• kewal sethi

some thoughts on new insurance schemes

some thoughts on new insurance schemes

modi government has launched two schemes, one for insurance in case od death by accident wherein the premium is rs. 12 per year and the other life insuarance wherein premium is rs 330 per annum.

two things stand out. one that it is not free. you have to pay even though it is a token payment of rs. 12. we have been spoiled by freebies so much so that we feel we cannot live without them. the commercial world exploits this mentality to the hilt. 'buy one, get one free', is the slogan met almost every day in a variety of wares. numerous sales where the price is marked up and then given a discount is a fair occurrence. in this atmosphere, to ask for rs. 12 is also a brave step.

the second and more important point is also there which makes me think that this scheme should have been launched fifty or sixty years ago. let me illustrate. most of our economists, who have written about poverty, have come to the conclusion that large families are responsible for the extent of poverty. this is true not only of india but of all the countries. but why this high rate of fertility? there was just last week a news item that a person got a son after fourteen daughters. he is now planning to go on till he has another. why? the simple reason is that sons are insurance for old age. in the days when infant mortality was rampant (even now india is well up the scale), how many will survive was a matter of luck. this prompted the couple(or rather the husband, because wife had almost no say in the matter) to go for a large number of children, hoping some will survive. if such an insurance scheme had been in vogue, the man will be less worried about his old age. some states have, no doubt, started old age pension but one the amount is meagre, two the uncertainty element remains since either the government records are incomplete or normal red tape intervenes ( i am not talking about corruption element at all, envisaging a honest system). with insurance companies involved and with regulatory authorities installed, the results would have been more satisfactory.

thus assured about the old age worries, the temptation to provide insurance though progeny would be much less. once the habit had kicked in the insuarnace for old age sickness could also have been started. what an effect it would have on economy. with lesser number of children, the rate of savings in the family would have gone up. abhijeet bannerjee and esther duflo, in their book 'poor economic' have opined that household savings increased from 5 % in 1978 to 34 % in 1994 when the one child norm was enforced in china  (page 181). according to them one third of this increase can directly be attributed to smaller family. increase in savings rate is one aspect. consider the increased expenditure per capita on education and health. it is found that in the states like kerala and tamil nadu which have reached the TFR of 1.7 household expenditure  per capita on education is much more than in  bihar which is still struggling with tfr of 3.9 spends much. similar trends can probably be figured out for household expenses on health. .

with a more educated and more healthy population, the effect on economic progress can be envisgaed. the idea is that even a partial removal of fear over the security of the old age would encourage the citizens to live fuller life which is the over powering idea. might even usher in achchhe din.

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