The Budget session of the Parliament commenced today with the customary presentation of the Economic Survey by the finance minister Arun Jaitley.
Arun Jaitley,Union Finance Minister
Jaitley will present the Union Budget 2018-19 on February 1 around noon. Last year too, the date of budget presentation was the same.
This will be Narendra Modi government's fifth and last full-fledged budget presentation before the 2019 Lok Sabha polls.
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Asia Insurance Post presents the Budget-Wishes as outlined by the leading players in non-life and life and pension industry.
Sanath Kumar, CMD, National Insurance Company
We are looking for higher exemption limit on premiums for buying health covers. A health insurance policyholder should get exemption upto Rs 50,000 premium. The existing exemption limit under section(U/S) 80 (D) of IT Act is Rs 25,000.
MN Sarma, CMD, United India Insurance
We want that the amount u’s 80 (D) should be increased to Rs 50,000 from the existing limit of Rs 25,000.
Besides health insurance,, personal lines of business should also be included u/s 80 (C). There is a talk of universal health insurance. If it is launched,, then all the similar existing schemes would be merged into one.It will be central sponsored scheme with participation of all the states.
Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance
One of the most critical issues that the upcoming budget must address is lack of awareness about insurance in India. Insurance is an important tool for providing support to an individual or even a business in case of any adverse event, and the financial stability of the society that can be earned through insurance play a part in establishing the economic stability of the nation. Our overall budget wish list include:-
The proposed Universal Health Scheme is a welcome move by the government and it will help reaching out larger geographies and beneficiaries in the country. It is been observed that nations equipped with a good healthcare infrastructure are sure to have an improved life expectancy rate.
At present, a miniscule health insurance penetration in India is a matter of concern, which can be addressed by introducing various measures in the Union Budget. The government can make it compulsory for employers to provide health insurance scheme to all their employees, which will help insurance to reach out to a much larger population.
The government can also look at implementing home insurance scheme for covering property losses caused by catastrophes. For this, an index based policy may be launched to cover the losses occurred due to natural calamities and premium for which could be linked with property tax collection. Talking about claims, if customer’s Jan Dhan account is linked to his home insurance policy, it could be used for making claim payment when triggered as specified.
Healthcare inflation is rising at an alarming rate of 15% annually where the average medical treatment expenses are increasing. The last revision has taken place in place in 2015-16, and before that revision took place after a large gap. Hence, it is vital to revise the limit of tax benefits for health insurance under Section 80 D, not just in the coming budget but on a fairly continual basis to be at par with rising medical costs and encourage Indian citizens to buy insurance.
Pushan Mahapatra, MD & CEO, SBI General
The government needs to continue its efforts to increase the insurance penetration in the country. Awareness for health insurance continues to grow with impetus from the various government sponsored schemes and tax incentives for the segments, but there is a concern in terms of under insurance and low awareness towards other covers such as home insurance.
The government could consider offering tax incentives for home insurance as this will help increase awareness amongst home owners on their potential risks.
Government impetus on other sectors also indirectly affects the insurance space.
For example, growth in the infrastructure space would result in expediting stalled capital projects, thus positively impacting the insurance sector. Along with infrastructure, the housing sector will also see a change.
There has been an improvement in the housing sector since the introduction of RERA. If implemented properly, RERA can help push the housing sector and we will see progress in the sector.
Various studies state that medical inflation has been rising on an average of 10-12% each year. Unfortunately, health insurance in India is bought for tax exemption and not as per need of the individual or the family. An increase in the 80 D limit will assist customers in opting for health insurance keeping future health emergencies in sight.
In the long run, this would help prompt a shift in the mindset of consumers who still think they do not require insurance and encourage them to review their decision.
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While senior citizens have been given some tax exemption for products such as health insurance, it needs to be noted that they are especially vulnerable given diminished incomes post retirement as well as running higher risk of illnesses and injuries with advancing age. Hence, tax exemptions, which would lead to greater penetration of insurance products among senior citizens, should be encouraged.
Insurance density (defined as premium per capita) has been hovering low in India for the past few years and is much lower compared to developed countries. Any effort to improve the situation including providing tax exemptions to buy insurance products would be a welcome development. However, parallel to this, it is imperative that other avenues be explored to improve insurance penetration. These include campaigns to educate the public about the importance of insurance as well as ease of buying insurance products online. Millennials, who are a large and affluent group of potential insurance buyers, would be interested in online solutions.
K.G Krishnamoorthy Rao , M.D and C.E.O , Future Generali India Insurance.
In India as insurance is still considered as an expense rather than an investment.One does not think about protecting the biggest asset i.e home unless one is taking a home loan wherein home insurance is mandated by the lender.
The recent Mumbai Floods which disrupted many lives and destroyed property is an example that throws light on the need of an adequate home insurance policy. Insurance could have saved the victims from a huge financial setback.
In India a concerted effort from all stakeholders including the government is required to make home insurance pervasive. Making home insurance mandatory and incentivizing home buyers by providing income tax benefit for the premium paid towards a home insurance policy are some of the ways that will encourage people to protect their house.
It will not only reassure protection against financial losses one faces during natural calamities but also aid in deepening insurance penetration in the country, providing tax benefit on the premium paid will ease the burden on customer’s pocket and will encourage people across age groups to avail the policy.
Another aspect that needs to be addressed is health insurance. We are leading a sedentary lifestyle today which is increasing the incidence of communicable and lifestyle diseases. Additionally medical inflation is also growing. To bridge the gap between rising healthcare costs and affordability it would help to increase the income tax exemption limit for Health insurance.
Roopam Asthana, Liberty Videocon CEO and wholetime director
Generate Employment
While the level of unemployment remains high, insurance companies are starved of adequately trained insurance professionals to manage their business especially in smaller towns. Unfortunately, there are not enough institutions like we have ITIs for technical training for training professionals on insurance business. This situation will only get more acute with time unless a solution is worked on right now.
I would suggest that expenditure of insurance companies on providing insurance related vocational training leading to employment be given a tax break in the form of deduction from tax payable. This will encourage more insurance companies to set up their own vocational training setups leading to greater employment and better managed growth of insurance business in India.
Health Insurance
Penetration of health insurance is woefully low in India. We have a strange phenomenon in India where health insurance penetration in relative terms is higher in BPL segment (due to Government sponsored schemes), middle class, Government employees and in the affluent segment (due to higher awareness and ability to afford) as compared to the middle-lower middle income segments especially in the self-employed professional category in both large metros as well as small town India.
While this segment may not be paying income tax , at the same time a large number of such self-employed professionals are today covered in the ambit of GST. Thus, while deductions in Income Tax may not be attractive to this segment, a set-off of GST payable could make a difference to them in terms of their cash flows and should be considered to encourage purchase of health insurance for themselves, their families as well as for their employees – who probably are the most vulnerable and need it the most.
Home Insurance
For a large number of Indians, the biggest investment is in buying or building a home. With easier availability of mortgages and government thrust on affordable homes, Indians are not just investing their savings but also their future savings in buying or building homes. At the same time, exposure to natural calamities is only increasing with earthquakes, landslides, floods and inundation.
Frequency of buildings collapsing also seems to have increased if one goes by news reports. A natural calamity in a large urban agglomeration could lead to severe losses to a very large number of home owners as less than 1% of homes in India are insured today. These losses could cause a large social upheaval and stress on Government resources as well as NPAs for mortgage lenders.
There is, therefore, a crying need to increase the penetration of home insurance in India. Besides the lack of awareness, there seems to be a cultural opposition to insure homes as we believe that “it will never happen to us”. This thinking needs to be changed and home owners need to be forced to get home insurance till it becomes an automatic part of buying/building homes in India.
I would, therefore, recommend that buying home insurance be made a pre-requisite to registration of homes just like buying motor third party insurance is mandatory for registration of automobiles in India. This can start with new homes and then extended to others at the time of registration of lease agreements, changes in plans, extensions etc. Buying home insurance is a good habit and this has to be fostered forcibly to save our society from future catastrophic losses.
Ashish Mehrotra, MD & CEO, Max Bupa Health Insurance
Healthcare expenditure is a major cost for most Indians today as almost 62% of the healthcare spending is currently Out of Pocket. Financial pressure on individuals from such expenditure is constantly increasing given the high rate of medical inflation in India (12%-15%).
We expect the Budget (2018) to be a ‘healthy’ one for all Indians and look forward to the government increasing its spending on public health cover as well as incentivizing health insurance purchase.
Incentives could be in the form of a lower GST slab for health insurance premiums paid from the existing 18% to 5% and higher tax benefits under Section 80D. Additionally, to encourage people to insure themselves for a longer period, tax exemption should be available each year based on number of years covered. Alternatively, tax exemption can be multiplied by number of years of coverage. Tax benefits will help boost penetration of health insurance as well as help nurture a culture of preventive healthcare in India. For specialized health insurance companies, period of carry forward of business loss and depreciation should be extended to at least 12 years.”
Life Insurance & Pension
Hemant Contractor, chairman, PFRDA
We are looking for the EEE(exempt, exempt and exempt) status for NPS products, on the lines of mutual funds and life insurance products. There must be a provision to treat all pension products at par with when it comes to taxation.
R.M. Vishakha, MD & CEO, IndiaFirst Life Insurance
The government has taken several initiatives to promote life insurance by introducing a bouquet of plans such as Pradhan Mantri Jeevan Jyoti Bima Yojna, Pradhan Mantri Suraksha BimaYojna, Atal Pension Yojna (PMAPY) in the past few years. Now it is important to review its advantages and match them against the changing socio-economic dynamics of the country.
In the upcoming budget, we would like see life insurance, a push product, receiving a shot in the arm, through provisions within the Income Tax structure.
For life insurance products, we believe, an earmarked provision of say, at least Rs. 50,000 could boost its widespread adoption, as against combining it with other instruments exempt under 80C.
I would add from a customer perspective that life insurance needs to be as obligatory as a third-party motor insurance, being a vital component of risk protection.
Currently, 80 CCD exemption is exclusive to NPS contributions. Including insurers’ pension products also under this benefit will provide a level-playing field for pension accumulation schemes.
The government demonstrated a hands-on approach to financial inclusion through launching PMJJBY, the GST-exempt insurance scheme. Reinforcing this intent will be lowered GST tax rates on term products, with the life insurance sector and the administration jointly working towards enhanced pan-India penetration.
Be it the term plan, health insurance, critical illness plans or riders like term rider and critical illness rider, the Government of India should fully exempt these from GST. A significant reduction in premium will go a long way in creating a secure nation where every household will have the ability to overcome financial stress caused by unforeseen events of life.”
Jyoti Vaswani, Chief Investments Officer, Future Generali India Life Insurance
Among other themes, Budget may also announce measures to further incentive household savings in form of insurance and pension products in the backdrop of continued focus of shifting savers from physical to financial savings. Sectors such as Automobiles, Banks & NBFCs, Agrochemicals, Infrastructure, FMCG and Cement are slated to be the key beneficiaries of the Budget.
With implementation of structural reforms like demonetization, GST, Bankruptcy Code and RERA, the government is posed with the growth vs fiscal deficit conundrum, which might culminate in a higher fiscal deficit of 20-30 bps in FY18/19, which we believe is taken well into cognizance by domestic and international investors, as they would be more concerned about long term benefits of widened tax base and higher tax revenues, than a short term blip in fiscal deficit.
Anoop Pabby, MD & CEO, DHFL Pramerica Life Insurance
In India, Life Insurance as a percentage of GDP stood at 3.3% against the global average of 6.4% in 2016. From budget 2018, we expect some of the measures that may result in deepening financial inclusion in our country:
– In India, annuity products are taxable and hence, unattractive compared to other investment options. If annuity from maturity of Pension funds is made tax free under section 10(10A) of the Act or a standard deduction/ threshold / slab limit on the same is assigned based on income and ages – the middle class would be initiated towards making a long term investment under pension schemes.
– Health and protection needs of the lower middle class and weaker sections of society have been largely unaddressed. If a separate Tax deduction for Life and Health Insurance u/s 😯 other than section 80C & 80D is given, it would help a large chunk of the population.
– Term Insurance products should be made zero rated or at lowest GST slab rate of 5 % in order to maximize protection and drive social benefit of Insurance.
– Online insurance products bypass distribution bottlenecks and are a great impetus for furthering the Digital India vision of the honorable Prime Minister. We would want to see a reduction in GST rates here as well, which would help increase the adoption & penetration of online Insurance products in the country.
– Insurance and Pension Policies should be classified as capital assets for the class of policies which are not exempt u/s 10(10D), so that customers can benefit from the lower tax rate under long term capital gains.