The upcoming Budget 2024-25 is crucial for advancing insurance accessibility and inclusivity, in line with IRDAI’s ‘insurance for all by 2047’ vision. Some of the important functionaries of the Indian industry put forward a few demands before union finance minister Nirmala Sitharaman to translate the grand agenda into action
Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance
Over the past decade, India has achieved remarkable economic growth, with GDP consistently exceeding 6 per cent and surpassing many global economies.
As we approach this budget, we anticipate measures that will sustain and simultaneously accelerate this long-term growth, benefiting individuals and businesses alike, with a strong emphasis on job creation. Addressing inflation is crucial for securing a robust financial future for individuals, as it will enable them to have more money in hand, towards savings and investments for their long-term goals and financial security.
With increased earning power and disposable income, Indian citizens will be able to invest in versatile life insurance products for their peace of mind and financial goals. Given the under penetration of life insurance in the country, there is substantial room for sectoral growth.
As an industry, some of our budget expectations from the finance ministry is to consider lower GST on life insurance products.
Additionally, in the pension products category, with the objective of securing post-retirement financial needs of the individuals, we urge the government to align life insurance annuity or pension products with the National Pension Scheme (NPS) and allow the similar additional deduction of Rs. 50,000 or more for life insurance annuity or pension products under Income Tax.
We also request the ministry to introduce Long Term Capital Gain taxability for all high value traditional life insurance plans (more than Rs.5 lakhs aggregate annual premium), in line with high value ULIPs. This will bring in uniformity and tax efficiency for insurance customers at par with other similar financial products in the market.”
Rakesh Jain, CEO, Reliance General Insurance
The upcoming Union Budget 2024 presents an opportunity to promote sustainable development goals by prioritizing risk management and protection.
We commend the IRDAI’s initiatives to prioritize the wellbeing of policyholders, from implementing cashless systems to emphasizing Ombudsman schemes, ensuring policyholders’ interests are safeguarded.
However, with increasing climate change and economic development-related risks, there is a pressing need to protect against unforeseen disruptions.
We recommend that the government consider the following measures:
-Increase the upper limit for tax exemption on health insurance premiums to Rs 75,000,.
-Introduce financial support or tax benefits for extensive insurance on electric
vehicles (EVs).
-Give tax advantages for cyber insurance, particularly for small and medium businesses, to enhance their ability to withstand cyber risks and data breaches.
-Mandate health insurance to all employers for their employees to bring holistic
protection to the working class.
Implementing these measures will not only create a more resilient and sustainable economic environment but also pave the way for a healthier and greener future, fostering a sense of optimism and progress.
Rushabh Gandhi, MD & CEO, IndiaFirst Life Insurance
For the life insurance sector, we expect the Union Budget to consider the following to bridge the protection gap and promote life insurance as a financial product for protection and long-term savings:
-Providing a separate tax deduction for life insurance premiums.
-Reducing GST on term insurance plans and considering “zero rating” for PMJJBY and Micro Insurance products, to make them more affordable and accessible for the masses.
-Extending the 10(10D) benefit to annuities to encourage retirement planning and provide tax relief to senior citizens.
Introducing composite license for insurers to empower them to sell life, non-life, health insurance products.
-Facilitating economies of scale and encouraging employees of life insurance companies to distribute other financial service products for a fee.
-Allowing related value-added services, such as wellness programs, health screenings, telemedicine, roadside and legal aid, claim support, etc… to be sold along with insurance.
-Eliminating training for the simplest products and making it more stringent for complex products. In other words, establishing a graded distribution model with varied degrees of training basis product complexity.
We believe these steps would further strengthen the life insurance penetration in India while benefiting the economy and the society.
Prasun Sikdar, MD & CEO, ManipalCigna Health Insurance
Right to Health is a part and parcel of Right to Life under Indian constitution. The government has two primary objectives (a) ensure wider access to healthcare services at affordable prices and adequate quality (b) Reduce the out-of- pocket expenditure.
Keeping this in mind, the National Health Policy has proposed an increase in public expenditure to 2.5% of GDP by 2025. Despite some progress over the years, India’s healthcare spending is still low compared to the global average, necessitating a substantial boost in healthcare spends.
Thus, in the upcoming union budget, we expect the Finance Minister to announce higher allocation of funds for healthcare compared to what was proposed in interim budget to meet the targets of the National Health Policy.
Addressing the second objective, reducing out-of-pocket expenses, is equally critical. Currently, these expenses are still high relative to global standards, indicating a considerable protection gap. Private health insurance is vital in bridging this gap. The insurance regulator, IRDAI has also set a vision of achieving Insurance for All by 2047, marking a century of India’s independence.
Thus, our sincere submission to government is to reduce the current 18% GST rate on essential service like Health Insurance. Further, specific segment considerations are also required especially for middle-income and senior citizen segments who are struggling to meet the rising healthcare costs.
Lowering the GST burden on the health insurance premiums will be a huge respite for missing middle and senior citizens to get access to quality healthcare they need and help to significantly boost insurance penetration across India by driving affordability.”
Shanai Ghosh, MD & CEO, Zuno General Insurance
The upcoming Budget 2024-25 is crucial for advancing insurance accessibility and inclusivity, in line with IRDAI’s ‘insurance for all by 2047’ vision.
Insurance is a protection solution and critical for financial security. Indians being savings driven, need to be encouraged to invest in protection through various policy measures and tax incentives are one such tool.
The deduction for health insurance premiums under Section 80D has been constant despite significant increase in healthcare cost, underscores the need for linkage to inflation and periodic revision.
Extending benefits to the New Tax Regime is essential for increasing health insurance penetration. We also need to encourage property insurance for retail customers and SMEs. Employee Health insurance has emerged as an important benefit and all employers should provide it. However the GST on the same is not available as Input tax credit for the employer and is a significant cost, this should be reviewed. Finally, reduction of gst on health insurance premium will reduce the cost to the customer and make it more affordable.”
Satishwar B., MD and CEO, Bandhan Life.
Our journey towards ‘Insurance for All by 2047’ is marked by strategic steps, and certain recommendations for the upcoming Budget could pave the way for growth and accessibility in the life insurance sector:
No Taxation for annuity plans to benefit both retirees and the Industry: Many Indians don’t save enough for retirement, and the gap between needed and available retirement funds is expected to reach $85 trillion by 2050.
To help close this gap, consider these steps:
– Investing in pension and annuity products is crucial for income after retirement. Making taxes simpler or removing them for these products will encourage more people to invest in these important financial protections. Pension policies, like the NPS, provide a steady income in retirement. It’s important to lessen the tax load for people receiving pensions from the National Pension System (NPS), as the retirement fund gap is expected to increase a lot. The current ₹50,000 tax exemption for NPS under Section 80CCD(1B) should also apply to pension and annuity plans provided by life insurance companies to encourage more people to use them.
–Improving Tax Benefits to Increase Insurance Coverage: India faces a severe issue with inadequate insurance. When a family’s primary earner passes away, the money left for the survivors to live and settle debts is usually less than nine percent of what’s actually needed[1] .
– Separating Savings for Life and Health: Changing tax sections 80C and 80D to provide separate tax breaks for the life-threatening risk part of term life plans could help close the gap in death risk coverage and enhance social security.
Complete Deduction for Life Insurance Premiums: Permitting individuals to deduct the entire amount paid for Term life insurance premiums from their taxable income, without any decrease due to claims made under other sections, such as 80C, will encourage more people to buy insurance. This means they get the full tax benefit for their insurance premiums, making insurance more financially appealing.
GST Reforms for Wider Reach: Insurance is not a luxury but a necessity. In India, adequate social security measures are still evolving, so insurance serves as a vital safety net – providing financial protection to families in times of illness, accidents, or the loss of a breadwinner. Not being able to afford insurance can leave families vulnerable to financial crises in times of need.
The imposition of an 18% Goods and Services Tax (GST) on life insurance in India can deter individuals and families from securing essential life coverage.
Lowering the GST on term life insurance and applying a ‘Zero rating’ –which means setting the tax rate to 0%— By effectively removing the tax without sacrificing tax benefits for businesses, this policy aims to enhance financial security for more citizens. It will promote financial inclusion and facilitate greater participation in insurance schemes across society, empowering Indians with the means to mitigate financial risks.
Overall, the affordability and accessibility of insurance should be prioritised in order to take a significant step towards building a financially inclusive society where every individual has the opportunity to secure their financial future.
Ashwani Dhanawat, Executive Director and Chief Investment Officer, Shriram General Insurance Company
We anticipate the upcoming union budget to address several critical areas essential for economic growth and public welfare. We welcome the prospect of higher budgetary allocations to the insurance sector, which will enhance our ability to provide comprehensive coverage and innovative solutions to a broader segment of the population in achieving the Insurance for All mission of IRDAI .
In light of rising healthcare costs, we expect an increase in the deduction limit for health insurance premiums, as it will offer greater financial relief to policyholders.
Also, reducing the GST on health insurance policies will make these essential products more affordable and accessible. An increased focus on sectors such as defence, railways, infrastructure, and renewable energy will strengthen national security and improve transportation paving for sustainable development.
Extending the benefits under Section 80EEB for Electric Vehicles (EVs) beyond March 2023 will encourage more people to adopt eco-friendly transportation options and will further promote sustainable practices. These measures will collectively contribute to a resilient economy, improved financial security, and a healthier, more sustainable future for all.
Subhrajit Mukhopadhyay, Executive Director, Edelweiss Life Insurance
As the industry continues to undertake collective efforts towards improving insurance penetration, some key industry expectations from the upcoming Union Budget are:
The burgeoning annuity opportunity:
India’s vast ageing population underlines its burgeoning pension and annuity market. Annuity caters to the key dilemma of a pensioner, for a life-long pension at a steady, guaranteed rate and exposes the investors to a reinvestment rate risk especially in a volatile interest rate scenario. Annuities are the only solution, which provide complete protection from the perspective of living longer (i.e. outliving one’s corpus), by providing a regular flow of income throughout one’s lifetime, purchased in lieu of a single lump-sum amount.
Currently, annuity is completely taxed in the hands of the customer, which reduces the product’s attractiveness. Also, currently, tax incentive is offered for people to accumulate corpus in NPS under Section 80CCD (1b ). A similar incentive may also be extended to Annuities.
Making insurance affordable through tax incentives:
India’s infrastructure sector is poised for a significant growth and requires a huge investment to support that growth. Life insurance firms, with their long-term assets, can help spur this sector. The upcoming Budget may look at incentivizing investments into Life Insurance products to facilitate infrastructure and overall development of the country.
We also expect the budget to consider creating a separate section for tax deduction on premium paid towards life insurance which would be beneficial to the insurance buyer. This would also enable a more rational segregation of investor’s funds into long-term and short-term kitties. Additionally, the budget may consider rewarding insurance buyers with a lower GST rate.
Mayank Gupta, COO and Co-Founders, Zopper
“The upcoming Budget 2.0 spearheaded by Modi 3.0 is expected to focus on bringing in policies and reducing taxes in order to promote economic growth and offer relief especially for the lower income brackets to fuel consumption. We witnessed that in the past few budgets, our government did push the agenda of health insurance. In fact, it is now building a standard network of hospitals and rate cards. In a nutshell, the prime focus will on spreading insurance awareness amongst first time insurance (New To Insurers) which will help build momentum for the “Insurance For All by 2047” vision of the regulator.
In the coming times as well, we also expect the Government to tweak all the present policies from the lens of term life inclusion in new tax regime, retirement plans for a sound security in the future and reduction of GST from 18 to 5 per cent, all in order to ensure our economic growth is more equitable and broad based.
Finally, it will be good to hear if the government acknowledges the role of InsurTechs in accelerating the growth of insurance adoption in India. It will be remarkable to witness any developments on this front as well”.
Anand K Rathi, co-founder of Mira Money.
The focus of the forthcoming Budget will likely be on increasing the tax base, which is currently very limited.
– GST – There’s been discussion about reducing the 18 per cent GST on health insurance and mutual fund distributors,
-Focus on renewables and EVs: I expect the upcoming budget to place substantial emphasis on renewable energy and electric vehicles (EVs), with the government likely to introduce incentives to promote these sectors. This focus aligns with international
commitments to reduce carbon emissions, and consequently, budget allocations for renewables may be higher than in previous years,.
– Changes in debts and arbitrage funds: One notable potential change could involve the tax structure for arbitrage funds. Banks facing difficulties in raising deposits might push for this adjustment. Arbitrage funds are taxed like equity, but this gap might be addressed to encourage more money flow into deposits.
– Short-Term Capital Gains Tax: The short-term capital gains tax on equity could be increased from the current 15 per cent, potentially aligning it with income tax rates.