Objective="Provide health insurance for employees of a Government department."
Details for Reform Option "Scheme for Assistance to Families in Exigency (SAFE), Karnataka."
The social security schemes being offered by Department of Space (DoS) did not satisfy the varied financial needs of all its employees. Besides, the existing insurance providers could not meet their specific needs and some found the cost of the schemes to be very high. Therefore, a need for a comprehensive social security scheme was felt by the DoS employees, which supplements and complements social security is cost-effective and efficient in disbursing the financial assistance at the time of their need.
Two committees were constituted by DoS to carry out the preliminary work of forming the trust.
Based on the recommendation of the two committees, Vikram Sarabhai Trust (VSAT), an autonomous and financially independent trust was established by DoS, Government of India (GOI) in 1997, which could meet the specific social security gaps of DoS employees and also fulfilled the requirement of section 10 (23A AA) of Indian Income Tax Act.
Data was collected on mortality, serious illness and hospitalization etc. of DoS employees. Based on the data, a welfare scheme called Scheme for Assistance to Families in Exigency (SAFE) was formulated within the parameters of section 10 (23A AA) of Income Tax Act. The scheme enjoys tax exemption under the Income Tax Act; the corpus and surplus are invested in instruments approved by Department of Income Tax.
The governing rules of SAFE including trust deeds and bye-laws were drafted out. In December 1997, an innovative social security scheme for DoS/ISRO serving employees and their families was floated. The procedures were chalked out so that they were well defined and easily understood for disbursal of benefits to avoid discretion and arbitrariness.
SAFE governing rules have been widely circulated amongst DoS employees for their information. In addition, procedures for disbursal of Financial Assistance for Exigency (FAE) and residual bonus have been made available to all contributors. The annual report of the VAST provides audited accounts, which is sent regularly to contributors.
The institutional structure consists of the Patron, Board of Trustees (BOT), Ombudsman and Link Committees (LC). The BOT is a policy making body. The number of trustees can range from 5 to 17. Approximately one-third of the trustees retire each year. For transparency, BOT appoints an Ombudsman for redressal of complaints/grievances. The procedure for grievance redressal is widely publicized through the annual report of VAST.
Link committee members are identified at various locations of DoS to act as a bridge between the trust and the employees and to receive and process requests for benefits. The LC is supposed to give remarks for each of the application made by contributors in the prescribed format and send it to the Payment Facilitation Committee (PFC) formed by VAST. Normally, a trustee is a chairman of a LC.
The PFC goes through all requests for benefits and remarks of the concerned link committees and gives recommendation on a prescribed format. The VAST thereby releases the financial assistance in one or more installment to the contributor or to the nominee.
The scheme, prior to finalization was discussed in depth with a number of DoS employees. It was designed carefully and conservatively to ensure that it is cost-effective and financially viable. SAFE provides two types of benefits- FAE and residual bonus at the time of withdrawal from SAFE due to any reason.
The scheme provides three types of cover to the DoS/ISRO employees. They can choose the kind of cover they require, and then fix their own contribution, which can be no less than 0.5 per cent of their basic pay plus Dearness Allowance (DA) and not more than 2.5 per cent of their Basic+DA. Within this band, the benefit amounts vary according to the type of cover chosen. Types of insurance coverage are:
* Type 1 covers the death or permanent disability for contributor alone.
* Type 2 covers the loss of eyes or limbs, prolonged sickness and loss of pay on account of illness for contributor alone.
* Type 3 covers similar benefits under Type 2 for the contributors’ spouse and children below the age of 25.
The scheme has a nominee facility, for which the contributor may identify three nominees in order of preference in the joining form.
It is a voluntary scheme; therefore, an employee of the department may request to join SAFE by submitting the prescribed form along with the necessary documents.
SAFE has been widely accepted by DoS employees as this versatile scheme offers more than just life insurance to ISRO employees. At present, there are about 10,000 contributors. During the year 2004-05, 351 employees joined SAFE as the first/regular contributors, including the membership campaign in February 2005. The trust during 2004-05 has extended financial assistance in exigency to 72 contributors amounting to INR 69, 62,375.
ISRO/DSO employees and their families.
Cost: The premium cost for SAFE was much lower than other insurance coverage. It is low-cost risk coverage with incidental saving being the by-product.
Incentive: The contribution and benefits automatically keeps up with inflation without any action by the contributor.
Residual bonus: Paid at the time of withdrawal from the scheme to the contributor and to the nominee in case of death of the contributor.
Flexibility: Contribution level can be chosen anywhere from 0.5% to 4.0% of (Basic pay + DA). Contributor has the choice to choose from the three types of coverage. Contributor has the opportunity to change the contribution level and type of coverage once in a year to meet the changing needs during the employment career.
Comprehensive insurance scheme: Voluntary, contributory and multipurpose welfare scheme which provides substantial financial assistance in case of death, disability, loss of eyes/limbs, loss of pay due to sickness and serious/prolonged sickness of contributors and family.
Non-medical expenses: The scheme has a provision for non-medical expenses, especially for serious/prolonged sickness.
Voluntary and optional: It is a social security scheme which is voluntary in nature. Provides wide choice of coverage options and contribution levels.
Effective communication to management and employees.
Form a trust within the ambit of section 10 (23AAA) of the Income Tax Act.
Support from the concerned employer- organization.
Who needs to be consulted
Vikram A. Sarabhai Trust.
Contributors to SAFE.
SAFE is financially independent and is designed to be financially self-sustaining and is not supported by DoS financially. DoS has extended critical support by establishing VAST, providing some office space, making it possible to deduct the contribution.
Chances of Replication
There is a latent demand for low-cost tailor-made insurance products in India.
The following social security gaps led to evolving of SAFE: –
(a) The Group Insurance Scheme does not keep pace with inflation and higher income of DoS employees. The ratio of insurance amount to the basic pay has come down. Consequently, many employees were constrained to take additional life insurance at very high premium.
(b) There was no risk coverage if an employee loses job because of disability except in case of accident, loss of pay due to prolonged sickness.
(c) Non-medical expenses in case of prolonged sickness.
(d) Contributory Health Service Scheme (CHSS) does not cover all medical expenses.
Dr. Nandini Roy, Research Consultant- HS-PROD, NIMS. May 2006.