As we inch closer to the announcements of Budget 2024, the insurance sector wants govt to ensure insurance penetration to the last mile, parity in tax treatment for pension products, and introduce employee health insurance for the workforce in MSMEs.
There has been a growing awareness about ‘insurance’, which is a protection solution critical for financial security. Indians being savings-driven, need to be encouraged to invest in protection through various policy measures. Experts say that ‘tax incentives’ are one such tool to usher this trend.
As we inch closer to the announcements of the Union Budget 2024, the insurance sector has set hopes from the government to ensure insurance penetration to the last mile. Among many asks, the call for parity in tax treatment for pension products, and the push for group health insurance for Micro, Small, and Medium Enterprises (MSMEs) has gained prominence this year.
Shanai Ghosh, MD & CEO of Zuno General Insurance, says, “Budget 2024-25 would be crucial to advance insurance accessibility and inclusivity, in line with Irdai's 'insurance for all by 2047' vision.
Achieving tax parity for retirement planning instruments, particularly pension and annuity plans, had been at the forefront of the insurance sector's desires before the Interim Budget presentation and it has gained prominence again ahead of Union Budget 2024 announcements.
“The deduction for health insurance premiums under Section 80D has been constant despite a significant spike in healthcare costs. This underscores the need for linkage to inflation and periodic revision,” says Ghosh.
The industry leaders see ‘annuity’ as a solution to the key dilemma of a pensioner. Annuity is seen as a life-long pension at a steady, guaranteed rate which 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,” says Subhrajit Mukhopadhyay, Executive Director, Edelweiss Life Insurance.
Experts say that the complete taxation of annuities has reduced the product’s attractiveness to customers. Many believe that just like a tax incentive is offered for people to accumulate corpus in NPS under Section 80CCD (1b ), a similar incentive should also be extended to Annuities.
Irdai's 'insurance for all by 2047' vision needs to be broadened keeping in mind the coverage for two under-represented groups, namely the senior citizenry and the salaried class.
Industry feels that the government must encourage property insurance for retail customers and SMEs. Employee Health insurance is also being seen as a need of the hour. “However, the GST on the same is not available as the Input tax credit for the employer and is a significant cost, this should be reviewed,” Ghosh states.
The reduction of GST on health insurance premiums is also a popular ask to reduce the cost to the customer and make insurance more affordable for all.
Ghosh also notes that tax benefits must be extended under the New Tax Regime to increase the health insurance penetration among the masses.
Rakesh Jain CEO of Reliance General Insurance tells Outlook Money that with increasing climate change and economic development-related risks, individuals would see a pressing need to protect themselves against unforeseen disruptions. “The upcoming Union Budget 2024 presents an opportunity to promote sustainable development goals by prioritising risk management and protection,” Jain states.
The key demands of the Insurance sector are:
An increase in the upper limit for tax exemption on health insurance premiums up to Rs 75,000.
Financial support or tax benefits for all-inclusive insurance coverage on electric vehicles (EVs).
Tax benefits for cyber insurance, especially for small and medium businesses. Amid the growing cyber-attacks targeting populations across all age groups, the industry seeks measures that can enhance the ability to withstand online threats and data breaches.
Group health insurance from all employers for their employees is one of the most sought-after demands to bring holistic coverage for the working class.
As we await the Budget 2024 announcements, the insurance industry places its hope that these initiatives will be prioritised to boost protections and financial security for all citizenries.