What is a Credit Insurance (CI) Scheme Under the Emigration Act, 1983 ?

The Credit Insurance (CI) scheme under the Emigration Act, 1983, is an optional financial security mechanism introduced by the Ministry of External Affairs (MEA) for Registered Recruiting Agents (RAs). It provides an alternative to the existing Bank Guarantee (BG) system for fulfilling the financial requirements necessary to issue or renew Registration Certificates (RC). 

The scheme ensures compensation to Indian migrant workers in case of grievances or liabilities caused by RAs. CI policies are issued by approved insurance companies and cover claims up to ₹50 lakhs over a five-year validity period, with an additional 3.5 years of extended claim reporting. This initiative aims to promote a safer migration process, reduce financial barriers for RAs, and ensure better protection for workers.

What are the Key Features of the Credit Insurance (CI) scheme under the Emigration Act, 1983?

The terms and conditions under the Surety Insurance for Recruiting Agents (RA) / Credit Insurance scheme are outlined below. These conditions must be followed by both the insurance companies and the RAs opting for the scheme, as amended by the Ministry from time to time:

1. Not a Replacement for Bank Guarantee (BG): The CI scheme is an additional option, not a replacement for the existing BG system. It allows RAs to utilize their capital locked in BGs to explore more overseas employment opportunities for the benefit of Indian migrant workers.
2. Approach to Insurance Companies: After the Ministry approves an RA’s application for the issue or renewal of the RC (Recruitment Certificate), and requests the RA to provide financial security (via BG or insurance policy), the RA may approach the insurance companies approved by the Ministry for issuing the insurance policy.
3. Initial Eligibility: The scheme is initially available only to RAs with a recruitment capacity of 1000+. The Ministry may consider including RAs with a lower recruitment capacity in the future. RAs wishing to increase their capacity to 1000+ can opt for the CI scheme with a sum assured of INR 50 lakh.
4. Policy Issuance: The insurance company will issue the insurance policy after the RA pays the required one-time premium. The policy is valid for 5 years, plus an additional 3.5 years for claim reporting if the policy is not renewed, aligning with the existing BG scheme’s coverage.
5. Policy renewal: In case of renewal of the RC, the insurance company can reissue the insurance policy for next 5 years after expiry of the RC on payment of required premium by the RA.
6. Switching from BG to CI: RAs transitioning from the BG system to the CI scheme will be provided with additional coverage for the past 3 years. The BG will be returned to the RA once the insurance policy is submitted and successfully registered on the eMigrate portal.
7. Exclusive Choice: RAs must either opt for the CI scheme or remain with the existing BG system. Partial use of both options is not permitted.
8. Premium Rates: The premium rate may vary slightly between insurance companies, depending on market competition. RAs can choose their preferred insurance provider from the list of Ministry-approved companies.
9. Policy Submission: The original insurance policy must be submitted to the Ministry for custody to ensure timely receipt and eliminate the need for additional confirmation from the insurance provider.
10. Compensation to Migrant Workers: If the Ministry holds the RA responsible for compensating aggrieved emigrants, the insurance company will pay up to INR 50,000 as compensation directly to the migrant workers within 30 days. The Ministry may decide to increase the compensation amount on a case-by-case basis, based on documentary evidence.
11. Claims under PBBY: If the claim is covered under the Pravasi Bhartiya Bima Yojna (PBBY), no separate payment will be made by the RA or the insurance company unless specified by the Ministry. Such claims will be settled by the insurance company that issued the PBBY policy.
12. Recoupment of Claims: If compensation is paid under the policy, the RA may need to recoup the used portion of the insurance policy by paying an additional premium on a pro-rata basis to restore the sum assured to INR 50 lakh. This is also applicable for policy renewals after the RC expires.
13. Coverage for Legal Emigrants: The insurance company will cover only those emigrants who have migrated legally through the eMigrate portal, with an EC issued under the RC of the concerned RA. Both ECNR and ECR category workers migrating through registered RAs will be covered under this scheme.
14. RA’s Responsibility: While the insurance company will handle financial compensation, the RA remains responsible for resolving grievances with foreign employers and ensuring that exit visas are issued. The RA may face penal actions as per the Emigration Act, 1983, in case of default.
15. Claims Limit: The total sum for all claims and compensations under the policy during the 5-year period cannot exceed the sum assured of INR 50 lakh.
16. Switching Back to BG: RAs can switch back from the CI scheme to the BG system only once during the 5-year validity of their RC. In such cases, the insurance company will refund the premium based on the remaining policy tenure, subject to Ministry confirmation. Premium refunds will not be entertained for cases involving suspension or cancellation of RC due to penal actions.

What are the eligibility criteria for purchasing credit insurance policy? 

The eligibility criteria for purchasing a Credit Insurance (CI) policy under the Emigration Act, 1983, are as follows:

1. Recruitment Capacity: Initially, only Registered Recruiting Agents (RAs) with a recruitment capacity of 1,000 or more are eligible to purchase a CI policy.
2. Option for Smaller RAs: RAs with lower recruitment capacities may become eligible in the future or can apply to increase their capacity to 1,000+ to participate in the scheme.
3. Approval by MEA: The RA must receive approval from the Ministry of External Affairs (MEA) for the issuance or renewal of their Registration Certificate (RC) before approaching an approved insurance company for a CI policy.
4. Compliance: The RA must adhere to the terms and conditions set under the CI scheme, including requirements on claims, reporting, and financial obligations.

Which insurance companies provide credit insurance policies?

Currently, only two companies provide credit insurance policies under the Emigration Act, 1983:

1. IFFCO TOKIO General Insurance Co. Ltd.
2. Raheja QBE General Insurance Co. Ltd.

Both are approved by the Ministry of External Affairs (MEA) and registered with India’s Insurance Regulatory and Development Authority (IRDAI).