Why is Universal Basic Insurance a better proposition
Answer: It took the COVID-19 pandemic to expose the precariousness of human society across the world.
As the importance of social security came into focus after the major waves
of the pandemic, the debate on universal basic income (UBI) began to
resurface in policy circles across the globe.
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● UBI is a model for providing all citizens of a country with a guaranteed minimum sum of money, regardless of their income, resources or employment status.
● This provides a “safety net preventing any citizen” from sinking below a basic
minimum standard of living.
● Economic Survey 2016–17 has recommended UBI as an alternative to the
various subsidies.
Issues with UBI:
● Lack of political will
● Huge fiscal pressure
● Free cash to people may increase the inflation rate
● Difficulty in reducing subsidies on existing schemes
● No guarantee that cash will be spent on productive assets.
● Low insurance penetration: 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.
● Thus insurance can become a need-based safety net for the poor.
Conclusion:
● Till the Indian economy grows to have adequate voluntary insurance, social
security can be boosted through the scheme of universal basic insurance.
Originally published at https://www.upsciq.com on August 26, 2022.
