anyone will be able to walk into one of the 30 RICB branch offices across the country, provide proper identification, fill up a form and become a policy holder. Current subscribers to the RILS will also be updated in the NLI database and simply start paying the new premiums after choosing a policy option.

“We have the mandate to strengthen the nation’s social safety net and to that end, we have to design a scheme that is easily accessible and affordable for everyone,” said RICB’s Executive Director Sonam Dorji. “Once the scheme is taken over by RICB, the risks associated with the scheme will shift solely to RICB whereas the current scheme is a risk borne by taxpayers.”

In the event of delay in premium payments, a grace period of up to one month is proposed. If a death occurs during the grace period the family will be compensated but not in the case of death after the grace period.

However, with its extensive infrastructure and manpower throughout the country, the corporation is confident that timely collections will be made as will claims payouts.

The RICB database will have information on the entire eligible Bhutanese population from the national census which will be shared with the Dzongkhags and Gups to make people aware of deadlines and its implications. Branch managers will also follow up with all stakeholders to ensure premiums are collected timely.

The existing rural life insurance was started in the 1980s by Royal Decree at a premium rate of Nu.30 and a payout of Nu.10,000. Villagers called it, mistakenly, Mithey which directly translates to “human tax” and was managed by the Geog Gups with support funding from the Ministry of Finance. It was then revised in April 2009 to Nu.45 and Nu.15,000 and made voluntary. The government paid claim amounts that exceeded premium collections.

With the rising prices and costs, however, the current compensation of Nu.15,000 only barely covers and sometimes not even funeral rites. So an increase of claims amount would further be a drain on taxpayers’ money.

The RICB’s financial resources and the investments of the premium collected will ensure that claimants are paid without government financing, said Sonam Dorji.

The cabinet held a preliminary discussion on Tuesday, 2nd July and passed it to a subcommittee for review and advice.

The RICB is also working with the Ministry of Agriculture and Forests to start a crop insurance scheme as a risk management tool for farmers in the events of disasters and worsening weather conditions due to climate change. Premiums are currently being discussed.

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