7th Pay Commission recommendation – How increase in group insurance scheme is unjustified
CGEGIS – Central Government Employees Group insurance Scheme
a) Term insurance premiums have plummeted over last 6 years. Since 2009, term insurance premium have crashed by 75 percent. A one crore cover for 30 year old male costs around Rs.30,000 in 2008, but one would be able to get the same cover today for around Rs.8000. But 7th CPC has made its recommendations exactly opposite to the trend in the market, instead of passing on the benefit to employees, 7th CPC recommended for taking away even meager benefit extended in the form of contribution to CGEGIS.
b) Huge unjustified increase in monthly deduction for GIS: 7th CPC has recommended for increasing monthly deduction & insurance amount by 41.7 times for Group ‘A’ & ‘B’ and 50 times for Group ‘C’ as given in table below,
c) 7th CPC recommended a ratio of savings fund to insurance fund as 75:25.
d) Therefore, for the annual contribution of Rs.18,000 by a Group ‘C’ employee Rs.13,500 will go for savings fund and Rs.4,500 will go for insurance fund.
e) On cessation of account (i.e. on retirement) savings amount plus 8.7% interest per annum (compounded quarterly) for savings account has to be paid to the employee.
f) In case of demise of the employee savings amount plus Interest as applicable on date plus insurance amount has to be paid.
g) So for risk coverage to the value of Rs.15,00,000 a Group ‘C’ employee need to contribute Rs.4,500 annually.
h) Whereas in LIC’s New Amulya Jeevan-II insurance policy, which covers only risk (100% goes to insurance fund), if a person joins at the age of 20 for the period of 30 years, for risk insurance amount of Rs.25,00,000 annual contribution is only Rs.3,652 per year. In LIC’s New Amulya Jeevan- II policy annual contribution is less by Rs.848 and insurance amount is more by Rs.10,00,000 than CGEGIS recommended by 7th CPC.
i) Unreasonable recommendation by 7th CPC: For 0.81 times of contribution recommended by 7th CPC, LIC of India a PSU is offering an insurance amount of 1.67 times recommended by 7th CPC.
j) When around 30,00,000 employees are going to be in the Group insurance scheme, annual deduction has to be much less than LIC’s policy which is offered for individuals.
k) Monthly deduction given in the table below for recommended insurance amount by 7th CPC is sufficient as per the rates applicable in New Amulya Jeevan-II insurance policy.
) By adding deduction towards savings fund, monthly deduction for CGEGIS for the insurance amount recommended by 7th CPC is given in the table below and it may please be ensured that savings fund should be paid the interest equal to interest paid to PF.