Kerala State Insurance Department: An Overview

Introduction

The roots of the Kerala State Insurance Department trace back to 1896, established under the erstwhile Princely State of Travancore. Following the formation of Kerala State, it evolved into the State Insurance Department. Functioning as a line department under the Department of Finance, it is headed by the Director of State Insurance. With its headquarters in Thiruvananthapuram and representative offices across all 14 districts, the department operates with a dedicated workforce of 343 employees.

Life Insurance and Nationalization

Long before the nationalization of the insurance sector in India, the department provided insurance services through two distinct wings: the Official Branch for government employees and the Public Branch for the general public.

With the enactment of the LIC of India Act in 1956, life insurance business became a monopoly of the Life Insurance Corporation (LIC). Consequently, the Public Branch of the department was merged into LIC. However, under Section 44 (f) of the Act, the department retained the authority to continue the Official Branch exclusively for government employees. Records indicate that many employees from the department transitioned to LIC during this structural shift.

The Compulsory Insurance

Prior to 1976, participation in the life insurance scheme was optional for employees. In the 1976 budget speech, the then Finance Minister Shri K.M. Mani introduced the mandatory State Life Insurance (SLI) scheme as we know it today. This social security initiative was implemented by reducing the compulsory minimum GPF contribution from 10% to 6% of basic pay. Since then, enrollment in the SLI scheme has been mandatory for all employees entering service.

Expanding its protective umbrella, the department introduced the Group Insurance Scheme (GIS) in 1984, modeled after the central government employees’ scheme. Furthermore, the Group Personal Accident Insurance Scheme (GPAIS), which was launched in 2007 on a co-insurance basis with a public sector company, is now directly managed by the State Insurance Department under the brand name ‘Jeevanraksha’. Currently, the benefits and mandates of these schemes extend beyond government employees to include staff in quasi-government, public sector, and co- operative institutions.

General Insurance Domain

The General Insurance Business Nationalisation (GIBN) Act of 1972 limited general insurance operations to four public sector companies. However, Section 36(1) (a) of the same Act empowers the State Insurance Department to manage the general insurance business of the State Government, its departments, statutory boards, corporations, and other entities in which the government have substancial financial interest. This grants the department the unique status of a ‘Composite Insurer’, handling both Life and General insurance portfolios.

Exempted Insurer Status

The State Insurance Department is categorized as an ‘Exempted Insurer’. Under Section 118 (c) of the Insurance Act of 1938, certain provisions of the Act do not apply to insurance businesses directly operated by the Central or State Governments. However, the department is still governed by specific rules under Section 110 (F) of the Insurance Act, which are applicable to all entities conducting insurance business in India. Furthermore, the State Insurance Department is entitled to the exemptions provided under Section 36 of the GIBN Act of 1972.

The Contemporary Landscape

Post-globalization, the insurance sector saw the entry of private players and the establishment of the Insurance Regulatory and Development Authority (IRDA). Today, the department continues to serve the state’s interests while navigating the regulatory frameworks and guidelines issued by the IRDA to ensure a secure and robust insurance environment.