Union Budget 2021: Make insurance more affordable, attractive proposition for customers
Due to COVID-19, the consumer mindset has undergone a tectonic shift from looking at health insurance as a priority to seeing it as a necessity, says ManipalCigna's Prasun Sikdar
The healthcare sector must be supported and encouraged to expand and thrive so that it can make a real difference to the country’s economy and employment. COVID-19 has been a rude wake-up call with regard to health insurance—many understood the need to have one as the pandemic struck. In the wake of COVID-19 pandemic, the insurance sector is hopeful that the finance minister will announce measures that may assist enhance the variety of life and medical insurance policyholders within the nation.
Considering the low penetration rate, there is more to be done, and insurers have their wish list for the upcoming Budget which they shared with Firstpost:
Ashish Kumar Srivastava, MD and CEO, PNB MetLife
Most Indians (75 percent) do not have any form of life insurance, and those that do are vastly underinsured, covering less than 8 percent of what’s required to protect their family from financial shock if they die unexpectedly. In the upcoming Budget, we expect the finance minister to allocate a separate tax exemption segment for term plans under 80C. We also believe that the existing exemption limit of Rs 1.5 lakhs for 80C should be raised further, thus attracting more taxpayers to opt for insurance plans basis their life stage needs, while also keeping the burden of income tax at bay. Another encouraging factor for the customers to opt for insurance plans would be to reduce 18 percent GST on the insurance premiums.
Gopal Balachandran, Chief Financial Officer and Chief Risk Officer, ICICI Lombard General Insurance
The need for health insurance has gone up with people increasingly perceiving health insurance as a necessary investment to be made. Whilst the insurance premium payments constitute admissible deductions from income for tax payers, enhancing the extent of eligible deduction by at least 50 percent vis-à-vis the current levels, would go a long way in further improving the penetration of health insurance in the country. The global pandemic necessitates a health insurance cover being made mandatory for employees in order to protect them.
Accordingly, we believe that it would a great fillip from a health insurance penetration standpoint, to allow the input tax credit to be claimed with respect to the GST charged on health insurance premiums paid by corporates whilst purchasing Group Health Insurance Covers, which is presently unavailable as per the current GST laws in force.
G Murlidhar, MD and CEO, Kotak Mahindra Life Insurance Company
The finance ministry is expected to prioritise job-driven growth recovery and infrastructure building. Given the government’s weak fiscal position, some innovative means to finance budget deficit may be introduced as well. Based on our learning of the last few months, we expect the government to encourage people to be prepared for life’s uncertainties by incentivising them to invest in various insurance products. More investment in insurance products will in turn help finance fiscal deficit as well as support infrastructure lending.
Prasun Sikdar, MD and CEO, ManipalCigna Health Insurance Company
Due to the COVID-19 pandemic situation, the consumer mindset has undergone a tectonic shift from looking at health insurance as a priority to seeing it as a necessity. Whether it is the government, bureaucracy, industry, media or common man, we are all now discussing protecting lives and financing for the same in the form of health insurance. Thus, in the upcoming Union Budget 2021, we expect the government to come up with several changes in the regulatory framework to ensure the majority of the population comes under the ambit of insurance. COVID-19 pandemic has revealed the serious gap between supply-demand imbalances. This is a lingering issue that needs to be addressed with a structural course of action. We hope that the upcoming Budget comes up with a series of measures to boost this sector.
The health insurance has become an essential commodity and needs to be slotted in the 5 percent GST tax slab along with commodities such as food items to make it more affordable for people to get access to quality healthcare care. Also, the increase in the limit of tax deduction in Section 80D of the Income Tax Act can help better penetration of health insurance.
Neeraj Prakash, Managing Director, Shriram General Insurance
Purchasing any kind of Insurance is still looked at as a cost rather than a protection from the adverse financial situation. To increase the penetration of non-life insurance, the government could look at offering more tax benefits, include more products under mandatory insurance cover and roll out more mass Insurance schemes. Standardization of policy documents across various Insurance products like health/home insurance could help in better understanding of insurance products.
Currently, all the life and health insurance policies are exempted from section 80C of the Income Tax Act. The government may consider a separate deduction section or enhance the limit under Section 80C of the Income Tax Act, 1961, since the current limit of Rs 150,000 is too low to cater to all the contributions it covers. 80D should introduce new scheme(s) to encourage a self-securing environment in India. The government may also try to reduce 18 percent GST to 12 percent or probably lower. This will help increase the penetration of life insurance.
Parag Raja, MD and CEO, Bharti AXA Life Insurance
A large part of the population in the country still remains underinsured or uninsured. We expect this Budget to spur penetration of insurance with a lower tax regime and higher tax-free slabs in a crammed 80C and 80D limit where life insurance comes across to be grappling for space. Undoubtedly, the insurance industry needs a much-needed boost from the government in terms of policy incentives and relevant tax relaxations. This will also enhance insurance penetration and financial inclusion in the country.
Tarun Chugh, MD and CEO, Bajaj Allianz Life
With the increased risk perception amongst customers converting to more people buying term plans, it would be an ideal time for the government to consider increasing the tax exemption limit for life insurance or have a separate section for deduction of life insurance premiums. The deduction for life insurance premiums should be available to all taxpayers, irrespective of the taxation regime opted by them. The next critical item for the government to consider would be on how to incentivise individuals to save better for their post-retirement financial needs. Finally, a financial product as critical as life insurance should have a reduced GST, and get exemption on Stamp Duty for mandated products, so that the costs are not increased for the end-customer.
Vighnesh Shahane, MD and CEO, IDBI Federal Life
Section 80C of the Income Tax Act provides for tax deduction of up to Rs. 1,50,000/- on various investments such as insurance policies, PPF, principal amount paid towards home loan, ELSS, NSC, NPS amongst others. With so many investment options available, this section is too low and too cluttered. Our recommendation would be to either keep a separate deduction section for insurance policies or there should be an increase in the limit under Section 80C. This would allow customers to consider insurance not just as a tax-saving tool, but as a long-term means of fulfilling their financial goals.
We also suggest that the current exemption limit for TDS on insurance commission is Rs. 15,000 under section 194 D of the Income Tax Act. Raising this exemption limit would provide a greater impetus to insurance agents. Further tax laws could be aligned to the regulatory minimum of 7 times the cover for individuals above the age of 45 years.
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