Budget 2024-25: Here is what experts expect for the insurance sector
One major expectation is higher government investment in the insurance sector. Higher budgetary allocation, they believe, will provide the sector with the requisite impetus
As the 2024-25 budget plan unfolds, financial analysts and industry experts anticipate measures to help the insurance sector. With mounting economic challenges amidst the global pandemic, the government needs to focus on ensuring comprehensive financial protection, thus fortifying the role of insurance in assuring economic stability.
Industry experts believe that the budget 2024-25 serves as an extraordinary opportunity to address the current gaps in the insurance sector and drive growth. One major expectation is increased investment in the insurance sector. Higher budgetary allocation, they believe, will provide the sector with the requisite impetus.
Moreover, experts emphasise the importance of tax benefits in augmenting the insurance sector's outreach. They strongly recommend changes in section 80C of the Income Tax Act, which will allow a higher cap for insurance premium payments, incentivising more people to invest in insurance products. This will not only aid the penetration of insurance to the grassroots but also simultaneously ensure citizens have sufficient coverage.
The digital transformation of the insurance sector is yet another pivotal point of interest. With technology swiftly seeping into every industry, experts suggest that allocating budget for technology adoption in the industry can enhance customer experience, streamline operations, and encourage innovation. Integrated platforms, artificial intelligence, and data analytics can unlock immense potential for the sector and drive growth.
Here is what experts say:
Rahul M Mishra, Director and Co-Founder of PolicyEnsure
“Insurance sector experts are urging the budget to bring about significant changes to taxation, regulatory measures, and technology. They seek tax benefits for life insurance products, emphasising relaxation in tax deductibility limits for premiums, particularly for term plans. A reduction in the GST rate on insurance premiums is desired to enhance affordability and accessibility. Additionally, experts are calling for the elimination of taxation on annuity returns to make them more attractive. Regulatory expectations involve easing minimum capital requirements for new insurers, introducing a composite license, and focusing on microinsurance for low-income groups. In the technology realm, support for InsurTech startups and a focus on cybersecurity are requested to foster innovation and protect against cyber threats. Collectively, these measures aim to make insurance more widespread, innovative, and financially inclusive."
Tejas Jain, Founder of BimaKavach - Insurance
Support for InsurTech businesses and a cybersecurity emphasis are sought after in the technology sphere to encourage innovation and guard against cyber dangers, ultimately encouraging ubiquitous, inventive, and affordable insurance. The insurance industry hopes that the forthcoming budget will provide more regulatory flexibility, easing some of the strict regulations that impede market expansion and innovation. Experts highlight that to promote competition and simplify operations, minimum capital requirements for new insurers should be loosened. The need for a more efficient industry is evident in the idea for a composite licence. To ensure data security and promote technological breakthroughs, a legal framework that supports InsurTech businesses and cybersecurity measures is necessary.
Ritesh Kumar, the MD & CEO of HDFC ERGO
General InsuranceWe appreciate the steps taken by the Government and the IRDAI to transform the insurance sector and truly believe that they augment the industry’s efforts of achieving insurance penetration till the last mile. In line with the IRDAI’s vision of ‘Insurance for All by 2047’, there is a need to reconsider the GST rate of 18% on health insurance policies in the upcoming Union Budget, thereby improving the affordability for our citizens.
Krishnan Ramachandran, MD & CEO, Niva Bupa
In our country, the incentive for purchasing health insurance is often tied to tax benefits. Therefore, to further encourage health insurance adoption, it's crucial to link the 80D tax exemption limit to inflation and periodically review and revise it in view of the prevailing inflation rate of the country. An increase from the current Rs 1 lakh limit under section 80D will drive more individuals toward health insurance. In addition, the deduction limits for health insurance for parents, especially senior citizens, should be enhanced to promote coverage for this demographic. Moreover, the prevailing 18% GST on health insurance premiums poses a challenge, making insurance costly and hindering the inclusion of outpatient benefits. Lowering the GST rate could align with IRDAI's vision of universal insurance coverage by 2047.
Prashant Tripathy, MD & CEO, Max Life Insurance
Many Indians don’t save enough for their post-retirement life, and there remains a huge gap between the funds available and the funds needed for a peaceful retirement. To help close this gap and enhance the social security of taxpayers, it is proposed that the government consider extending the application of the current Rs 50,000 tax exemption for the National Pension Scheme under Section 80CCD(1B) to pension and annuity plans of insurance companies that will provide a more level playing field for such similar products and encourage increased investments. Alongside, it is suggested to consider zero rating of pension and annuity plans, i.e., setting a GST rate of 0% for the said plans, which will also help lessen the tax load for people receiving pensions and thus enhance financial security for more citizens.
India faces a severe issue of inadequate insurance, i.e., when a family’s primary earner passes away, the money left for the survivors to live and settle debts is usually less than what’s actually needed. Accordingly, we propose that the government consider introducing a separate tax deduction limit for term life insurance under the old tax regime, as the current Section 80C also covers other tax-saving products like PPF, Sukanya Samriddhi Scheme, ELSS, etc. Additionally, there should also be an allowance of deduction for term life insurance under the new tax regime. This will make life insurance more financially appealing and also motivate taxpayers to practice responsible financial behaviours and ensure that families stay financially secure in uncertain times.
