Business Standard

Sunday, January 19, 2025 | 12:40 AM ISTEN Hindi

Notification Icon
userprofile IconSearch

Insurance industry seeks tax incentives, Insurance Act amendment in Budget

Considering the low penetration in the country, experts believe additional funding could provide vital support for the segment

insurance irdai

Aathira Varier Mumbai

Listen to This Article

The insurance industry is expecting amendments to the Insurance Act, along with additional tax exemptions for protection and health insurance products, as well as adjustments to the new tax regime, in this year’s Union Budget to improve affordability and drive greater penetration and growth in the sector. The industry is also expecting capital infusion into state-owned general insurers to improve their solvency.
 
According to industry insiders, amendments to the Insurance Act will bring a raft of changes, including opening the agency channel for insurers and changes to capital requirements for the companies. Moreover, the industry is expecting an increase in the foreign direct investment (FDI) limit to 100 per cent from the current 74 per cent.
 
 
“The government might table the Insurance Laws (Amendment) Bill, 2024, in the Budget session, proposing a slew of changes to capital requirements, the permissible FDI limit, opening up the agency channel, minimum capital requirements, and more. These changes will extensively accelerate the growth of the industry and support the government and the regulator’s financial inclusion agenda,” said Sumit Rai, managing director (MD) and chief executive officer (CEO) of Edelweiss Life Insurance.
 
According to Sumit Bohra, president of the Insurance Brokers Association of India, there should also be a separate section, apart from Sections 80D and 80C, for deductions or exemptions for insurance policies that cover health, personal accident, home, and life.
 
“This deduction for insurance policies should also be part of the new tax regime,” said Bohra.
 
Separately, non-life insurance companies have said that the deduction under Section 80D in the old tax regime needs to be enhanced, and there should be some deduction for health insurance premiums in the new tax regime as well.
 
“Section 80D limits need to be increased to Rs 50,000 for all and Rs 1 lakh for senior citizens. Section 80D should also be allowed in the new taxation regime to increase health insurance penetration. Rule 6E, which currently allows unexpired premium reserves to be calculated at 50 per cent, should be changed to the 1/365 method as permitted by the Insurance Regulatory and Development Authority of India in the preparation of financial statements of insurance companies,” said G Srinivasan, MD and CEO, Galaxy Health Insurance Company.
 
Insurers are also expecting higher allocations for healthcare and education, focusing on bolstering public health infrastructure, digital education, and skill development, which will strengthen technology support and aid in insurance penetration.
 
Sharad Mathur, MD and CEO of Universal Sompo General Insurance, said, “The need for better penetration with more affordable and accessible insurtech (insurance technology) insurance products can be met with better digital readiness and innovation. This approach allows the Budget to focus on how to build trust and engagement with the end consumer, reduce barriers to insurance adoption, and increase competition in underinsured markets. This will serve to raise the profile of various insurance products and contribute to the deepening of the market.”
 
Also, considering the low penetration in the country, experts believe that additional funding could be a key source of support for the segment.
 
“Given the weak solvency position of the public sector general insurance companies, the announcement related to budgetary allocation for their recapitalisation will be positive. Further, given the low penetration of the insurance segment, the government can announce measures to incentivise penetration, especially for lower-ticket-size policies,” said Neha Parikh, vice-president and sector head of financial sector ratings, ICRA.

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Jan 14 2025 | 8:01 PM IST

Explore News