UNIVERSAL BASIC ‘INSURANCE’

Context

• As the importance of social security came into focus after the major waves of the COVID-19 pandemic, the debate on universal basic income (UBI) began to resurface in policy circles across the globe.
• However, there is another UBI that needs to be examined in the Indian context, i.e., Universal Basic ‘Insurance’.

Need of Social security systems

• Before discussing the second UBI, or insurance, it is worthwhile looking at the design options for social security.
• Income shocks result in a free fall of those living on the line of ‘Basic Living Wages’ down towards the ‘Critical Survival Line’. In any case, a fall that is further below ‘Critical Survival Line’ needs to be prevented as it can be catastrophic — a household can end up facing a poverty trap.
• Social security systems are like a safety net placed at ‘Critical Survival Line’.

Types of Existing Social Security Nets

• These social security nets can be of three types.
• The first type of safety net is basically a social assistance programme meant for the most income-deprived sections of society.
• The second is an active safety net which works like a trampoline so that those who fall on it are able to bounce back to ‘Basic Living Wages’. The second type of safety net is a scheme with a higher outlay.
• The third is a proactive safety net which acts like a launchpad so that those who fall on it will not only bounce back but will also move up beyond ‘Basic Living Wages’.
• The third type of social security net is the most desirable option but requires immense resources and institutional capacity.

Food Security

• Social security mainly encompasses food security, health security and income security.
• The Indian food security programme has over 800 million beneficiaries being provided heavily subsidised food grain under the National Food Security Act (NFSA).
• About 120 million children are provided free lunch under the Mid-Day Meal Scheme.

Health Security

• On the health security front, for the unorganised sector, there is the Ayushman Bharat Scheme of the central government with over 490 million beneficiaries.
• In the organized sector, the Central government runs the Employees State Insurance Corporation (ESIC) and Central Government Health Scheme (CGHS) catering to 130 million and four million beneficiaries, respectively.
• Health insurance schemes run by various State governments cover about 200 million people.
• Despite these large-scale provisions, about 400 million Indians are not covered under any kind of health insurance.

Income security

• Income security is the trickiest part to tackle in the social security basket.
• For the organised sector, there are three types of provident fund schemes: (1) General Provident Fund (GPF), (2) Employees’ Provident Fund (EPF) and (3) Public Provident Fund (PPF).
• There are about 53 million New Pension Scheme subscribers in the country.
• In the unorganised sector, the Pradhan Mantri Kisan Maan-Dhan Yojana (PM-KMY) and the PM-KISAN scheme is availed by about 120 million farmers.
• Atal Pension Yojana (APY) benefits 40 million people.
• The Pradhan Mantri Shram Yogi Maandhan Yojana has about five million beneficiaries while there are about 50,000 beneficiaries under the National Pension Scheme for Traders and Self-Employed Persons (NPS-Traders) scheme.
• The largest unorganised sector income security programme is the scheme under the Mahatma Gandhi National Rural Employment Guarantee Act, which has about 60 million beneficiaries.
• Thus, out of 500 million workers in India, about 100 million have no income security (pension, gratuity or other income) coverage.

Issues with Universal Basic ‘Income’

• Proponents of universal basic income cite the informality of the Indian economy as the hurdle in rolling out schemes such as unemployment insurance in the country.
• However, besides huge fiscal implications (around 4.5% of GDP), the proposal of universal basic income runs the risk of implementation failure due to large-scale beneficiary identification requirements.

Why Universal Basic ‘Insurance’?

• The other UBI, i.e. universal basic insurance, is a better proposition for two reasons.
• One, the insurance penetration (premium as a percentage of GDP) in India has been hovering around 4% for many years compared to 17%, 9% and 6% in Taiwan, Japan and China, respectively.
• Two, though the economy largely remains informal, data of that informal sector are now available both for businesses (through GSTIN – Goods and Services Tax Identification Number) and for unorganised workers (through e-Shram database of all unorganised workers).

Recommendation

• As a result of the recent initiatives by the Government, the Goods and Services Tax (GST) portal has 13.5 million registrations and the e-Shram portal has over 280 million registrations.
• As a prototype of a social security portal based on such data, the social registry portal, ‘Kutumba’, developed by Karnataka is available as a blueprint.
• Till the Indian economy grows to have adequate voluntary insurance, social security can be boosted through the scheme of universal basic insurance.