The case for rail insurance

Accident victims deserve better than arbitrary ex Gratia relief

It happens over and over again. After a gruesome train accident — the last being the one near Mumbai on May 5 — the Railway Minister announces ex gratia relief, experts repeat their lines on rail safety and everything is forgotten in a week. What is rarely, if ever, discussed is the absence of a fair, clear-cut system of compensation, rather than one that starts and generally ends with an ex gratia dole. It is true that the bereaved can make a claim at the Railways Accident Claims Tribunal, which awards a maximum of ₹4 lakh for death and slices disability into 34 categories to award compensation ranging from ₹32,000 to ₹3.6 lakh. But the process is cumbersome and discourages people from applying for compensation. The logical step would be to migrate to a system of rail insurance — a rights-based system that reinforces the rights of the bereaved while also keeping the interests of insurers and the Railways in mind. The Railways carries 24 million passengers daily. While there are far too many accidents, thanks to a callous disregard for safety, less than three passengers lose their lives to accidents daily (about 900 in a year). A generous insurance cover can be generated out of a modest premium built into the train ticket.

An attempt was made in 2008, when ICICI Lombard provided a cover of ₹4 lakh on a premium of five paise per ticket. Strangely, this did not sustain because the Railways was opposed to an increase in premium and the two parties failed to agree on how the corpus should be used. A premium of just ₹2 from 24 million daily passengers can mop up close to ₹1,800 crore annually. Even if compensation for death was raised from ₹4 lakh to ₹20 lakh, the outgo per year would be only ₹180 crore. Compensation for disability should vary not just with the seriousness of injury but also the age of the passenger. A young individual below 40 years should be compensated to the extent of, say, 75 per cent of the life claim if his injury robs him of his capacity to earn a livelihood. For other cases of injury, the categories should be reduced to a minimum in order to reduce red tape. Even if this simplification leads to higher compensation levels, the sums involved are likely to fall within 10 per cent of the annual premium collection.

Higher compensation levels are desirable not merely in principle; they could spur the Railways into showing some more concern about safety. The modalities of premium-sharing can be worked out by setting up a committee with the Railways, the IRDA and private players as members. Perhaps, a joint venture arrangement could work well in the initial stages, with a portion of the premium being used for safety measures. These details can be worked out later; the immediate need is to put an agreed upon framework in place.

(This article was published on May 8, 2014)