SECP forwards proposalsto Finance Ministry

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has forwarded its recommendations on compulsory group insurance coverage, increase in the minimum sum cover amount and amendment in federal and provincial labour laws to the Finance Ministry.
According to the recommendations, despite the fact that group insurance is legally mandatory, a significant part of the labour force remains uninsured because their employers do not procure group life insurance. As a result, the families of such uninsured employees remain financially vulnerable in case of death or disability of the breadwinner.
It is worth mentioning that through the 1968 Industrial and Commercial Employment (Standing Order) Ordinance, the compulsory group insurance had been made mandatory for permanent workmen, provided that the minimum number of employees in an industrial establishment is 50 and in a commercial establishment in 20.
The SECP pointed out that the minimum sum cover was last notified by the federal government in 2001 through the Labour Laws (Amendment) Ordinance 2001, according to which the amount stands at Rs 200,000.
However, the minimum sum cover amount needs to be substantially raised. Furthermore, the provision of group insurance is required for only ‘permanent’ employees. The contract and temporary workers have been excluded from the scope of the compulsory group life insurance.
It has also been found out that the Section 10-B(4) of the 1968 ordinance makes the overall implementation of Section 10-B(1), (2) and (3) ineffective by requiring the employer to pay the prescribed benefits against death and injury to the heir of the workman if insurance has not been procured by the employer.
The penalty for non-compliance with the provisions of the 1968 ordinance is negligible, which has also lost value with the passage of time. The minimum sum cover for which each workman is to be insured is specified in Schedule IV to the 1923 Workmen Compensation Act as adopted by the provinces.
The SECP has recommended certain legal amendments to the federal and provincial labour laws. The recommendations seek to enhance the scope of coverage of group insurance, dynamise the minimum sum cover by linking it with a multiple of minimum wage, widen the applicability of compulsory group insurance and impose significant penalties for non-compliance.
The implementation of this scheme is also in line with the objectives of the National Financial Inclusion Strategy (NFIS) recently launched by the federal government, under which the government has committed to provide access to broad-based financial services, including insurance to those consumers which are currently excluded from the financial sector.