Budget 2024: Insurance Sector Anticipates Transformative Reforms In Upcoming Budget
Finance Minister Nirmala Sitharaman is slated to present the Interim Budget 2024-25 on 1 February 2024, with major announcements likely held off until after the 2024 Lok Sabha Elections. The insurance sector eagerly awaits reforms aimed at enhancing India's insurance penetration and securing a financially inclusive future.
Tarun Chugh, Managing Director(MD) and Chief Executive Officer (CEO), Bajaj Allianz Life Insurance said, “The industry is hopeful that the interim budget will introduce much-needed reforms to incentivise the purchase of insurance and enhance the industry’s efforts to increase insurance penetration within the country. With a significant number of people heading towards retirement age in the next decade, incentivising the purchase of products in the pension category becomes crucial in this interim budget. It is recommended that life insurance annuity or pension products be aligned with the National Pension Scheme (NPS). We also advocate for an additional deduction of Rs. 50,000 or more. Additionally, similar initiatives will be required across our product categories, including pension products, Unit Linked Insurance Plans (ULIPs) and even traditional plans. I believe customers will benefit from them and will have more reasons to invest in the industry for their long-term financial goals, thereby fuelling India’s development.”
Industry experts also expect a much-needed reform for life insurance and health insurance, highlighting the same, Satishwar B, MD & CEO, Aegon Life Insurance said, "Changing tax sections 80C and 80D to provide separate tax breaks for the life-threatening risk part of life and health insurance payments, as well as for fixed-term insurance plans, could help close the gap in death risk coverage and enhance social security."
Satishwar further added that permitting individuals to deduct the entire amount paid for life insurance premiums from their taxable income, as stated in Section 56, without any decrease due to claims made under other sections such as 80C, will encourage more people to buy insurance and this means they get the full tax benefit for their insurance premiums, making insurance more financially appealing.
Experts also highlighted the importance of insurance to Micro, small and medium enterprises (MSMEs) and the ways by which insurance penetration can be increased, Tejas Jain, Founder, BimaKavach said, "There is a need for transformative measures in taxation, with a focus on enhancing benefits for insurance products for Indian Small and Medium Enterprises (SMEs). A key proposal the industry appeals for is reducing the Goods and Services Tax (GST) on insurance premiums and foreseeing improved affordability and accessibility across a diverse range of SMEs that are empowering the Indian Economy. This strategic move aims to encourage a broader segment of businesses to embrace financial protection and therefore enable financial growth."
Jain further added that there is significance of government support in nurturing the InsurTech startup ecosystem through tax breaks, funding initiatives and the establishment of regulatory sandboxes and these measures by the government can support the efforts of the Insurance Regulatory and Development Authority of India (IRDAI) to achieve "Insurance For All by 2047”.
Niraj Kumar, Chief Investment Officer of Future Generali India Life Insurance Company, says, "In the upcoming budget, our expectations for the insurance sector revolve around key reforms that can fortify its role in fostering financial security and resilience." Kumar highlights the need for a dedicated tax exemption category for term insurance, emphasising the limitations of Section 80C and the essentiality of a tailored framework. Kumar advocates for reduced taxes on pension and annuity products, aligning with goals of responsible financial planning. Additionally, he stresses on restructuring the Goods and Services Tax (GST) on specific insurance products, aiming to enhance accessibility and affordability.
Echoing similar thoughts, Aditya Dadia, Founder of Alwrite, a B2B insurtech startup suggests, "Taxation incentives might be introduced to amplify insurance penetration in India, transforming the perception of insurance from an added cost to a risk management necessity." Aditya outlines specific policies that could revolutionise the sector: an increase in tax deduction for life insurance premiums to stimulate policy purchases, non-taxability of annuity payouts to encourage non-term life products and potential tax deductions for MSMEs purchasing property insurance, aligning with recent policy introductions like Bharat Laghu Udhyam Suraksha and Bharat Sookshma Udhyam Suraksha.
Sharad Mathur, Managing Director & Chief Executive Officer of Universal Sompo General Insurance Company, emphasises leveraging advanced technologies to offer customised insurance solutions, stressing the need for policy reforms and fiscal support. "To fulfill the vision of 'Insurance for All by 2047', improving insurance awareness and extending tax benefits on insurance purchases are crucial," Mathur emphasises. He proposed amendments to increase deductions for medical insurance premiums and advocates for reduced GST on essential term insurance policies to enhance insurance coverage.
As anticipation builds for the upcoming budget, the insurance sector remains poised, hopeful for a transformative policy framework that will bolster financial inclusivity and resilience.
