Budget 2020:Indian General Insurance Industry
An index based scheme (Parametric Insurance) can be adopted which compensates for the damage caused due to catastrophic event, as per the pre-defined triggers for such events. The premium for the same can be collected along with the property tax and once the claim is triggered, amount can be directly transferred to beneficiary’s Jan Dhan Account linked to the home insurance policy. It will go a long way in bridging the protection gap between the economic losses and insured losses during Nat-Cat events
People usually have a perception that if they have kept their money in a bank, it’s completely safe, which is really not the case. Hence, there is a need to increase the limit of bank deposit insurance which appropriately safeguards the account holders. Currently the sum insured is Rs. 1 lakh and it needs to move up.
In a bid to promote IFSC as an attractive destination for investment for global re-insurers, the government has relaxed norms for setting up shops at Gandhinagar international financial services centre. The notification of Finance (No. 2) Act, 2019, has paved the way for reduction of the Net Owned Funds (NOF) requirement for the opening of branches of foreign re-insurers in International Financial Services Center (IFSC) to Rs 1,000 crore from Rs 5,000 crore. We should encourage more reinsurance players to enter India by opening the sector and make it more competitive. In the process, one of the measures can be reduction in Net Owned Funds requirement from Rs. 5,000 crore to Rs. 1,000 crore for RI even for non IFSC locations. Tax treatment for reinsurers can be same as existing corporate tax instead of taxing them at a higher rate.
In the recent times during natural catastrophes (Nat-Cat) events, we have seen homes/shops of people get washed away in floods. Most of these property losses belong to the lower strata of people. I feel that Government can introduce an affordable home insurance scheme in association with insurance companies that can cover losses to property during Nat-Cat events.
An index based scheme (Parametric Insurance) can be adopted which compensates for the damage caused due to catastrophic event, as per the pre-defined triggers for such events. The premium for the same can be collected along with the property tax and once the claim is triggered, amount can be directly transferred to beneficiary’s Jan Dhan Account linked to the home insurance policy. It will go a long way in bridging the protection gap between the economic losses and insured losses during Nat-Cat events.
Many people don’t realize the importance of home insurance. Having a home insurance ensures that your 30 years of labour doesn’t go waste because of a catastrophic event. I feel giving tax exemption for home insurance just like health insurance deduction under 80 D will encourage people to opt for it.
Currently, 18% GST rate is applicable for majority of insurance products. This rate is levied on the premium paid by the customers and hence can be a dampener for them to opt for insurance. I feel the Government can look at reduction in GST across insurance products, to encourage purchase of this important financial tool.
PSU Insurance Companies reforms:Merger talks of PSUs are ongoing. This merger should not be looked merely from a consolidation perspective. It needs to be thought through well wherein one or two vertical focused insurance companies can be created rather than just blindly merging them and be competitive to each other.
Ayushman Bharat is a robust scheme and that it should continue in some shape or format in all states, and some announcement on a National health scheme should be conceptualised to cover people from all strata. This will bring more people under the ambit of insurance. I feel that having adequate health insurance cover can increase a person’s life expectancy by 10-15 years. Hence, the more people have health insurance the better it will be for our country.
Given the economic slowdown, Government should focus more on spending despite the fiscal deficit constraints. They need to keep the fiscal deficit target aside in these troubled times and spend more money to kick-start the growth of economy.
Divestment is another area which Government is working on. Government could raise funds by divesting in public sector enterprises and spend the proceeds on the productive side, especially for non-core PSU enterprises.
Corporate tax cut was good, beyond our hopes. But the current situation is not just about the corporate spending, but overall demand in the economy is down. To spur more demand,Government can look at easing the income tax limits so that there is more money in the hands of customers.