For life insurers, life without tax sops for policyholders is going to be different ball game altogether and some are already bracing themselves for what lies ahead.
Life Insurance Corporation has gone a step ahead of its competitors and has e-mailed a new sales pitch to its agents and development officers.
While agents said the target for insurance companies is now going to be people in the Rs 1.5-5 lakh income bracket, they denied it had anything to do with the reduction of the benefits under Section 88 of the Income Tax Act.
"People with over Rs 5 lakh income were in any case not dependent on life insurance to save taxes, so they will not be affected. But those with lower income levels are the ones who may shift to other instruments since the standard deduction would be reduced," an LIC executive said.
But striking a discordant note, HDFC Standard Life managing director Deepak Satwalkar said from the customer's point of view, the tax exemption limit might have been done away with too soon. A number of private insurers too have used Section 88 benefits as a hard selling point.
In fact, even LIC is expecting a dip in sales volume, especially in the last quarter of the fiscal. The company, for instance, sells nearly 60 per cent of its policies between January and March every year.
LIC's managing director N C Sharma, however, says that I-T sops or no sops, companies would still sell insurance. "We have 12 crore policies in force. Of these only around 2 million are for filing IT returns," he said.
The mailer from LIC executive director T K Banerjee to the company's sales force on life after the altered Section 88 uses real life examples to stress on the four advantages that the state-owned company offers.
This includes the prospect of assured returns, and help to the policyholder to achieve the goal for which the cover was bought, the unmatched commitment of the company in standing by its commitment and the twist -- insurance is a risk cover, not a tax-saving instrument.
It cites the example of the seven-year-old whose father bought her a bond worth Rs 5,500 from a financial institution with the promise of giving Rs 1 lakh after 20 years, when the girl would need funds for education or marriage.
But the institution, put a call option after five years and the girl got only Rs 9,000 and the father had no clue how to reinvest the money, especially in a falling interest rate regime.
The mail emphasis that LIC has never gone back on its commitment -- a message that should be conveyed to the prospective clients.
How far the agents use the advise and how much prospective customers digest it would only be known next fiscal.
