The Securities and Exchange Commission of Pakistan (SECP) has drafted measures to improve the implementation of Compulsory Group Life Insurance (CGLI) schemes.
The proposals include changing the minimum number of employees working in industrial establishments from 50 to 20 that would be the trigger requiring employers to purchase the insurance for their staff. The change will also cover contractual and temporary workers who are now outside the scope of the schemes, reported Business Recorder.
In addition, the amendments will link the minimum sum covered to minimum wages so that the minimum insured sum automatically increases with revisions in minimum wages.
With purchasing power eroded by inflation over the years, the sum assured specified for workers is not adequate. The minimum insured amount of PKR200,000 (US$1,898) was set by the federal government in 2001. While this was revised in 2013 by the governments of Punjab and Khyber Pakhtunkhwa to PKR400,000 and PKR300,000 respectively, these too are not adequate, the SECP said.
According to the regulator, group insurance is mandatory under the Standing Order Ordinance, 1968, but a significant part of the labour force remains uninsured. This is because employers do not procure group insurance for their employees. As a result the families of uninsured employees remain financially vulnerable to death or disability of their bread earner.
While the Standing Orders Ordinance requires the employer to pay the prescribed benefits against death and injury to the beneficiaries of the workman if insurance has not been procured by the employer, the penalty for non-compliance has become meagre over time and does not deter employers from flouting the law. The changes proposed by the SECP aim too to increase penalties on employers who fail to buy the compulsory insurance.
The financial regulator, which also oversees the insurance sector, has submitted its proposals to the National Financial Inclusion Strategy Steering Committee.